STATE OF SUPPLY CHAIN SUSTAINABILITY 2020

MIT Center for Transportation & Logistics

Council of Supply Chain Management Professionals

CSCMP

EXECUTIVE SUMMARY

The Path to 2020

Sustainability is impacting the way companies operate in every industry across the globe. Yet our understanding of supply chain sustainability and its impact on enterprises is limited. The State of Supply Chain Sustainability 2020 Report aims to fill this information gap and to help inform what the future of supply chain sustainability might look like.

The report is groundbreaking on two fundamental levels. First, this is the first edition of what will become an annual research project that aims to chronicle the evolution of supply chain sustainability over time. Second, our three-pronged analytical approach and comprehensive coverage are pioneering in the supply chain sustainability domain.

  • The pressure to act is pointed: Some organizations are feeling significant pressure while others are feeling none, with the pressure largely dependent on their industry. And for those feeling pressure, it is not coming from just one source—it is being exerted by a diversity of stakeholders—not just campaigners like non-governmental organizations (NGOs), contrary to accepted wisdom.
  • But what effect does pressure from stakeholders really have? We found that when companies feel pressure, they are far more likely to have publicly stated goals for which they will be held accountable. Companies that don’t receive pressure, meanwhile, are less likely to have such goals.
  • Despite pressure from multiple angles, many organizations appear to be rudderless when it comes to supply chain sustainability. Less than half of the supply chain professionals surveyed confirmed that their organizations have publicly stated supply chain sustainability goals. One-third maintained that their enterprises don’t have such goals, and the remaining respondents were not sure whether these goals exist at their firms.
  • Enterprises with sustainability goals tended to favor social rather than environmental targets. Eliminating child labor and forced labor was a top concern for most companies.
  • Setting goals is important—but the acid test is how much companies actually invest in efforts to attain those goals. Our research showed that there is a significant disparity between the two sides of supply chain sustainability; while social sustainability is touted as top of mind when it comes to setting goals, environmental goals receive the most investment.
  • What do companies publicly disclose about supply chain sustainability programs? Over 40% of respondents confirmed that their organizations disclose supply chain sustainability practices. They prefer to disclose on platforms the companies can control, like websites or press releases, rather than more structured disclosure reporting platforms like CDP (formerly the Carbon Disclosure Project) or Global Reporting Initiative (GRI). Carbon emissions and climate change are the most frequently reported topics.
  • Knowing which tools translate investments into action helps to guide supply chain’s pursuit of sustainability. Study results show that the two tools most widely embraced across the industries examined are supplier codes of conduct and supplier audits. Executives also expressed the value of collaborating with supply chain partners and external stakeholders to achieve sustainability goals.
  • A notable finding is that almost 40% of the practitioners surveyed were either a primary decision maker or directly involved with sustainability. This shows that supply chain is taking a central position in sustainability activities. Again, however, a note of caution is warranted: Some respondents pointed to issues such as a lack of engagement and training that can prevent supply chain professionals from taking on more responsibility for sustainability.
  • These are not the only speed bumps. Executives highlighted that financial, physical, and technological barriers also stand in the way of supply chain’s shift to more sustainable practices. For example, in low-margin businesses such as apparel, making the case for investments in supply chain sustainability can be extremely challenging.

The Future of Sustainable Supply Chains

Our research findings affirm that sustainability is influencing companies on both tactical and strategic levels, although it does face some significant headwinds. As business priorities change, so will the way in which supply chain sustainability is framed and implemented. Priorities and approaches are shifting for various reasons, but one thread dominates this complex weave: the COVID-19 pandemic.

This global catastrophe has already redrawn the supply chain sustainability map to some extent in response to changing consumer demand. The crisis is reshaping the contours of the sustainability movement, with some experts seeing a significant downturn in adoption of supply chain sustainability, while others see an opportunity to drive up engagement. It’s impossible to know for sure how the pandemic will impact supply chain sustainability in the long term—only time will tell.

  • We predict that COVID-19 will reset the supply chain sustainability trajectory over the next few years. Interest in sustainability peaked in 2019, and then it hit the buffers of the COVID-19 crisis in 2020. Today’s massive supply chain disruptions are forcing a pivot toward response and mitigation. The year 2021 will be characterized by supply chain redesign as the focus shifts to recovery. In 2022 and beyond, re-evaluations of supply chains—including sustainabilitymay gather steam as business models are redefined.
  • A key sustainability area that we expect will gain importance is social issues. The pandemic is teaching companies some harsh lessons about the cost of underestimating the importance of “front-line” workers such as meat packers and delivery drivers. One outcome could be a greater focus on worker health and safety, as well as on benefits and pay.
  • Another theme to note is the future role of technology. This is nothing new; however, in recovering from multiple disruptions, firms will probably be more likely to invest in information technology that gives them better visibility into upstream and downstream operations. As consumer buying habits are being reshaped by the pandemic, the value of trust and ethical practices as components of a brand will likely increase. This trend implies that supply chain transparency will gain in currency; the days of opaque supply chains as commercially viable entities may be numbered.
  • Finally, the pace of change was frenetic before the COVID-19 crisis. The post-pandemic era promises to be even more fraught with uncertainty, which underscores the need for this annual report.