COVID – the Ultimate Stress Test for Business Operations & Sustainability

22 January 2022

COVID-19 is reshaping how society functions and how businesses operate.

Our altered global reality came quickly and in the chaos, stark contrasts emerged into what communities would value as essential or nonessential, and demand fluctuated accordingly. Companies who were well positioned to support growing needs had strong product offerings, robust supply chains, and in particular, a history of sustainable procurement practices. As CPG portfolios underwent the ultimate stress test, supplier relationships came to the forefront. “Procurement leaders from Danone, PepsiCo, L’Oreal and more see the practices and tools gained through sustainability work as assets in the battle against pandemic supply chain disruptions” (Supply Chain Dive). Brands who were already partnering closely with their suppliers on sustainability initiatives were able to respond in an agile way, and rise above their competitors with innovative solutions that kept sales going and business running.

According to EcoVadis’ fourth annual edition of its Business Sustainability Risk & Performance Index, “Supply chains were extremely vulnerable leading up to the COVID-19 crisis. Assessments of 35,000 supplier ratings revealed that for every industry, more than a quarter of suppliers have no measures in place to protect employee health and safety and proper working conditions, nor are they monitoring these and other key due diligence indicators of their own suppliers.” Businesses that had not already prioritized sustainability fundamentals found it hard to shift to business continuity plans. Most were left scrambling in the dark suffering ongoing out of stocks, continuous delays, and ultimately consumer disappointment.

The aftermath of COVID revealed clearly that when transparency is enabled by strong sustainability partnerships, and supported by technology, companies can respond to supply chain disruptions, support suppliers better, and expand their sustainability footprints instead of retreating. Sustainability practices leveraged during the pandemic were heavily concentrated on transparency into supplier operations, safer working conditions at the factory level, and an ongoing commitment to sustainable procurement practices.

A closer look at brand resilience through transparency, safety, and sustainability.

The following examples highlight brand responses during COVID that sets them apart from most CPGs and shows a resilience strategy rooted in sustainability fundamentals:

Henkel

Henkel, a leader in adhesive technologies, beauty care and laundry & home care, has a long history of sustainability practices. Although not all product lines were deemed essential in 2020, the laundry and home care division showed strong performance as demand for cleaning products surged. In order to “mitigate potential shortages and delivery delays,” Henkel took “rapid and comprehensive measures to ensure the safety of employees, customers, partners and suppliers” (Henkel). Through their supplier partnership approach, Henkel was also able to shift some of their production facilities to produce much needed disinfectants, further helping critical organizations fight the virus (Henkel). In addition, due to Henkel’s strong infrastructure, they “did not introduce short-time working, apply for government aid or reduce (their) workforce due to the pandemic” (Henkel). Given their work in “driving internal engagement to roll out sustainable procurement programs in key dimensions including coverage (geographic, category, size or other diversity criteria),” Henkel was awarded the Sustainable Procurement: Best Internal Stakeholder Engagement award by EcoVadis in 2020. Henkel plans to continue their bold sustainability efforts and has set a target of 100 percent responsible sourcing by 2025 (EcoVadis).

Clorox

Clorox, maker of bleach, disinfecting wipes, and other cleaning supplies, is an example of a brand that met multiple COVID challenges head-on. First, Clorox products were in super-sonic-demand, with reports showing demand surged 500% for some products – and ultimately sales overall increased by 22% (EHSToday). Clorox also immediately prioritized safety measures at their factories in order to continue producing essential products that were helping to fight the spread of the virus, this included “temperature scanning, cleaning, staggered meals and breaks, social distancing, and masks” (SF Chronicle). Clorox audits of 21,000 suppliers by 2010, allowed for deeper insights into manufacturing practices (Clorox) and helped them to weather the storm. Their ongoing commitment to sustainability was already well established at this point, particularly in their efforts to reduce greenhouse-gas emissions, decrease energy use and a phase-out of harmful substances. It is no surprise that Barron ranked them #9 in their 2020 100 Most Sustainable Companies list. Their ongoing ESG goals include a commitment to 50% reduction in virgin packaging by 2030, 100% recyclable, reusable or compostable packaging by 2025, double plastic PCR in packaging by 2030, and 100% of plants achieving zero-waste-to-landfill by 2025 (Sustainability Consortium).

L’Oreal 

L’Oreal, the world’s largest beauty brand, suffered losses at the beginning of the pandemic; however, their primary goal was for business continuity with their existing suppliers. “Keeping those suppliers in business was important not just to maintain operations continuity, but because suppliers play a large part in L’Oreal’s emissions goals. Losing suppliers to the pandemic would mean starting over with new players,” (Supply Chain Dive). L’Oreal’s long term commitment to sustainable procurement meant they would have to invest in their partners during the downturn, regardless of how well the brand was performing in sales. For their most “exposed suppliers,” they shortened lead time for payments for close to 9000 suppliers – putting more cash in the hand to their partners who needed it most (L’Oreal). In addition to this, L’Oreal was able to work closely with their manufacturing partners and began producing alcohol based sanitizer to be distributed within their network (Cosmetic Design). L’Oreal’s track record in sustainability earned them EcoVadis’ Sustainable Procurement: Best Value Chain Engagement award in 2020, which recognizes “excellence in engaging suppliers in sustainable procurement programs, such as training programs, as well as development program plans and efforts to train and reward suppliers for sustainability and CSR performance.”

