Ecovadis: The Sustainable Value Chains Podcast series features senior sustainability experts and executives who explore a wide range of environmental, labor and human rights, ethics, and sustainable procurement issues and looks at how companies can develop more sustainable value chains.
In this episode of the Sustainable Value Chains Podcast, Divya Demato, CEO and co-founder of of GoodOps outlines a clear perspective on what sustainable leadership means today – and how it has changed since the pandemic.
Sustainability Leadership Today: Going Beyond the Basics
In our rapidly changing world definitions and expectations are also subject to major shifts. Gone are the days when merely announcing a commitment to reducing water usage or ensuring fair wages made a company a leader in sustainability. Today, true sustainability leadership demands more. It’s about embedding environmental and social initiatives deeply within the core business, moving beyond CSR to integrate these values across the entire value chain.
So, how exactly has sustainability leadership changed over the past few years? Divya explains that before the pandemic we saw a deluge of corporate sustainability reports, but the post-pandemic world demands these environmental and social commitments be deeply woven into the business fabric, going beyond mere Corporate Social Responsibility (CSR). As a result, companies that were once at the forefront, those who made early commitments to reduce water use, pledge net zero, or ensure fair wages, now blend into the mainstream. Today’s sustainability leaders are reimagining business strategies. This includes innovations in product packaging, responsible raw material sourcing, transitioning to renewable energy, and committing to policies that protect society’s most vulnerable. The cornerstone? Building trusted supplier relationships. The shift is not just about ticking boxes for the upcoming 2030 and 2050 milestones; it’s about establishing businesses that can thrive amidst rapidly changing global conditions.
Divya further categorizes leadership tiers in sustainability. The first involves those companies that quickly adapt to new sustainable technologies and practices. The second, the “leaders of leaders,” invest in novel solutions, sometimes in collaboration with competitors. The third are pioneers, those who challenge and shift industry paradigms. Examples include Unilever’s living wage commitment and Patagonia’s unwavering environmental pledge. However, the current urgency around sustainability isn’t just driven by foresight; for many industries, it’s about immediate survival. With predictions like the potential depletion of seafood by 2048, some sectors face existential threats. The path forward requires not just innovation, but also deep introspection about the legacies companies wish to leave behind.
The Role of C-Suite in Sustainability
For successful sustainability initiatives, a top-down approach is paramount. While sustainability teams lay the groundwork by identifying environmental and societal challenges, real momentum is generated when the C-suite, especially CEOs and CFOs, offer their support. This leadership involvement ensures sustainability permeates throughout every facet of the organization – from product design and innovation to procurement and energy infrastructure. CEOs, in particular, play a critical role. Their foresight into future challenges allows the company to pivot, innovate, and remain relevant in an ever-changing landscape. This isn’t solely about addressing current consumer needs or navigating impending regulations; it’s about ensuring a viable business future in the face of existential threats such as climate change or resource scarcity.
Challenges in Transitioning to Sustainability and Sustainable Value Chains
Leadership in sustainability isn’t without challenges, however. Some initiatives, like promoting living wages, might not always translate to immediate profits. Yet, even if a company isn’t leading the charge, inaction isn’t an option. Every business, due to its reliance on natural resources, faces potential disruptions. To navigate these disruptions, firms need to be proactive about sustainable sourcing and adopt regenerative practices. But one of the biggest mistakes companies make is viewing sustainability only as a marketing or CALMS exercise. This perspective often leads them to grapple with whether their supply chain practices truly warrant the sustainable labels they claim. Strategically, businesses should evaluate their sustainability claims and align them with genuine practices. Financially, these initiatives demand significant investments, especially in areas like R&D. Adopting sustainable practices could involve using biodegradable packaging, transitioning to regenerative agriculture, or ensuring fair wages for workers. Successful sustainability transition requires cross-departmental collaboration, involving heads of procurement, logistics, marketing, and finance, to ensure a coherent and integrated approach.
