Supply Chains for Good: Stakeholder Capitalism

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What is the purpose of the organization? The traditional economist view that the sole purpose of organizations is to generate a profit is being replaced with a broader definition called stakeholder capitalism or being a purpose-driven organizations.   A purpose-driven organization gives weight to wider stakeholder groups of customers, suppliers, employees and communities, in addition to shareholders. Shareholder-driven organizations capitalize on stakeholder relationships to deliver a return on investment whereas purpose-driven organizations leverage the organizational culture to deliver benefits for all stakeholder groups (see Figure 1). The B-Corporation Movement codifies being a purpose-driven organization by building trust and accountability through third-party validation, public transparency and legal accountability. The COVID-19 pandemic has shown that supply chains are critical to a functioning society. Whether it be putting food on shelves, or providing equipment or drugs to hospitals, this is all driven through supply chains. In the early days of the pandemic we saw organizations pivot their expertise to solve problems, such as limited personal protective equipment and ventilator capacity. Our research shows that supply chains are becoming increasingly purpose driven by focusing on three areas: putting in place goals, building stakeholders into decision making and engaging employees: Goals: Being purpose driven is not just about doing no harm to stakeholders, but positively amplifying benefits. For many supply chains this means focusing on their environmental and community impacts. Our research finds that 93% of supply chains plan to focus on responsible sourcing and 88% plan to focus on operational greenhouse gas emissions reduction. For more information on key sustainability trends for 2021, Gartner clients can click here: Three Sustainability Trends Shaping Supply Chains in 2021. Decision making: Our research highlights that supply chain organizations are focused on stakeholder capitalism through decision making for suppliers and the product portfolio. The pandemic has highlighted the importance of supplier relationship management, and the need to move beyond being transactional to being collaborative and transparent. An organization’s purpose is often expressed through the product portfolio. However, our research shows alignment of the portfolio and divestment of misaligned products does not score highly, representing a potential missed opportunity. Employee empowerment: The Edelman Trust Barometer shows that 73% of employees expect employers to act on societal issues. One of the most pressing social issues of 2020 was racial inequality, at its worst shown through the killing of George Floyd, Breonna Taylor, Ahmaud Arbery and other Black people in the U.S., leading to a global Black Lives Matter movement. Increasingly, organizations are speaking up around social issues, while trying to create diverse, inclusive and equitable workplaces. Supply chains don’t operate in a vacuum. When society does well, business does well. In August 2019, over 181 CEOs made a commitment that their organizations would be led for the benefit of all stakeholders. Could we be witnessing the inception of a new way to do business? Sarah Watt Senior Director Analyst Gartner Supply Chain [email protected]

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