Future Proofing.

By most accounts, industry volatility will continue well into 2021. As the pandemic continues to rage on around the world, different countries and regions will respond in different ways – leading to more unexpected shutdowns, outbreaks, and quarantines. Supply chains need to take the lessons learned from 2020, and embrace a new approach, rather than wait for a return to pre-pandemic times. Three key areas will be:

Regular scenario planning as a best practice and risk mitigation strategy.

Supply chain teams need to develop a new muscle that rests on their ability to respond quickly to dynamic changes during unprecedented times. The ability to be truly agile will require great supplier management technology and a “war room” mindset. Similar to holiday preparation teams at large retailers, companies will need to create a task-force and “control tower” that manages all potential scenarios and solutions that may arise in 2021 (McKinsey). This includes cross-functional representation, daily/weekly meetings to address critical bottlenecks, and top-down participation to ensure decisions happen quickly. A network and data approach with supply partners will also be key for integration in the planning process so they are well-prepared for any scenario that needs to be implemented immediately. The key for 2021 will be a robust and flexible operation that can handle any crisis that springs up from COVID or potentially a climate event.

Deepening supplier relationships to ensure partners are adequately prepared.

Suppliers are the key to a resilient operation. Brands need to see not just their owned suppliers, but their contracted suppliers as critical extensions of their brand operations. “Sustainable procurement continues to lag. While companies are addressing social and labor impacts within their own operations, they are neglecting the risks that exist among their suppliers – representing a missed opportunity to drive value and create resilience in the next tier of the supply chain” (EcoVadis 2020 Index). During these trying times, it will be important to strengthen relationships, honor contracts and terms, and support safety measures and the factory level whenever possible. In addition to strengthening existing partners, brands must also diversify key suppliers based on potential supply disruptions. Contingency plans will be critical in order to optimize capacity shifts, leverage backups, and offer alternatives if necessary. Developing plans with supplier buy-in is essential.

Transparency into supply chains as a marketing tool to build consumer trust.

Responsible manufacturing will be a new and potent loyalty driver as consumers become more determined to take control of their impact on climate change. “Ninety percent of consumer respondents said they were equally or more concerned about these [environmental] issues after the COVID-19 outbreak, and nearly 95% said they believed their personal actions could help reduce unsustainable waste, tackle climate change, and protect wildlife and biodiversity, with 27% to 30% noting that this belief had strengthened as a result of the crisis,” (BCG). Brands that continue to invest in their sustainability practices will reap the rewards as consumers become more savvy and demand evidence against marketing claims. Companies who have truly incorporated sustainable procurement practices into their product lines will be far ahead of the curve, not only in terms of risk mitigation, but in building consumer confidence.

Sustainability technology and consulting partners are key to long-term success.

As COVID-19 continues to wreak havoc on our world, with unknown disruptions lurking ahead, the imperative for brands is clear – establish and deepen their sustainable business practices. “In some cases, sustainability efforts made supply chains more resilient as pandemic stresses began to mount,” (Supply Chain Dive). Close supplier relationships rooted in a shared commitment to positive social and environmental impact, enabled by technology and agile working methods, is the key to success. “Companies that commit to sustainability during the Covid crisis will come out stronger, with more solid customer and supplier relationships, enhanced corporate reputations, and improved employee loyalty and productivity,” (Bain).

As companies navigate their sustainable procurement agendas, technology and external partners will be key to their success. EcoVadis offers a unique solution to drive supplier engagement through robust scorecard assessments that improve transparency and mitigate risk. GoodOps, a sustainable supply chain consultancy, works with leadership teams to benchmark, prioritize, and implement the right processes and teams to address their most pressing challenges. Together, teams will be well positioned for a resilient future.

Article modified. Previously published on EcoVadis.

A Roadmap for Supply Chain Resilience

1 October 2020

COVID-19 is a potent accelerator for sustainable supply chains.

In the same way digital transformation consumed industries the last 15 years, ESG-centered systems will be the new essential mandate for any business that survives these turbulent times. Although both initiatives have been on the radar for most companies, many felt the time horizon for full adoption was still 3-5 years out. When the COVID-19 pandemic hit, extreme business disruption began wreaking havoc around the world in a matter of days. Most companies were not adequately prepared. In fact, most experts agree that even those companies with the most robust business continuity plans, which included dry-runs and mock scenarios, were not able to properly respond given the unique aspects of this pandemic, such as extended stay-at-home policies around the world. Global industries plummeted and market capitalization declined across sectors. A new reality was emerging and human-centered industries that relied on the movement of people were suddenly on the brink of collapse. Global supply chains broke leaving a wake of wreckage. Millions of workers lost their jobs, consumers were without essential items, suppliers were left in peril and as we’ve seen, investors retreated in fear.