Tools like materiality assessments can guide businesses in prioritizing their sustainability efforts, pinpointing high-risk areas that might impact both consumers and the larger world. Such evaluations can forecast potential challenges, as demonstrated during the pandemic, and aid in future-proofing business strategies. While prioritizing is vital, it’s equally crucial not to overlook any sustainability aspect, as lesser concerns can swiftly become significant risks. On the communication front, if a company has a genuine sustainability story, marketing becomes straightforward. Yet, issues arise when businesses prioritize branding before actual sustainable actions. With the supply chain’s increasing visibility, especially during crises like the pandemic, consumers now seek transparency and authenticity in sustainability stories, underscoring the need for marketing and operations to work collaboratively.
Divya stresses, however, that sustainability efforts are about progress, not perfection. The key is transparency about where a company stands in its sustainability journey.
Best Practices for Sustainability Leadership
Leaders in sustainability aren’t merely setting long-term goals; they’re taking transformative steps toward tangible impacts. The most proactive businesses have their sights on 2030 and 2050 emissions targets, considering their Scope 1, 2, and 3 impacts. Since roughly 80% of a company’s emissions often fall within Scope 3, there’s an emphasis on reimagining the business model. This involves genuinely investing in their suppliers, helping them modernize with tools like solar panels and other renewables. These leaders recognize that without adequate support for frontline workers, achieving sustainability is a pipedream. Successful strategies prioritize efficient operations and community programs, like migrant education and improving the health conditions of workers, acknowledging that protecting these communities ensures long-term business viability.
It’s also noteworthy the role of procurement has emerged as pivotal. The Chief Procurement Officer (CPO) should ideally sit alongside other C-suite executives, bridging the gap between suppliers and business objectives. This redefined role sees procurement not just as a cost-saving function but as an innovative hub that balances affordability with sustainability. In the past, the procurement department often operated in the shadows, but as businesses realize its central role in driving sustainable solutions, it’s gaining the respect and voice it deserves. The new-age procurement team returns to the drawing board with solutions and options, working closely with suppliers to highlight new sustainable methods unknown to upstream departments, positioning them as central figures in the journey towards a more sustainable future.
Lastly, Divya reaffirmed that while sustainability is not just about communication, the narrative becomes more straightforward when businesses have a genuine story to share. If companies work towards sustainability in their supply chains and value chains, their marketing narrative will naturally resonate with consumers.
As the fashion industry continues to grapple with the far-reaching impacts of the pandemic and new global challenges, it has become clear that the ability to swiftly respond to changes in the supply chain is a defining factor for companies to achieve success. Industry stakeholders from ultra-fast fashion player Shein, sustainability strategy and operations consultancy GoodOps and management consulting firm Boston Consulting Group (BCG) discussed the challenges and opportunities of an agile supply chain in the recent webinar “Agile Supply Chain and the Future of the Fashion Industry”.
When are supply chains agile?
In the fashion industry, supply chains are considered agile when they can move products from the design phase to retailer shelves in two to eight months (or less), replenish inventory in season based on demand, and keep end-of-season remainders to a minimum. Some of the key challenges are cost management, end-to-end collaboration and quality control.
“In other words, companies with supply chain agility are able to respond quickly to short-term changes in demand by building a customer-oriented, end-to-end product-supply mechanism. This requires close collaboration and the quick coordination of merchandising, design, production, and channel needs,” states the BCG report “Agility Is Fashion’s New Source of Competitive Advantage”.
Challenge 1: changing customer behaviour
Veronique Yang, managing director and senior partner at Boston Consulting Group started the discussion by explaining how customers’ behaviour has changed: “They are expecting more diverse and ample products that come to them faster through faster deliveries and with free returns and exchanges. All the while expecting quality and a competitive price, which adds pressure on brands.” That is the customer-driven business model and according to Yang, ultra-fast fashion exists because of that need of consumers.
“It’s a tall order and we’re trying to meet it,” agreed Shein’s executive vice chairman Donald Tang. “Nobody has the answer of what the new normal is but consumers have become quite demanding and the battle has intensified and moved online,” he added. That is the battle for their attention, business and best deals: While inflation and economic uncertainties have pushed prices up, consumers are looking for ever more affordable prices. Tang stated that a survey among 25 percent of Shein’s customers revealed that while 13 percent are looking for more responsible choices in the current scenario, 87 percent have changed to more affordable brands.
