EY research suggests that even when boards have a more favorable view of sustainability, cost issues often outweigh environmental considerations in making decisions. How companies address this tension, particularly as the risk for supply chain disruption from issues such as climate change continues to increase, may well emerge as a defining business issue over the next decade.
Moving beyond compliance
We are approaching a key inflection point, one in which supply chain sustainability becomes a key competitive differentiator for companies that embrace sustainability, offer innovative products and services, and back their rhetoric with significant investments. Conversely, companies that view sustainability as simply a compliance exercise could find themselves struggling to retain talent and maintain their brand image.
At a recent gathering of an Ernst & Young LLP sponsored executive supply chain roundtable, several US and global corporations discussed the steps they were taking to move their sustainability programs beyond compliance. While some companies were using sustainability to differentiate themselves in the marketplace, others were engaging in efforts to reduce costs as well as meet additional goals, such as addressing human rights issues, improving transparency and supporting sustainable agricultural practices.
We currently see several ways in which companies are striving to become more environmentally sustainable in ways that resonate with the marketplace. The first is trying to meet environmental concerns of food consumers, while the other is to reduce waste in production, from materials as diverse as food to steel. We also see a third sustainability differentiator that will soon assume increasing importance — a traceable supply chain that will show consumers the exact path a product took from the production shop to the consumer.