When all of humanity suffers, business falters.

There has been no global event in recent times that has captured such a dominant role over the movement of people, nor an event that has connected human beings so intrinsically. Many have seen the campaign #WeAreInThisTogether which speaks to the underlying current between all of us as we struggle as a species to overcome this threat. Supply chains are no different and we are seeing the ripple effect across our industries. “Nearly 75 % of companies report supply chain disruptions in some capacity due to coronavirus-related transportation restrictions, and more than 80 % believe that their organization will experience some impact because of COVID-19 disruptions,” according to the Institute for Supply Chain Management COVID-19 Survey: Impacts On Global Supply Chains.

Companies quickly realized there was no recovery playbook to draw from and are now facing a myriad of obstacles and crisis. The only path forward, is one that is built on social and environmental responsibility. To deepen our understanding, we need to look at which industries are most impacted by the crisis, the best ESG metrics to prioritize and finally the specific frameworks to help guide teams as they begin to address stakeholder needs.

INDUSTRY IMPACT

The impact of COVID-19 has been two fold. Most companies are experiencing plummeting consumer demand, where virtually all orders have dropped off a cliff. Others are having the biggest spike in demand ever as their sales hit hockey-stick type growth organically. Both scenarios are leaving companies with critical decisions to make as they navigate this uncertain time. As organizations begin to address where they are on the spectrum, they must also look at the toll on social and environmental ecosystems as they build both long and short-term strategies.

Evaporating Demand

Global industries seeing evaporating demand include: Airlines, Hotels, Automotive, Oil & Gas, Apparel, Fashion & Luxury, Restaurants, Local Transportation, Wellness Services, Personal Care Services, Arts & Cultural Events and Personal & Office Goods. What’s important to note for sustainability considerations is the social and environmental impact this event has caused.

In terms of social, the human toll extends beyond loss of wages, healthcare and safety – but also the impact to the millions of small and medium sized businesses going bankrupt around the world. In the US alone, 99% of employers are small business owners and employ upwards of 57 million people. The pandemic has caused significant loss of wages across value chain, a lack of healthcare and benefits, increased safety risks for the most vulnerable, and bankruptcy for many independent businesses.

In terms of environmental impact, we know that a drop in demand will create substantial waste of unused natural resources already consumed into manufacturing products. We are seeing this play out in the food and apparel sectors as millions of pounds of unused product are being thrown away and burned. The residual effect of COVID-19 on these industries will reverberate for years to come. The temporary lower emissions leading to some climate relief for air, water and wildlife – is not enough to offset the excess supply of consumed resources and increase in waste without distribution due to COVID-19.

Exponential Growth

On the other hand, many industries are seeing exponential growth due to rising demand of stay-at-home consumers: Warehouse Fulfillment, Delivery Services, Cleaning Services, Online Grocery Stores, Farm-fresh Delivery, Pizza Delivery & Food Trucks, Streaming Services, Online Fitness, DIY Products, Hospital Care and Online Education. Direct to consumer businesses for items like food, toilet paper and personal care are all well positioned to reap the benefits of the pandemic.

In terms of social impact, it’s important to note the sudden spike in demand has all but crippled many suppliers and unfortunately many businesses are unable to fully realize the growth opportunity due to dried up or bottlenecked supply chains. In addition, the social and environmental toll will leave many of the temporary workers with health risks and an uncertain future. For those companies capitalizing on this moment and capturing market share, they need to also be held accountable for low wages for “essential” workers, high risk to health with no/few benefits and the impact of temporary work with no guarantees.

The link between global health and business resiliency begins to play out as more and more companies struggle to recover. Front line workers continue to fall ill, stoping production in its tracks.  Factory workers with already compromised immune systems are at high risk, grocery store workers are dying after repeated exposure to shoppers, fulfillment centers can shut down overnight if just one worker tests positive to COVID-19. Safety measures are eroding or ignored, there is a reduction in recycling & upcycling, an increase in waste from PPE is seen in oceans and there is a spike in packaging for shipping DTC as individuals continue to shelter in place.

“The current global industry is bringing to the forefront how social and environmental sustainability is intrinsically linked to our global well-being,” says Marie-Claire Daveu, Chief Sustainability Officer & Head of International Institutional Relations at Kering.

Crisis Management

The path to resilience will be hard won. It will be tempting to neglect sustainability considerations and instead focus on securing supply, driving down price and reducing financial exposure at all cost. The need to generate revenue and get people back to work will dominate procurement and supply chain strategies, but we caution against this frantic approach. Companies, now more than ever, must be strategic in their response and recovery efforts to ensure successful restoration and reinforcement of their brands for long-term viability. The playbook in progress pre-COVID-19 that embraced a more responsible supply chain is not only relevant, but it is the key to managing the crisis.

There are 4 stages in Gartner’s Crisis Management Journey that lay out very clearly the time horizon for resilience. In the short term, response and recovery continue to face limited options due to continued global uncertainty. And in the long term, restoration and prevention depend on the stability of your rebuilt foundation and its ability to navigate the “new” normal.

So, yes, the primary goal is near-term survival, but what is the most fundamental thing to remember here is that the signals you send during this crisis will endure and permeate throughout your future efforts. Simone Cipriani, Head and Founder of the Ethical Fashion Initiative @UN International Trade Centre, calls out a cautionary point for companies trying to rush back to business without proper considerations and that is an unstable short-term solution can have damaging effects downstream: “The big question mark remains about the global supply chains. In fragile countries there could be increases in illegal and informal migration, a boom of the informal economy and a surge in terrorism and illicit trade. These factors could create further unsettlement.”

There is no quick fix and there is no turning back the clock. If you act irresponsibly now, forgiveness may not be awarded to you – especially if your competitors are able to navigate with minimal ESG fallout. Blackrock executives are also sounding the alarm around the correlation between environmental degradation and its impact to local populations, who are typically the backbone of all manufacturing models. “This pandemic is a “Gray Rhino”, a highly obvious, highly probable, but still neglected danger. Rising global temperature extends the reach of vector-borne illnesses, and localized air pollution and environmental degradation increase health risks for local populations,” according to Philipp Hildebrand during J.P. Morgan’s 5th Global ESG Conference.

Look to the fashion industry. A recent example is how H&M paid out all their supplier contracts in full even though they had to shutter all of their retail stores. Primark who tried to cancel contracts – were called out in comparison and have had to since reinstate contracts with garment suppliers they tried to cancel. The voices of workers are amplified by consumers and you’re seeing brands coming back to the table to structure more responsible agreements to safeguard their reputations.

Sustainability is the cornerstone of resilience.

Sustainability is meeting the needs of the present without compromising the ability of future generations to meet their needs; comprising three pillars – people, planet & profit. Resiliency is the ability to recover quickly from disruptive change, or misfortune without being overwhelmed or acting in dysfunctional or harmful ways. There is an inextricable link between sustainability and resilience. Essentially, both require the ability to survive in the face of threat using a holistic and balanced approach.

The current pandemic is giving every company an opportunity to infuse ESG strategies as they recover, rebuild and reimagine their business. To future-proof supply networks from another reality-altering event, companies must build business continuity plans centered on stabilizing the people and resources in their supply chain. Companies who place sustainability at the center of recovery efforts will ascend to the highest point in the hearts and minds of consumers, employees, suppliers and investors.

Given limited resources, it’s imperative to prioritize how teams think through sustainability efforts and respond in order to both get back online quickly and efficiently, as well as ensure the most stable foundation as you move forward into more developed stages of resiliency. The 3 key pillars of sustainability – Environmental, Social and Governance – must map to key considerations and needs of the 4 primary stakeholders – suppliers, investors, customers and employees.

SUSTAINABILITY PILLARS

When thinking about sustainability initiatives, the ESG model is the best framework to identify which areas to focus efforts on. Regardless of where your company prioritized initiatives pre-COVID-19, the recommendation now is to first prioritize “SOCIAL” efforts as this addresses the needs of the people your organization impacts. So, why prioritize social? First and foremost, when people are in such a vulnerable state they’re not able to support other initiatives. And while supply chains have historically focused on environmental sustainability – arguably due to the more easily quantifiable nature of the outcomes – COVID-19 is a uniquely human crisis. Never before have so many individuals and communities been so disrupted at the same time. This instability is a key risk to the future of our collective supply chains, and we can only solve the problem through individual but directionally aligned efforts.

For a recent example from an enterprise leader, Lars Petrsson, former US President of Ikea, said recently without a doubt, the most important aspect of sustainability today is taking care of people – and this includes all stakeholders: suppliers, customers, employees and communities – as these are the individuals who will help you recover, rebuild and restore business quickly. Key metrics include labor Standards, human rights & continuity, health & safety and customer responsibility. Once the people aspect is on a solid ground, companies can move to environmental considerations, key metrics being climate change, pollution & resources, water security and biodiversity. And then finally, governance, which includes measuring risk mitigation, anti-corruption, corporate governance and tax transparency.

STAKEHOLDER PRIORITIES

The four main stakeholders companies must address with urgency, authenticity and action are: Suppliers, Investors, Consumers and Employees.

Suppliers: The Power Dynamics are Shifting

For all companies, and procurement executives in particular, the supplier relationship is the most critical. Without the right amount of quality supply at the right cost and the right time, companies are left vulnerable. The pandemic has exacerbated this dynamic and companies must navigate strategically. Although some industries are experiencing a knee-jerk reaction to the pandemic and trying to cut orders, cancel contracts and deepening their push for even lower prices, others realize the long-game is to support suppliers with their own rebuilding efforts to ensure a more stable and enduring supply network for the foreseeable future.

For many industries, existing models are breaking. “Just in time” inventory is leaving many products out of stock, “centralized production” is choking flow if capacity can’t be met, and “vetting alternative suppliers” may be nearly impossible without breaking rigorous compliance protocols. We are seeing this acutely play out in medical supply chains where scarce ingredients made in China and India are leading to shortages in life-saving drugs and testing kits. In a highly globalized economy facing a global pandemic, very few companies have the luxury of just bouncing back with aggressive tactics and a business as usual approach. Power dynamics are shifting to suppliers who are in the best position to provide much needed quality capacity at the right time.

For long-term viability, the most strategic response is a socially responsible path that supports and invests in suppliers, enabling them to build financially sound enterprises operated by a safe, healthy and trusted workforce.

  1. Identify strategic suppliers & map relationships against current strengths & weaknesses both short/long term. During the recovery and restoration period, begin mapping out which suppliers are key to both a short and long-term competitive advantage. Identify current strengths and weaknesses to see which levers you can pull.
  2. Honor contracts & offer supplier relief: throttle orders, pay invoices early, low interest loans, send PPE.. Honor ALL contracts – regardless if you plan to work with them post-crisis. All industries are small and suppliers will quickly learn which companies didn’t respect agreed upon terms. At the same time, offer relief – especially financially. The quicker your partners stabilize, the sooner they can begin to perform.
  3. Right any wrongs from the past: return to fair prices, relax penalties, extend grace periods, shorter terms. Fix anything from the past that needs to be addressed. Whether it’s adjusting prices back to reasonable levels or offering favorable payment terms, see this as an opportunity to reset with your suppliers and nurture a new foundation built on mutual-long term success. It will be tempting to want to fight for even lower prices given current economic pressures; however, this is precisely why it should be the opposite. By further squeezing your suppliers, you are damaging ecosystems already on the edge of collapse. If you push too hard, you may lose whatever is left remaining and recovery at that point will be near impossible.
  4. Build a roadmap for each supplier using a “social” impact ambition framework, committing the right resources. Not all supplier strategies are the same. It’s important to build a framework to better help you identify your ambitions and properly dedicate resources accordingly.

The Sustainability Ambition Matrix squarely frames “Social” impact in supply chains around a company’s commitment in addressing the well-being of their supplier’s extended workforce. CORE is essentially “Business as Usual” and means seeing suppliers as predominantly a transactional entity, with the primary goal of getting the lowest price at the most favorable terms. Unfortunately, this approach will suffer in the “new normal” as more long-term success metrics come to light demonstrating a more “partnership approach” will endure over time. ADJACENT is essentially incremental improvement in terms of supplier relations. This path speaks to offering more processes, products and assets to suppliers – including payment upon receipt, extending credit lines, waving debts, offering bonus payments and offering even more benefits. BREAKTHROUGH is what is possible when you start to invest in long-term supplier resilience, such as supporting living wages, toxic-free production, sponsored audits, profit sharing and more. Companies have the chance to help suppliers rebuild and reimagine what is possible for themselves and each other. By thinking beyond the transaction, companies can unlock new ways of working that have yet to be realized across industries and dominate responsibly in the new normal.

Investors: The Growing Case for ESG Investing

In recent years, we’ve seen a tremendous rise in socially responsible investing around the world. This trend comes on the heels of a decades-long explosive campaign around climate change and the role of businesses in acknowledging their contribution to it and now moving to address it.

As a result of the coronavirus, ESG investing is only going to grow and expand its reach. Companies will need to explain to investors how they plan to rebuild their already fragile supply networks without making them even more fragile. Investors realize the most enduring returns will generate from companies with responsible foundations where all stakeholders thrive.

ESG Investment Indicators: We see this as one of the key pillars to acting now because whereas before you may have had up to 5 years to switch to an ESG based supply chain model, now you only have 1-2 years, and that means starting yesterday given the complexity of most supply chains. When you take a step back, it is clear to see why responsible investing will pick up steam in the aftermath of COVID-19. There was already a healthy appetite given strong performances in the stock market, however, the fact that right after coronavirus started to hit the news, ESG funds returned higher returns than their counterparts. In addition, millennial investors have already shown an overwhelming interest in supporting companies with a triple-bottom line. More of them see the best way to scale their impact is through business, versus traditional philanthropy. And lastly, the correlation between both climate and labor risks on business disruption continues to grow. More and more companies are faced with having to abruptly switch or stop production altogether due to negative reputational and operational risks – largely due to unstable environments related issues. Companies must think about how their actions today will impact their long-term opportunity to tap this growing investor segment.

Consumers: The Demand for Action Accelerates

Another growing trend in the marketplace has been consumer activism. This trend has also been exponentially growing in recent years, however, the big shift after COVID-19 is consumers expect companies to rebuild with decency and humanity in mind.