“Those changes were happening already before the pandemic but the pandemic accelerated it,” explained GoodOps’s CEO and co-founder Divya Demato. “While there is no denying of the climate crisis and different industries having a role in that, companies are often at odds with that reality and consumers are at different levels of understanding this; they align themselves to brands according to that.”
Challenge 2: linear business models
For her, a linear business model does not work any more, especially in fashion. “The pandemic caught many off guard; the ones that managed had close relationships with their suppliers but there were still a lot of unknowns,” she said. “Brands are challenged with inventory management. They need to identify a supply chain eco system and build resilience,” she advised.
“Everybody would like to satisfy responsible consumer choices,” said Tang. A transformation that worked for Shein was to digitise small and medium size factories. “A few years ago in China, you saw small factories disappear. We digitised everything and connected small factories so that together, they could become one big company and compete,” recounted Tang. “This has increased their visibility, they can now see their own capacity and we can pay them fast, which leads to better liquidity.”
Opportunity 1: digitisation and transparency
For the Shein executive, sustainability comes back to technology and the platform. “We have to use technology for the planet and to improve working conditions,” he said. In this respect, Tang sees Shein as an “empowerment company”.
For Yang, it is not only technology that has made a difference: “Companies have realised that a supply chain can be really valuable and they started checking how it can be more stable while holding on to quality and competitive prices.”
For her, there have been three major changes: globally, the emergence of redesigned supply chain networks and even models; more openness and transparency across the supply chain, which includes new technology and digitisation; and finally, a high awareness of sustainability. All this, according to her, leads to resilience, responsiveness and responsibility, which is all very important as Demato pointed out “more is coming as the pandemic showed”.
Opportunity 2: on-demand
In terms of the tools to make all of this happen, Yang who manages different kinds of product categories, admitted that the fashion supply chain is the longest and most complex. “It involves many internal and external stakeholders and is quite fragmented,” she said. It requires the coordination of a large group of parties of different complexities, sophistication levels and digitisation levels and managing all that is challenging, which is why the complexity of the fashion supply chain can be a bit overwhelming. “Everybody needs to learn from the best but carefully select what fits their own business model,” she advised.
“Agility is the new source of competitive advantage, even before the pandemic,” emphasised Tang. Through its on-demand model – which Tang calls ‘a game-changer’, Shein also makes sure there is no waste, manages its inventory well and focuses on consumers’ needs, which for him is crucial for growth. “We want to be more inclusive; colour of skin, location, orientation, etc. does not matter but you have to reimagine the supply chain. At the end of the day, the consumer wins and you have to find a way to do go good while you’re doing well and do well while you’re doing good,” he summarised.
Demato agreed and compared Shein’s on-demand model for retail to how Walmart revolutionised prices through its wholesale model and how Amazon revolutionised e-commerce. “There could be less wast upstream but what about downstream? What can technology do? Consumers are still going to buy.” For her, it will be about more sustainable materials and innovations in textile recycling as only one percent of garments are recycled today because the technology is not there yet.
Opportunity and challenge: sustainability
“The infrastructure is there and many elements are in place but from a circularity perspective, we have to think of the whole life cycle. Consumers will ask ‘is it worth it to buy this? Or will this go to landfill?’. This is an opportunity for brands to get ahead of that,” Demato said.
“This moment has probably come already,” chimed in Tang, adding that “we have to figure out the preferred materials.” He also pointed out that “so far, we are only getting the half life here, not the full life cycle”. For him, it all comes down to cooperation: “Nobody is going to be big enough to sustain it and figure out the end-of-lifetime approach on their own.”
Yang agreed that industry players have to come together and use their power, scale and know-how collectively. “Fashion is a discretionary category that has a social and environmental impact. The supply chain needs to be of service to build a future of fashion and consumers. Technology helps us to reduce products, maximise resources and select more eco-friendly choices when it comes to dyeing, washing and other processes,” she concluded.
