Sustainable Supply Chains and Bottom Lines—The Two Are No Longer Mutually Exclusive

50 percent of Millennials will pay more for sustainable products and 39 percent research company sustainability practices

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Over the past year, companies such as Unilever, Johnson & Johnson, P&G and Mars publicly committed to implementing zero deforestation policies throughout their supply chains. Sustainability is evolving from a nice-to-have to a business imperative, and businesses are beginning to recognize that what is good for the environment can also be good for revenues and help drive business growth.  

When done right and systematically, sustainability and zero-deforestation policies lead to improved brand image, industry differentiation, brand loyalty and, ultimately, stronger relationships with customers. For consumers, in particular, a company’s environmental practices are often defined by its supply chain, which provides a clear picture into how materials are produced and sourced.

According to new survey data from Asia Pulp & Paper (APP), 50 percent of Millennials are willing to pay more for sustainable products and 39 percent do research into the sustainability practices of companies before making a purchase. This interest in sustainability appears to be a growing trend, from Baby Boomers all the way down to Gen Z. And with an increasing desire for sustainability comes higher purchasing power. Millennials, at $200 billion and Gen Z at $44 billion, annually, have strong influence over how brands are perceived in the marketplace, and over time, are likely to be even more socially and environmentally conscious.

All generations of consumers are now looking to reward sustainability with their wallet. Companies need to prioritize consumer sustainability preferences, specifically how product materials are sourced and how comprehensively environmental initiatives are implemented.

Three Ways to Reduce Risk to Ensure Sustainable Supply Chains

While there are obvious long-term benefits to more sustainable practices, a major challenge for corporations—and procurement professionals in particular—is ensuring that the entire supply chain meets established standards.

At APP, we introduced our Forest Conversation Policy (FCP) in February 2013, which ended all natural forest clearance, and committed to supporting the protection and restoration of 1 million hectares of forest in Indonesia. These are complex and extensive initiatives, which require patience, diligence, transparency and collaboration. Although refining a supply chain takes time and dedication, here are three ways to reduce the inherent risks to supply chain management.

1. Beyond Compliance

Regulatory frameworks throughout the world, particularly those within the forestry sector, established a strong basis for companies to follow. This includes the U.S. Lacey Act, Indonesian Legality Assurance System (SVLK) and the European Union Timber Regulation (EUTR). However, these standards should be a starting point for sustainability, not an end.

Make your commitment go beyond compliance to meet a standard that exceeds the regulatory frameworks in all regions in which you operate.

2. Demonstrate Transparency

Engaging a third party to act as a partner that provides oversight of a company’s sustainability efforts is a smart and proactive move. It allows you to authentically back your sustainability claims, and can also help unveil risks in your supply chain or breaches from suppliers that you may not realize existed.

3. Promote Accountability

The reality is, when taking on a comprehensive commitment to sustainability practices, mistakes and oversights are likely to be made. As the change is implemented, you may find that important members of your supply chain are violating your new standards. Be proactive—address any issue before someone else does.

Suppliers must be held to your new standards and oversight is critical. If you are working with a supplier who isn’t willing to comply, replace them immediately. The same goes when you bring a new company into your supply chain. Conducting due diligence to investigate suppliers’ sustainability practices is mission-critical to delivering on your word.

A New Philosophy Moving Forward

Sustainability and an eye toward profit are no longer mutually exclusive. It’s time to rethink the role of sustainability as becoming an indispensable aspect of the way companies do business. Consistency and taking the long-term approach are vital if you want to succeed with a serious sustainability commitment. While the up-front financial costs may appear to be daunting, a policy of inaction will likely generate adverse long-term costs.