Signals are already permeating across industries that because of extended stay-at-home measures, more people are rethinking their purpose in the world and which brands they want to associate with based on that. Consumers have overwhelmingly indicated they are very interested in the social impact aspect of business restoration, and companies must realize that there are no short-cuts here. Savvy consumers will know how authentic your efforts are versus those that were solely for marketing purposes.

The immediate sustainability priorities for consumers are both meaningful and actionable. As more and more people stay at home, a large portion of the population is shifting value sets, and consumption patterns are changing. Customers will want to see all workers being treated fairly. They will want a strict focus on decarbonization and circularity when it comes to environmental stewardship. And lastly, they want operational efficiencies that reduce/limit waste – which can spark innovation in both designs and packaging.

Employees: Rebuilding Trust to Win Back Workers

There are many correlations between the wants and needs of customers and employees – but employees are distinctly looking for trust. Millions of them were abruptly let-go, or were thrust into unsafe working conditions. Companies like Amazon are already under fire for how they’re treating their employees and putting them in harm’s way. At this moment in time, many see a lack of sufficient health policies in place – leaving all of them vulnerable to illness.

To provide some context, Eagle Hill Consulting did a national poll and uncovered several important conclusions:

Over 163M Americans told to stay home to control the spread

  • 51% say their organization has the technology, tools and training for WFH
  • 49% say their company is increasing remote work in light of COVID-19
  • 55% U.S. employees say they are worried about their job security
  • 39% believe employer is proactive in addressing health concerns of employees
  • 31% say employer is proactive in addressing economic health of the org

And, key EMPLOYEE Trust Considerations are: Wage & Benefits, Safety, Business Health and Dignity & Respect.

In conclusion, the world is watching and we hope companies will consider sustainability as their key to resilience in a post-COVID-19 world.

Top Supply Chain Award

23 September 2020

Divya Demato, CEO of GoodOps, is the winner of the first Supply & Demand Chain Executive Women in Supply Chain Award.

“Supply chain is the backbone of any business, and the leadership team is critical to its success – not just from a profitability standpoint, but from an accountability one as well. Women bring a unique skill set to the table and repeatedly demonstrate their ability to multi-task, make tough decisions, and drive results. I’m honored to be chosen as an award recipient and congratulations to the rest of the winners – I look forward to shaping this industry together with each of you.”

According to Gartner Inc.’s 2020 Women in Supply Chain Survey among 177 supply chain professionals, 17% of chief supply chain officers (CSCOs) are now women—a 6% increase compared to 2019 and the highest rate since the first edition of the survey in 2016.

“The increase in women executive leaders over the past year is a positive sign, however the survey showed that women don’t consistently make it through the pipeline,” says Dana Stiffler, vice president analyst, Gartner Supply Chain Practice. “Lack of progress is not something the industry can afford at the moment. Supply chain’s role in the COVID-19 pandemic and subsequent recovery is crucial, with lives and livelihoods at stake. This is a pivotal time for many women in mid-level and senior management positions.”

Despite the increase, there is still a noticeable gap between women and men in vice president and director levels. According to the survey, 63% of respondents have active goals, objectives or initiatives to recruit more women to their business and build pipelines. However, it could take years to build this activity to strengthen pipelines. This contributes to representation of women in the total supply chain workforce remaining unchanged at 39% year-over-year.

The Wall Street Journal found that men earned 29% more than women in 2017, with the gap widening in C-suite positions. Although there are fewer women working within the field, men who had 15-19 years of experience in the industry earned 48% more than their female counterparts. And that gap only widens between women of color as well.

Nevertheless, women continue to move the industry forward. That’s part of the reason why Supply & Demand Chain Executive launched its first annual Women in Supply Chain award. The Women in Supply Chain award honors female supply chain leaders and executives whose accomplishments, mentorship and examples set a foundation for women in all levels of a company’s supply chain network.

Full list of winners. 

 

Supply Web

3 July 2020

It has been over four months since the COVID-19 crisis has gripped our world. This exposed the fragility, inequities and lack of redundancies in our material supply chains. As a response, the world is moving through exponentially rapid change and social turmoil amplified by digitization. Organizations are rethinking, responding and reinventing everything to respond to the needs of their customers and employees.

Prior to the Great Disruption, materials flowed in what we thought was an efficient system of supply chains. Goods and services criss-crossed the planet while logistics managers and procurement specialists managed the risks and disruptions through the digital flow of information. The operating systems were built to meet the needs of customers to provide the most amount of goods at the lowest cost options. Supply chains connected companies through win-lose negotiations. Compromises ruled.

We thought it was working pretty well. Until it broke. When COVID the future came fast. Faster than any business was prepared for. The low cost had come at a price. Multi-year roadmaps for digital transformation, sustainability and global expansion came to a head. Nearly overnight, companies froze in place; whatever they had in that moment was all they had to weather an unprecedented storm. Most, if not all, faltered. Companies either found themselves paralyzed by the sudden drop in demand, or a dried up supply. There were no alternative playbooks or clear pivots. The waste built into the chain, previously only sometimes visible, became an anchor.