As the fashion industry continues to grapple with the far-reaching impacts of the pandemic, it has become clear that the ability to swiftly respond to changes in the supply chain is a defining factor in achieving success.
On 6 June, 2023, SHEIN hosted a webinar that discussed how digitalization and agile supply chain models are helping fashion industry players gain a competitive edge in today’s market.
Panelists:
Donald Tang, Executive Vice Chairman, SHEIN
Divya Demato, CEO & Co-founder, GoodOps
Veronique Yang, Managing Director and Senior Partner, BCG
As the world recovers from the standstill that was the pandemic, the customer purchase decision process has changed, as have the products being prioritized. Customers are demanding greater product variety, including more responsible options and faster product fulfillment to feed their desire for almost instant gratification. Veronique Yang, Managing Director and Senior Partner, BCG, said consumers are demanding more inclusive products with speedier delivery. She added that the growth of ecommerce channels during the pandemic has also driven customer demand for speedier delivery times – while holding expectations on quality and price.
“Consumers are becoming quite demanding and less forgiving, and the battle for those hearts and minds has intensified. And the battle has moved online,” added Donald Tang, Executive Vice Chairman from SHEIN. He further referenced results of a recent survey of over 2,500 SHEIN customers, where 87% reported shifting to more affordable fashion choices as a result of inflationary pressures.
With increasing global economic pressures, there has been a notable shift in supply chains, with companies increasingly having to adapt their models to survive. Said Divya Demato, Co-Founder and CEO of GoodOps, “These changes were happening before the pandemic, but the pandemic exacerbated it.” This was echoed by Donald Tang, who shared SHEIN’s business model of on-demand production. Veronique Yang further explained that companies are rethinking their global supply chain network – diversifying their supply bases “and sometimes even changing their supply chain models to prevent disruption.”
This drove the conversation towards the topic of resilience, which all speakers agreed was fundamental for the advancement of the fashion industry. While Donald Tang further shared how SHEIN had made it its mission to empower the supply chain since the start of SHEIN’s business, whether it was by funding their adoption of new tools and technology, or providing training and up-skilling to their workers, or even offering flexible settlement terms that are much shorter than the 90-days standard of the industry. Veronique Yang also added that resilience required creating more openness and transparency across the entire value chain – from suppliers to retailers. “They have to work together to problem solve the potential frictions… and digitization is a big part of that.”
Speaking to the recent report, Creating Agile Supply Chains in the Fashion Industry | BCG, Veronique Yang shared key learnings from BCG’s research:
Digital technology can help improve performance across three measured commercial areas: balancing cost, speed to market and quality
Digitalization helps streamline supply chain tasks and save time for suppliers. For example, an online fabric ordering database and order system makes it effortless for suppliers to carry out material preparation ahead of production
People think it’s hard to control quality while keeping cost down. In reality, a digital system can predict and pre-empt potential quality issues, containing them from the very start of the value chain.
Donald Tang agreed, adding how on-demand fashion enables a brand to minimize waste while addressing the “fashion trilemma” – offering the broadest amount of choices, with frequent refresh while addressing inventory management. In this way, bespoke production can actually cost less than mass production.
Divya Demato countered that while there could be fewer articles of clothing upstream, fashion brands still need to consider downstream and post-consumption. She raised a call to innovation and investments in technologies and materials to support more sustainable fabrics for upstream.
In closing, speaking to forward looking change, Veronique Yang added: “Fashion industry companies – you have the responsibility and power and influence and to shape this together.”
In the short Q&A segment, there was much interest in SHEIN’s ability to replicate its business model in other markets. Donald Tang invited Marcelo Claure, Chairman of SHEIN Latin America, who was in the audience, to share about his plans and experience in rolling out manufacturing for SHEIN in Brazil.
The global pandemic has pushed many companies worldwide to improve the sustainability within their supply chains. GoodOps CEO Divya Demato is leading the charge, as they consult with some of the world’s largest companies, exploring new ways to improve their sustainability practices and gain competitive advantages by going green.
Whoever said “leave well enough alone,” was surely not a small business owner in growth mode. Change is not only a product of, but often a prerequisite to, breaking through to the next phase of business growth.
