How collaboration can drive value for you, your partners and the planet

Organizations have a growing responsibility to ensure their supply chains are sustainable, and in doing so, there is opportunity to generate both financial and non-financial value for themselves and their partners.

For example, EY research with the Coalition of Inclusive Capitalism shows that investing in sustainable supply chains can add 12% to 23% to overall value chain revenue. It also finds that organizations with supplier diversity programs generate a 133% higher return on procurement investments than those without.

The key to realizing such benefits lies in working closely and collaboratively with your value chain partners to collectively unlock value and improve your impact beyond the simple transactional function of making and selling products. Seek greater visibility into the behavior of your suppliers and partners – both upstream and downstream – and their impact on sustainability issues. And then use those insights to rethink and reshape how you engage with them, through the following actions:

1. Consult to define the standard you want to set

Before you embark on any commitments, understand what’s viable based on what you know and how quickly you want to deliver change. Collect feedback from suppliers and partners. Understand which ones won’t want to meet the standard you expect or will struggle to and why. And work out how to help them close the gap. It’s also important to listen to your suppliers – finding out what they’re challenged by, and how increased collaboration and integration might help achieve common sustainability goals. Remember, as part of a value chain, your partners will have their own standards that they’ll expect you to meet too.

2. Set the standard

Understand what sustainability means to your organization and your stakeholders, what your goals are, and how you can provide the evidence to communicate progress. This is an opportunity to refocus your sustainability strategy as a driver of growth, value and innovation. Be ready to demand data-based targets from your suppliers, rather than merely asking them to reduce emissions, and to widen the scope of your scorecards to measure the factors most important to your business.

3. Communicate it

Be clear about your expectations and the timeline for meeting them. Understand the contracts and contractual agreements you have in place – don’t be caught out. Establish and communicate the support you and your value chain partners can bring to enable the targets you set to be both ambitious and achievable.

4. Measure it

Build or leverage the capabilities to monitor and track supplier metrics and progress, capture certifications, and identify potential risks. Allow them access to your system to feed in their data, but visit them regularly too: your visible commitment and support will help foster change. Be honest and open about what it takes to be part of your ecosystem. Plus, be sure all of this is reflected in investor and stakeholder communications.

5. Improve it

Having clear expectations and targets for your suppliers’ behavior will help you spot those falling short and understand how they can change. Provide support and incentives to help them, e.g., loans to buy necessary equipment, centralized training and technology to keep everyone on the same page. As you achieve your goals, set your sights on new ones.

6. Scale successful initiatives across your business ecosystem

Once your standards-based ecosystem is up and running, share and scale up best practices across it. For example, cutting water use by 25% with one supplier might earn some favorable headlines – but a 5% cut across all suppliers may have a more meaningful impact.

While being able to set, measure and monitor sustainability standards across your value chain is vital, it’s only part of the story. Many challenges can only be resolved through working together and sharing responsibility with a wider business ecosystem.

What do we mean by a business ecosystem? Essentially, a grouping of organizations that come together to create higher value collectively than they could individually.

When focused on sustainability initiatives, the positive effect of such alliances can be several magnitudes greater than if the companies acted alone. What’s more, their collective nature builds bigger scale and therefore higher financial viability.

Harnessing the power of combined expertise …

Clearly, there are challenges to building ecosystems. Almost half (46%) of consumer-facing companies don’t prioritize the role of ecosystems in innovation. And when they’re asked why collaboration with other organizations fails, 39% point to a focus on low-value or non-core initiatives and 38% a lack of strategic alignment.

But overcoming these hurdles pays dividends. While a common problem might appear insurmountable for one company, the ability to solve it could exist within a broader ecosystem. If one company commits to meeting a sustainability target, progress may be difficult and the overall impact negligible. But if a consortium of companies aligns on the same standard and works together to resolve it, then the path is easier to navigate, and the final impact is exponentially better.

So, when looking to identify the root cause of an issue, think about which players are impacting all the levers involved and engage with them. And don’t limit yourself to your value chain: be ready to bring in competitors, governments and other third parties too.

What’s more, when reaching out, look to collaborate with other consumer-facing companies; you’ll often get a warm reception. EY Reimagining Industry Futures research shows that 44% look to ecosystems to access new skills, knowledge and competencies, and 42% to accelerate innovation.

… by making collaboration work

However, delivering against common goals requires more than being in the same room. It also demands a common commitment to making collaboration work. This means sharing tough problems, choosing like-minded collaborators, and building trust between all the parties.

All of this is already happening. Over the past few years, there’s been a tidal wave of alliances, each rapidly accelerating its membership. By the end of 2020 the number of international environmental organizations worldwide was approaching 200, with most counting many global consumer products and retail giants among their members.

What’s clear is that companies are increasingly accepting they can’t solve systemic sustainability challenges on their own. They’re realizing that the goals they’ve set for 2025 or 2030 will require a degree of scale only achievable by pooling resources.