Everything broke. That is what chains under stress do—they break. They are only as strong as their weakest links.

The companies who are surviving, even thriving during this time, have supply webs, not supply chains. A web is the best way to future proof your previously linear chain. The digital world is a network, a web. Companies who never wish to face this crisis again will retire the concept of a supply chain, and instead adopt a material model that is resilient, a supply web.

Why A Web? 

The world of arachnids is an inspiration. A spider creates her web by linking many threads together. The more threads linked, the stronger the web. Out of crickets and other bugs, at ambient temperatures, the crafty spider creates a silk, a complex composite material that is five times stronger, ounce to ounce, than steel, able, compared to Kevlar, to absorb five times the impact force without breaking. For the web to maintain its structural integrity under force, the material is also highly elastic, stretching up to 40% longer than rubber and bouncing back as good as new. The interconnected structure can withstand wind and the elements. Waste is unheard of. A web begins at the center – what is available locally and then moves beyond the center to acquire needed materials.

Future supply webs will rely on both the amount and strength of partners. This includes: farmers, suppliers, factories, manufacturers, shippers, packagers, retailers, fulfillment centers and more. A supply web allows a company to move in and out of situations dynamically, without sacrificing quality, efficiency or cost. A sustainable supply web does all that, and ensures protection and advancement of people and planet.

In a post-COVID world, no company alone can resurrect their industry. It will take many partners, even adversaries, to work together to find new meaning and market purpose. It will also require collaboration of supply partners, who are now only a fraction of what they once were. Previous competitors will need to band together to provide the capacity, quality and cost optimization needed to save their industries. All parties have to be equal, treated equally, all weathering the storm together. Future systems must be dynamic and have the ability to work across systems, partners and time zones, all in real time, meeting the expectations of the post-COVID consumer.

The Rise Of The Conscious Consumer

A recent Futerra study in the UK and US found “that nearly 80% [of consumers] are willing to make lifestyle changes to stop climate change as big as those they’ve made for coronavirus.” The COVID-19 pandemic has accelerated the need for operational excellence, as it has propelled the conscious consumer into the mainstream economy. There is no turning back for brands who have compartmentalized their ecosystem. No longer can marketing claims sit apart from production practices. Company accountability now encompasses the entire supply network – from the farms where raw materials originate to the consumer packaging used at point of sale.

Brands who are already working to address other complex consumer trends like personalization, omni-channel purchasing and technology enabled experiences—will now have to address their ‘purpose’ claims in an authentic and measurable way. Transparency will become the backbone of any brand story, and without a powerful supply web to support this, brands who fall short will be abandoned.

The Supply Web

A supply web is a network of partners, all intrinsically linked together. One can not survive without the other. The strength of each entity enriches the strength of the whole. For supply chains, this means building a democratic ecosystem centered on the viability of the group. It is initiated by a single entity and then expands out, locally at first, carefully building the foundation. As the core structure stabilizes, it expands. Each connector thoughtfully engages with the other, nimble enough to move and expand.

For companies, it is no different. As brands begin creating their products, they start a journey that will involve numerous other entities that are composed of people and natural resources. As each brand chooses their partners, they should first look locally, where they have the best ability to judge the quality of partner business practices. From there, product needs will dictate where the web expands. Throughout this process, it will be imperative to maintain the same principles and values to ensure all members of the web flow in unison, as the business itself will ebb and flow.

Circularity is a key component of the supply web. It is by nature meant to stay intact, producing no waste. The same goes for brands who are creating goods of the future. There is no room for excess materials or toxic chemicals, polluting natural systems or human bodies.

ReInventing Everything

ReInventing Everything is how we prepare for an uncertain future. Moving from supply chains to supply webs is a key element to creating a diverse, equitable, resilient and frankly much better company.  This is the moment in time where the once impossible is now possible. We can help.

Thank you.

Fashion’s Downfall

2 July 2020

“Above all we understood we went way too far. Our reckless actions have burned the house we live in,” says Gucci creative director, Alessandro Michele.

Angeli Mehta explores the troubling reality facing the fashion industry in her recent article in Ethical Corporation: “‘Pandemic forces fashion industry to take stock.”

The dire conditions facing manufacturing communities, due to abrupt cancellations of apparel orders from global brands, is accelerating the already critical crisis.

Highlights from the report include:

  • The average market capitalization of apparel, fashion and luxury brands dropped almost 40% in the year to the end of March.
  • McKinsey expects “a large number” of global fashion companies will go bankrupt in the next 12 to 18 months.
  • In 2016, WRAP estimated the fashion industry global supply chain waste was 800,000 tonnes, even before any clothing reached the consumer. In the UK alone that year 300,000 tonnes of clothing went to landfill.
  • The industry accounts for 10% of global carbon emissions.
  • McKinsey’s survey of North American and western European sourcing executives reveals not all brands are taking steps to support their supplier base. And only 19% are providing pre-payment for orders, even though 64% of respondents said this action would have a significant impact.
  • The pandemic has increased consumer interest in sustainability: a survey of consumers carried out in Europe and the US in March suggested 20% of them want to support local business, and in Europe 16% said they’d be buying more socially and ecologically sustainable clothing in future.
  • Consumers have also taken note of efforts by brands to look after their employees, contributing items like PPE, or donating to their communities.
  • The Textile Recycling Association fears that unsold stock will take the place of secondhand clothing in many markets in eastern Europe.