“That surprises some business owners,” says Divya Demato, CEO and co-founder of GoodOps, a supply chain and sustainability consultancy that advises companies on their business strategy. “They think, ‘We had success with this strategy, why change?’ But what you realize is you may have to modify your products or services, or vendors or partners, to be able to scale.”
Growing businesses—and all businesses in today’s ever-evolving business environment—must embrace agility. Whether that means adapting to changing conditions, like a global pandemic, or making strategic adjustments to reach the next level, the key is knowing what to change. Read on for four ways small business leaders must evolve their companies to enable growth.
1. Reshape Your Team For Growth
“Many times, the core entrepreneurial team that got you to this point, some of them may not be able to go on that journey of scale with you,” Demato says.
This can be a tough one—especially for close-knit companies. But it’s a matter of evolving roles and the skills needed for those roles. Small companies often require generalists rather than specialists and operations talent rather than managerial. Larger companies need more specialists and managers. And businesses in growth mode? They require a unique blend of both.
“You’re looking for people who have both entrepreneurial and operational strengths, and it’s a very potent combination,” says Demato. “It’s an interesting time in your business. You’re not so big yet, but you’re not a startup either.”
Small business leaders looking to grow should evaluate their team’s strengths and skill sets to ensure they have the right folks in the right roles and to determine what, if any, gaps in talent exist. This analysis will help leaders strategically recruit or retrain the talent needed to position their company for growth. While the talent market may be tight, offering recruits what they’re looking for now—including flexible work options and diverse teams, according to a 2021 study—can help attract the right candidates.
2. Leverage Customer Data
To grow your business, you have to know your business. Nothing can tell you more about your company, products and—most importantly—your customers, than data.
“If you’re not collecting customer data, you need to begin immediately,” Demato says. “Your business data will tell you the health of your business, but the consumer data lets you know how your consumers behave.” Understanding that behavior will allow you to adjust your sales, products, and marketing as needed to grow.
Many startups, and retailers in particular, choose the visibility and reach of third-party marketplaces to find and grow their customer base. The trade-off is often that the third party ends up owning the customer data.
In order to understand who is buying the product, what they’re willing to pay, what other products they’re interested in and where they’re located, some businesses may need to refresh their ecommerce strategy. If they’re selling through a third-party marketplace, based on the resources available, it may be time to move to their own retail site.
And, of course, they’ll need to learn how to interpret and leverage that data, too.
“You have to have the right people on your team that can make sense of that data,” says Demato.
3. Diversify Your Supply Chain
Growing companies should learn from the struggle that businesses of all sizes grappled with in a pandemic-impacted world. Dealing with uncertainty has pushed businesses to adapt, allowing them to be more agile, adopting new strategies and processes based on what they’ve learned. Small businesses with an eye on growth should do the same by building out their supply chain networks with the potential for disruption in mind.
“Make sure that whenever unforeseen situations happen, you can pull the right levers that keep you in business,” Demato says.
She recommends a two-pronged approach, beginning with a diversified supply base. Having multiple vendors allows businesses to keep operating, even when unexpected events disrupt one supplier’s operations. She also emphasizes the importance of developing strong relationships with suppliers.
“They’re truly your partners. You need them to buy into your vision. Think about their needs, and help them stabilize and be sustainable,” she says. “You want them to grow with you.”
4. Embrace Sustainability
Entrepreneurs have a breadth of options when it comes to sustainable sourcing. Though environmentally friendly suppliers and practices may have been a cost burden in the past, based on her experiences helping companies build sustainable supply chains, Demato has observed a change.
“There are great and very affordable options now,” she says. “The assumption that sustainable operations are more expensive, it’s just not the case anymore.”
At the same time, the costs of not operating sustainably are going up. Consumers, talent and investors all have sustainability top of mind—70% of consumers in a 2021 survey said they buy from brands that share their values. This reveals a clear market opportunity for small businesses. In another 2021 study, 85% of consumers said they have become greener in their purchasing, and more than a third of Gen Z and Millennial buyers say they’re willing to pay a premium for sustainable products.
For many small business owners, maintaining sustainable operations and choosing environmentally conscious suppliers—like Office Depot, whose Office Depot’s GreenerOffice™ line offers products with environmental attributes and ecolabels like cleaning supplies made with less harsh chemicals and paper with recycled content—is an easy first step. Your existing resources and partners are an extension of your team. Tapping into their sustainability opportunities is an efficient way to begin your sustainability journey.
Companies that can authentically communicate their environmental efforts to consumers have a competitive advantage when it comes to attracting and retaining customers. Establishing that rapport allows you to demonstrate that your brand has similar values as your customers and that you care about making a difference.
For small companies, growing does not mean running the same business on a larger scale. With the right people, processes and partners, small businesses can position themselves to reach their growth goals.
Supply chain and logistics are by definition multinational, but are they inclusive and diverse enough? Supply Chain Digital speaks to those in the know
In 2021, many businesses made popularist vows to become more diverse. As an international industry, supply chain is one sector that offers great potential for change.
Supply Chain Digital spoke to two prominent women in business. Here, they explain their roles, their experiences and their hopes for a diverse and inclusive future in the sector.
Sarah Barnes-Humphrey, who is based in Ontario, Canada, has been in supply chain and logistics her whole career. She is the co-founder of Shipz, a company that brings shippers and forwarders together and streamlines the quoting, booking, and shipment process.
She is also the co-founder of Blended, a non-profit organization whose mission is further diversity, equity and inclusion (DEI) goals. As well as this, she hosts two popular podcasts – one for Blended and another called Let’s Talk Supply Chain.
“The Blended podcast started after the success of our Women in Supply Chain series,” says Barnes-Humphries. “I knew the conversation needed to be bigger but I didn’t want to just be another podcast.”
Divya Demato, meanwhile, is the CEO and co-founder of supply chain and sustainability consultancy, GoodOps.
“With three children, I am my own supply chain”, jokes Demato. “I have 18 years’ experience in the supply chain stratosphere, across food, fashion, and home goods. I’ve worked as a buyer, so I understand procurement and sourcing very well.”
Supply chain challenges on diversity
With decades of experience, both women have seen the consequences of a lack of diversity and resistance to inclusion.
“There are a number of challenges,” says Barnes-Humphrey, “and to be fair it’s not just in the supply chain industry.”
She adds: “One is that DEI is not only gender based – it is about accepting all and being open to all perspectives, Second is that we really need to see representation of everyone at all levels of the supply chain. One way we can do that is by sponsoring diverse speakers and audience members, as well as sponsoring minority-owned business to have the same access to promotional activities.”
Supply chain jobs ‘often gender specific’
She continues: “Speaking as a woman of colour, there’s very few such women in the sector”, says Demato. “When I started, there were gender-specific positions. You saw a lot of female buyers, but not necessarily a lot of females in logistics, transportation or in the warehouse.
“The head of the team or the department was usually a man. In terms of diversity, I think women have an opportunity to innovate and bring their knowledge into the supply chain space.”
Barnes-Humphreys says she is not suggesting it’s only women who care about sustainability “because that’s not true”. But she does feel the way women think can benefit the supply chain.
“Women are more likely to ask about the impact of the work they are doing beyond just time and transit and the cost of moving products. They are more likely to ask how their work is connected to the entire supply chain.”
Demato believes there can never be enough diversification in any work environment.
“We know that more-diverse workforces perform better,” she says. “I think that in terms of inclusion it’s really about power, right? Do you have the ability to make the changes that you want? I was very fortunate to have amazing mentors and bosses that really shepherded me along the way.”
Supply workers ‘surprised I’m Indian’
Demato can remember instances in the pre-LinkedIn business world where her presence as an Indian woman surprised people.
“I definitely know that it was sometimes shocking for people to meet me, because we might communicate over email and then we’d meet in person and they would be surprised that I was an Indian woman. Nowadays, you can search online and have a sense of who you’re talking to.”
So in 2022, what hurdles does Demato feel people of colour deal with in the supply chain?
“To begin with,” she says, “the phrase ‘people of colour’ – that’s a massive group of people, so who are we talking about exactly?”
