5 actions to create value in your supply chain
The new generation of socially conscious consumers is seeking out brands that share their values: 77% of millennials believe companies have a responsibility to lead social and environmental change. [1] They want to see how businesses are actually driving purpose and see proof that it’s not just a nice, shiny marketing campaign. What they are searching for is a company that talks the talk and walks the walk. However, how could this be implemented in the supply chain?
Key messages:
“Purpose is not an initiative; it is a way of business. It must be core to the decisions, conversations, and behaviors across all levels to be authentic and deliver the wealth of advantages it promises. Now, more than ever, companies must cultivate the power of purpose if they are to succeed in a world where the opportunities—and responsibilities — of business have never been greater.” [4]
Why do companies embrace purpose??
In view of the global challenges, the responsibility of companies is growing. They can no longer base their strategy solely on their profits; instead, corporate management with the formulation of a purpose can bring long-term success. We can define purpose as “a company’s reason for being beyond profits that guides its business growth and impact on society” [5]. The idea is that organizations take social and environmental considerations into account and lead with responsible governance (ESG) to satisfy different stakeholder groups. For food companies, supply chains offer plenty of room for purpose. A lot of stakeholders in different locations can be included here, from food production, sourcing, manufacturing, and distribution. Furthermore, about 80% of the emissions generated are in the value chain - considering supply chains are therefore a crucial part of satisfying their critical consumers in terms of climate action.
5 action steps for supply chain managers?
Gartner has formulated 5 action steps that supply chain managers can take to achieve the desired purpose:
1. Executive Commitment:
As said, leaders risk losing their sincerity and the trust of their workforce if no meaningful action is taken. According to Gartner, supply chain managers should incorporate purpose into the decision-making processes and KPIs that comprise the overall supply chain strategy.
2. Engagement in Portfolio Management
Based on Gartner, product, purpose, and marketing position decisions have an impact on supply chain organizations and require them to deliver on those decisions. Supply chain managers must ensure that a product is advertised as sustainable and provide traceable proof of this claim.
3. Align Partner Ecosystem to Purpose
Supply chains can amplify their purpose by collaboratively partnering across the ecosystem, but an organization cannot be fully purpose-driven unless its crucial partners are aligned to the same goal. According to Gartner, however, less than half of supply chain leaders think ecosystem connections are crucial for supporting goals.
4. Employee Engagement
Employee engagement must be fostered by involving them in decision-making processes and giving them the chance to ask questions. It should also be promoted while recruiting new employees: “Building a purpose-driven culture means providing employees with autonomy, decision-making principles, and opportunities to ask questions and contribute.”
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5. Be Accountable
Accountability is necessary to reduce the risk that stakeholders may see a purpose-driven agenda as nothing more than a marketing gimmick.
“Enterprises aren’t charities,” said Watt. “Still, chief supply chain officers and executive leaders need to decide if they want their purpose to enable long-term profits, or if the enterprise is purely profit-centric, with purpose relegated to being an employee engagement tool. If they choose the former, they must implement the metrics to prove that they can walk the talk.” [6]
Unilever and Patagonia lead with example
The food giant Unilever and clothing pioneer Patagonia lead with example. Unilever introduced the concept of "brands with a purpose," implying that products like Miracle Whip served a greater purpose than simply making sandwiches taste better. Their purpose is summarized as follows: to make sustainable living commonplace.?
In its core, the company has formulated the Sustainable Living Plan. Launched in 2020, Unilever's Partners with Purpose (UPWP) program wants to take purpose-driven partnerships to a new level to drive market-leading innovation and protect and regenerate nature, while also taking their supply chains into account.?
Their strategy includes “the connected supply chain” with superior products, service, and value. Among other things, they want to gain purpose by creating a positive environment for people and the planet and by building partnerships.
Patagonia has a purposeful mission too: the enterprise has radically changed its corporate strategy and no longer wants to align success with growth but with environmental protection. In 2018, the company changed its target from "make the best product, do no unnecessary harm, use business to inspire and implement environmental solutions'' to "Patagonia is in business to save our home planet."
For example, we can look at the wool production of the company. Through their “Supply Chain Environmental Program”, Patagonia aims to create a robust standard that defines the best practices in animal welfare and land management that farmers implement. [7] Thereby, they want to cover farm-level practices including housing, nutrition, shearing, medical treatments, and sustainable grazing practices.
With their purpose, they have reduced the environmental impact of their supply chain over time: they have learned more about their suppliers' facilities and have increased cooperation in training and the implementation of improvements. Some suppliers, for example, have equipped their facilities with water and air emission treatment plants that go above and beyond the statutory requirements in order to meet the stricter Patagonia requirements. Other businesses have banned the use of hazardous chemicals and implemented safe chemical management procedures. As of March 2020, they have certified 170 certified businesses, ranging from farms to brands, in 23 countries around the world.
And to top it all off, as all of you have probably heard by now, the company's founder, Yvon Chouinard, plans to donate his future profits to the newly established Holdfast Collective foundation and donate his fortune to environmental protection - especially to measures against climate change. Any profits that are not directly reinvested in the company are to go to the foundation. According to the New York Times, that's $100 million this year alone. [8]
"We had to find a way to be able to put more money into fighting this crisis while keeping the values of the company intact," Chouinard continued. "Hopefully this will influence a new form of capitalism that doesn't end up with a few rich people and a bunch of poor people," Chouinard told the newspaper.
We help you to create purpose in your supply chain
At Klim, we believe that regenerative agriculture is the best solution for creating purpose in companies’ upstream agricultural supply chains. It is important for us to see eye-to-eye with your suppliers and take their needs into account. The Klim platform makes both possible: We offer farmers the opportunity to document their regenerative measures online and view their positive environmental and climate value. Companies can track the CO2 savings of their farmers and achieve their emissions targets. The tool offers a room for exchange, common learning, and proof of the metrics. With our label, we ensure that consumers become aware of the huge impact of regenerative agriculture and develop an appreciation for the product as well as for the farmers. The revenue generated can in turn be used to reward the farmers, giving them incentive and meaning.?
All in all, we can support a holistic transition of your supply chains, adding value by: