By Jay Millen and Lisa L. Walker
It is nearly impossible to return from a shopping trip without seeing Earth-friendly products or to watch or read the news without encountering a story about the environment. Businesses today need to focus on the complex issues of sustainability. Declining to do so may cost them dearly in today’s competitive marketplace of environmentally aware consumers.
Procurement processes that support the design and management of a sustainable supply chain are becoming critical for providers of goods and services in nearly every part of our economy. In releasing its annual list of “Top 10 Supply Chain Predictions for 2008,” Manufacturing Insights, part of the global technology market research firm IDC, gave the No. 1 spot to “Your suppliers’ problems become your own, especially when they are related to sustainability.” Sustainability, the firm predicted, will be the new metric for the supply chain. “It will no longer be enough to look for sustainability in your own operations, but in your suppliers’ operations as well. Sustainability will become more than just ‘green IT’ and environmental packaging. It will extend to things like social corporate responsibility, postponement and better use of logistics/transportation,” the report said.
The Talent Question
This is a tall order. Do companies have the necessary management expertise to tackle this increasingly complex issue? It is a question that is keeping more than a few C-suite executives awake at night.
Sixty-nine percent of the 90 companies interviewed by Capgemini Consulting for its 2008 Chief Procurement Officer survey rated competency development as a clear area of activity. Nearly one-third of survey respondents said developing the necessary talent was a top five critical issue.
Korn/Ferry’s own research confirms that management of procurement talent is top of mind. In a survey on environmental and sustainability issues conducted by Korn/Ferry with 1,500 executives across functions, industries and geographies, nearly half said that their companies were hiring new staff to support environmental initiatives, reassigning existing staff for that purpose or employing a combination of both tactics. In addition, nearly 30 percent of respondents believe that sustainability efforts will not take a back seat to profitability in the economic downturn, indicating that the need for experienced procurement executives will likely increase, not decrease.
Sustainability in a business context is very much a moving target. The amount of information available varies greatly. Standards for “benchmark” practices often differ, and the math behind what really creates a sustainable and economically viable solution grows more complicated each day.
However, nearly everyone agrees that a sustainable supply chain that seizes value-creation opportunities offers significant competitive advantages for early adopters and process innovators, and that executive leadership needs new skills in order to avoid having sustainability and profitability be an either-or discussion.
Drivers of the Sustainable Supply Chain
To assess what is driving the creation of more sustainable supply chains and the competencies managers will require to cope with them, we conducted a series of discussions last year with a cross-section of business leaders. Following are the top five trends our research uncovered:
1. The closed-loop supply chain. Sometimes also referred to as a cradle-to-cradle (C2C) supply chain, this term describes an ideally zero-waste supply chain that reuses all materials. It also may include corporate programs in which manufacturers assume responsibility for disposing of goods returned by customers after use. U.K.-based manufacturer of recycled corrugated packaging DS Smith Packaging has created an integrated production-logistics-recovery model with producers and retailers that has demonstrated use of this take-back approach as a potential value-added activity.