Companies are Falling Short of ESG Goals. It's Time for a Supply Chain Revolution!

Companies have increased their attention on sustainability, but efforts are falling short.? Three challenges contributing to the shortfall are lack of a clear focus, supply chain stagnation, and organizational culture. To achieve desired results, a supply chain revolution is needed!

Lack of Clear Focus

Identifying a company’s ESG priorities can be like asking toddler for their wish list of toys.? Everything they see immediately moves to the top of the list!

There is tremendous pressure from consumers and the investment community to meet sustainability goals, but results are futile with a lack of clarity and contradictory targets.

An example of these contradictory targets can be found in the packaging arena.? Among the Fortune 500, there was a massive push for recyclable product, then product with recycled content, then carbon emissions reductions, then plastic reductions, then recycled plastic, then overall packaging reductions. Sounds great, right?!? The truth is, many of these goals contrast with each other, and there are major challenges with each one.?

Recycled content can increase CO2 emissions.? Companies aren’t providing a clear direction until they decide if their key focus is recycled content or CO2 reduction.? Another paradox is the focus on recycled content alongside the poor recycling rate in the US. Shouldn’t this drive a focus on eliminating unnecessary packaging?? Definitive direction and sweeping lifestyle changes must be made to meet this goal, especially when the demand for recycled content is far outpacing its availability.? In fact, Greenpeace USA [1] finds that U.S. households generated an estimated 51 million tons of plastic waste in 2021, but of that, only 2.4 million tons were recycled. ?

The sustainability initiatives that companies are moving to the top of the list are hugely aspirational goals that strain existing supply chains, and in some cases, require big shifts in consumer behavior.? And when these initiatives don’t advance, the focus changes…Again.

Gartner predicts 20% of companies will shift their focus from recycling and plastic reduction to carbon footprint reductions by 2026 [2].? This constant change of direction can wreak havoc on an organization, causing confusion driving supply chain teams to abandon sustainability altogether.? They often fall back to a single focus the one clear goal – cost savings, without exploring if they could have both cost savings and sustainability improvement.

Supply Chain Stagnation

The supply chain is the usually the largest contributor to a company's carbon emissions.? For some verticals like CPGs and Financial Services companies, it makes up more than 95% of their carbon emissions [3].?

Unfortunately for Mother Earth, improvement in this area is heavily dependent on supply chains that are designed around industry giants that manufacture materials in a similarly environmentally unfriendly method as when silent movies were the trendy form of entertainment.?

There are innovative “disruptive” suppliers bringing solutions! Because these solutions don’t always bring an “apples-to-apples” comparison in the bidding process, these innovation opportunities are often prematurely dismissed from consideration, thus eliminating any chance a company has to actually achieve true progress.

Innovation is moving at a snail’s pace because supply chain teams are too busy keeping up with their current workload to explore alternatives.? The thought of a transformational approach to key categories can be crippling for supply chain professionals.? Without a supply chain revolution, the same suppliers are considered for the same business and the result is the same – little to no progress in meeting ESG goals.? When companies start investing resources and organizational support into entertaining new ways of doing business, the opportunities for sustainability improvement will shine through.

Organizational Culture

Few companies have adopted a culture of sustainability within their organizations.? While there are plenty of marketing messages devoted to sustainability initiatives, it is far too often just that - marketing.? Without a lens of sustainability embedded in the decision-making process of an organization, real progress is evasive.?

Another factor slowing organizational adoption of sustainability initiatives is the criteria used in evaluating employee performance.? While some companies link executive compensation to sustainability improvements, this incentive seldom trickles down to the category managers in the supply chain.? When the largest opportunity area relies on employees that are not evaluated or paid on these improvements, the results won’t happen.? The key focus will always be on the area that drives performance metrics.? Typically, in the supply chain, those performance metrics are cost savings, making an apples-to-apples bidding process a far more attractive approach than transformational change.

This is where the Supply Chain Revolution begins…

There are some amazing success stories in sustainability, but they are rarely shared.? This silence is called greenhushing, and it is driven by fear of criticism of a company’s approach to sustainability.?

To get desired results, companies must be boldly focused on the specific metrics, consistent in driving organizational change, and open to innovation. ?When successes are identified, sharing loudly and often should be encouraged so that a wildfire of progress is sparked, and only then will the supply chain revolution lead us to a happier Mother Earth.

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[1] New Greenpeace Report: Plastic Recycling Is A Dead-End Street—Year After Year, Plastic Recycling Declines Even as Plastic Waste Increases - Greenpeace USA

[2] Gartner Predicts 20% of Organizations with Sustainable Packaging Goals Will Shift Their Focus from Recycling and Eliminating Plastics to Reducing the Carbon Footprint of Their Packaging by 2026

[3] World Resources Institute; Source data provided by CDP; data analysis conducted by Concordia University

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