LONDON – New research shows the balancing act supply chain managers face between focusing on sustainability and economic issues. The global survey of supply chain decision makers reveals that economic performance is the top ranking corporate sustainability priority for the majority of organisations. However, when directly asked whether profitability or sustainability was more important, 60 per cent gave equal priority to these objectives, with another 25 per cent leaning towards sustainability. The results are particularly relevant for apparel supply chains where there are constant calls for better coordination between sustainability and purchasing functions.
Conducted by the Economist Intelligence Unit, the research and analysis division of The Economist Group, and sponsored by LLamasoft, a global leader in supply chain optimisation software and solutions, the survey of senior executives in 250 manufacturing and retail organisations across the U.S., Latin America, EMEA and APAC regions set out to explore supply chain approaches and priorities in relation to business sustainability.
Jeremy Kingsley, technology editor with the Economist Intelligence Unit, said: “These findings are extremely interesting – on the one hand we see respondents possibly ‘saying the right thing’ when asked in the abstract about the relative importance of profitability and sustainability, but saying something quite different when it comes to specific organisational priorities. We also see a correlation between seniority and the relative importance of sustainability and profitability, with 67 per cent of C-Suite respondents saying that sustainability comes first, compared to 55 per cent of other respondents.”
When asked about what is driving supply chain sustainability in their organisation, growth opportunities (36 per cent), cost savings (34 per cent) and the importance of responsible business practices (33 per cent) were the top drivers. However, respondents were divided on whether supply chain sustainability has a positive or negative impact on cost, with increased costs being cited as the largest impediment to supply chain sustainability and responsibility by 38 per cent of respondents, especially those representing smaller businesses. Difficulty in monitoring complex supply chains (29 per cent) and organisational structures (24 per cent) were also cited as barriers.
“There are many ways companies can make their supply chains leaner and greener, but for organisations with potentially hundreds of suppliers, thousands of products and millions of customers, determining the best alternatives is far from straightforward, at times making sustainability and profitability an ‘either-or’ choice – but it does not have to be,” said Razat Gaurav, CEO of LLamasoft. “Making the right decisions that can accomplish these dual objectives requires both a big picture view and a granular understanding of the end-to-end supply chain. Global organisations must turn to technology to build ‘digital twins’ of their real world supply chain, providing a risk-free environment in which to play out many scenarios, from the expected to the unlikely, giving them the confidence that the changes they make will deliver the desired and expected outcomes.”
Full survey findings are available in a report entitled “Sustainability: The Missing Link?”, which can be downloaded here