She adds: “There’s racism and bias in general but I would bring it down to education. That’s something I think is really interesting about supply chain. For example, do you need a college degree to work in the supply chain? Not necessarily. So much is based on experience. And this isn’t just about people of colour. There are a lot of socio-economic challenges.”
Women in supply: the barriers
“It depends on the environment,” says Barnes-Humphrey. “Women have many more allies than we used to – allies who stand up to conference organisers and refuse to be on a panel that is not diverse. I am hoping this will expand into not just being gender focused. Women do still face very male-dominated thinking in some aspects of the industry. It is very frustrating that we are still dealing with this kind of thinking.”
As for Demato, she feels the brand of workplace opposition many women face is people doubting their ability. She says she has had colleagues and associates questioning her position, and asking how much experience she really has.
“I was lucky to join such big-name companies early in my career,” she admits. “That gave me a lot of credibility.”
Demato also points out that just because hers is a numbers-driven type of job – “performance metrics, KPIs and so on” – that does not mean the job is not for women. Quite the reverse, she insists. “I’d say it’s an exciting space to get into, if you’re someone who likes direct assessment of your performance.”
Learning life lessons in supply chain
Anyone who has earned a degree and been fortunate enough to go straight into that career field knows that workplace reality rarely follows textbook theory. Most of what we learn in our careers is on the job. So what have Demato and Barnes-Humphrey learned?
“I think it’s understanding there is an impact to everything we create and make. The reason I’m focusing on the sustainability side of supply chain is based on that lesson. These things all come at a cost, whether it’s to the people or to the planet”, says Demato.
She adds: “The supply chain gives jobs; it is a livelihood. It is a current that runs around the world and it can give life to communities. The supply chain actually has a lot of power.
“And we western countries – how much waste are we creating? What are we buying? What is actually happening to the communities where all this landfill is going?”
Barnes-Humphreys reveals the most important lesson she’s learned is that it’s only with mutual respect “that the magic happens”.
“When we come together, work together, and understand and respect each other’s roles, that’s where the magic happens. Communication and data are the other big components, because the more we know the better we can be.”
Both Demato and Barnes-Humphreys want to see diversity reign – from head office to warehouse floor, especially after two years of social distancing as a result of the pandemic.
“In the global supply chain you will interact with people from all over the world,” says Demato. “If you want to work with a diverse group of people what could be better than this?”
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.
The advantages of building sustainability in your supply chain
Increasing awareness worldwide of the impact of climate change and preserving the environment has thrust sustainability to the forefront. More and more companies are now implementing sustainable practices and innovation into their business. In this Buyer Fireside Chat, learn everything you need to know about sustainable sourcing – from the challenges and opportunities to the advantages of building sustainability in your supply chain and what lies ahead.
The panel
Pia Pinkawa
An independent communications and marketing professional and sustainable supply chain expert, Pia works with international organizations and service providers to engage procurement, supply chains and people to strive for and implement a sustainable way of making business.
Pia is part of the steering committee team of the Sustainable Procurement Pledge (SPP), a global initiative and growing procurement community of already more than 5,000 ambassadors.
Aaron Leonard
Sustainability has always been a passion for Aaron, one that he now combines with his years of experience and expertise to drive positive outcomes in corporations’ sustainability journeys. Aaron has more than 20 years of experience in offering innovative, business-changing digital and sustainability solutions to large multinational corporations.
Previously, he was Sales Director and co-founder of the successful startup Simple iD, a leading IT solution and consulting company helping to modernize companies’ collaboration and communication systems across the APAC region and beyond.
Divya Demato
Divya is the CEO and co-founder of GoodOps – a supply chain and sustainability consultancy that partners with high-growth startups and global enterprises to architect, accelerate and scale responsible operations.
Divya is also an advisor to Rethink Food VC and Radiant Ventures, is chairwoman emeritus for Nexus Global, and a mentor for Unreasonable Group. In 2021, she was named one of the Top 100 Women in Supply Chain by Supply Chain Digital.
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.
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.
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.
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.
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.
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.