Read more here: https://bit.ly/2AwaaVw

A Business Case for Sustainability

27 June 2020

Pierre-Francois Thaler, Co-founder and Co-CEO of EcoVadis, perfectly articulates  the new business imperative – sustainable supply chains – in his piece in Future of Sourcing, “The Growing Business Criticality of a Sustainable Supply Chain.”

Key insights include:

  • 88% of studies found companies adhering to social or environmental standards showed better operational performance, with 80% showing a positive impact on stock performance.
  • Sustainably minded shoppers will spend $150 billion on sustainable products by next year. That’s $14-22 billion more compared to prior years, pointing to new sales opportunities for businesses that prioritize sustainability in product devleopment.
  • Sustainable supply chain practices reduce costs by 9-16% and create a 15-30% increase in brand value. 73% of CEOs report sustainable business builds trust and reputation.
  • Ignoring ESG exposes investments to huge risks and erodes returns. This behavior has wiped out $534bn of valuation in the last five years.

Read more here: https://bit.ly/2NT6xM8

Webinar: Greenwashing

25 June 2020

Brands are facing a reckoning.

Greenwashing is as pervasive now as it was pre-COVID. Sustainability marketing claims have spiked, but they don’t always mean action. Conscious consumerism is bringing a tsunami of accountability like never before.

How do brands navigate? How can consumers cut through the noise? And what really drives social and environmental impact in fashion and food?

Transparency, supplier partnerships and ESG innovation are just some of the solutions we explored in our NextGenChef Table Talk.

Our panel:

Watch the full panel: HERE

 

 

White Paper: Food Systems

15 June 2020

NextGenChef’s white paper, The State and Future of the Food System post-COVID-19, explores today’s most pressing questions.

COVID-19 has exposed the weak points in the U.S. food supply chain, raising fears of food shortage among consumers. The disruptions have drawn widespread attention to the problems that entrench the food industry, simultaneously urging the country to reflect on sustainable alternatives.

As consumers alter shopping behavior, suppliers run low on supply, and logistics buckle under pressure, brands who will emerge as winners will be the ones who lead with environmentally and socially responsible operations.

In this NextGenChef whitepaper, the team speaks with eight industry experts across the country, including senior supply chain consultants and CEOs who represent more than 180 organizations to uncover how COVID-19 has changed the food supply chain.

GoodOps’ CEO, Divya Demato, touches upon the importance of DTC food models and how the path to resiliency lies in supplier recovery.

Read on for exclusive industry insights here https://go.aws/2CdRJVU

Webinar: FASHINNOVATION Worldwide Talks

5 June 2020

FASHINNOVATION’s Worldwide Talks 2020 panel on Supply Chain and Circular Economy explores the role of equal justice, standardizing sustainability metrics, power of being an early adopter of ESG and future trends like plant-based materials.

Panelists:

Watch the full panel here: https://lnkd.in/djH-xNv

A Playbook for Social Justice

1 June 2020

In light of current conversations surrounding systemic racism both in our nation and our world, an inextricable link between social responsibility and social justice are coming together. By no means perfect, sustainability playbooks can offer an initial basic framework for #SocialJustice initiatives as executives begin their journeys:

SET GOALS

Set concrete goals that uplift people of color at all levels of the company: board members, investors, c-suite, managers, front-line workers, partners, customers, etc. Promoting marginalized people into power positions, paying them well, providing health benefits, improving educational opportunities for themselves & their children – all have an impact on communities & society at large. Think about areas typically covered under “S” in ESG.

CREATE METRICS

Determine the right metrics to measure results and adapt tactics if initiatives are not working. Work w/community leaders to determine these so they are not done in a vacuum.

DEVELOP A TIMELINE

Set an aggressive & meaningful timeline. To say there are “no great candidates of color” for leadership positions is a total failure in effort. Expand your networks and collaborate w/black & brown leaders who are connected to these communities & can help funnel talent your way.

BE ACCOUNTABLE

Be held accountable. Publish your goals & timeline publicly & update us – the same way we see sustainability announcements. Do a bi-annual report outlining your social justice progress & share your challenges so others can help.

Specifically for Black Lives, here’s how to act now:

  • Invest in black founders.
  • Promote black colleagues.
  • Invite black executives to boards.
  • Hire black people for “office” jobs.
  • Fast track/mentor black leaders.
  • Fund black accelerators.
  • Partner with black founded companies.
  • Buy from black businesses.
  • Cast black actors in ads/media/film roles.
  • Make products that address black needs.
  • Give black leaders awards.

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