State of Supply Chain Sustainability 2021

MIT Center for Transportation & Logistics

Council of Supply Chain Management Professionals

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Contents

Presented by

CSCMP

Sponsored by

Blue Yonder
KPMG
Sam's Club

Executive Summary

Key Insights: The Path to 2021

Highlights from the second annual State of Supply Chain Sustainability include:

Last year, when the impact of the Covid-19 pandemic was still escalating, we expected the crisis to dampen companies’ enthusiasm for investing in supply chain sustainability (SCS). Enterprises would surely divert all their attention to combating the pandemic. Remarkably, the survey results suggest that Covid-19 did not significantly slow the push to make supply chains more sustainable. More than 80% of survey respondents in this year’s report claimed the crisis had no impact or increased their firm’s commitments to SCS. Executives were undeterred by the crisis; 83% of the executives interviewed said that Covid-19 has either accelerated SCS activity or, at the very least, increased awareness and brought urgency to this growing field.

A caveat to the steady progress in SCS between 2019 and 2020 is that the momentum appears to come primarily from large (1,000–10,000 employees) and very large (10,000+ employees) companies. Small- and medium-sized companies were more likely to pull back, with more enterprises in this category indicating they were not engaged before the pandemic and even less so during the crisis likely due to strained financial resources.

Still, the number and range of stakeholders that are compelling companies to pursue SCS has not diminished. A finding in line with last year’s report is that the pressure to support sustainability in supply chains is coming from multiple sources, both internal and external. Between 2019 and 2020, pressure from investors, government, and international bodies grew the most of all sources (see Figure 8).

Internally, company executives emerged as critical SCS champions. Executives were the most significant source of pressure behind corporate commitments to supply chain sustainability across all issue areas. Given executives’ central role in setting and steering strategies for growth, this finding suggests that the drive toward supply chain sustainability is not a fad but rather a business trend to watch.

Companies’ overall commitment to social and environmental issues were similar between 2019 and 2020. However, interest in some areas such as human rights protection, worker welfare and safety, and energy savings and renewable energy, increased significantly. The growing interest in social and labor issues is a continuation of a trend we saw in the first report. In 2020, this finding is likely due to, in large part, the reprioritization of corporate goals during the pandemic.

This year’s report sheds light on how companies put their SCS promises into practice. Of the many ways to accomplish this, three common approaches emerged, including supplier development, supply chain visibility, and environmental impact reduction. Supplier development was the most common across all industries; however, visibility proved equally attractive in manufacturing and transportation.

As the supply chain sustainability field advances, so does this report, and this year we introduce a classification of companies based on behaviors related to SCS. The model, called the SCS Firm Typology, yields fresh insights into the state of sustainability in supply chains. Categories of firms range from low-effort enterprises with little engagement in SCS to highly committed leaders. This typology distills the report’s analyses into an interpretable model and enables future exploration of the evolution of SCS across multiple dimensions.

An indication of the typology tool’s potential is this year’s analysis of supply chain professionals’ engagement in SCS activities—a critical determinant of what companies can accomplish in this area. The level of engagement shown by practitioners (from operating as a decision maker to having no engagement at all) was aligned with the commitment shown by different categories of firms. For example, professionals in firms that we identified as “Leaders” exhibited the highest level of engagement.

80%

Covid-19 had no impact or increased SCS commitments

8%

Pressure from investors grew from last year

4.1

(out of 5) Commitment to employee welfare & safety

59%

Invest in supply chain sustainability

Proposed Outlook:
The Future of Sustainable Supply Chains

In the concluding section, the authors offer a point of view on the potential evolution of supply chain sustainability over the next five years. Highlights include:

With the increased momentum for major commitments to supply chain sustainability in 2020, the future will likely bring greater investments in sustainability—and scrutiny of the degree to which enterprises deliver on their promises.

With more scrutiny comes more responsibility. If the pressure from investors and regulators does indeed put companies’ supply chain sustainability practices under a microscope, this will in turn require more enterprises to increase transparency and disclosure of practices and activities in their supply chains.

As the pressure to pursue SCS increases, so too will the importance of supply chain professionals as sustainability champions and practitioners. To support and help drive progress, more supply chain professionals will be engaged in sustainability efforts and help companies to overcome the many formidable barriers to SCS that lie ahead.

These impediments differ from company to company and from one industry to another, but our research identified some common threads, such as the key role of suppliers in furthering supply chain sustainability.

Investors are wielding more influence as advocates of SCS, and we expect this to continue in the near term. The connection between companies’ track records in sustainability and their ability to win market share and turn a profit is likely to strengthen.

Social issues and climate change mitigation will likely feature prominently in the future of SCS. Both areas received much attention in 2020, and both pose long-term challenges that are unlikely to abate in the foreseeable future.

We’re already looking forward to the 2022 edition.

“Supply chain professionals have a large role to play in driving sustainability as one of the top metrics being tracked for the health of the business. How supply chain professionals respond (short- and long-term) in terms of different scenarios has a lasting impact on sustainability.”

Hong Mo Yang, Senior Vice President and General Manager of Manufacturing Sector, Blue Yonder

“In 2021, sustainability issues were rated by our customers as the second-highest concern after capacity.”

Rachel Schwalbach, Vice President, ESG, C.H. Robinson

“When things shut down in China because of Covid-19, that slowed us down in terms of addressing our 2020 audit completion goals, but the impact on the sustainability movement overall was limited.”

Adam J. Schafer, Director of Supply Chain Responsibility, Intel

“With an increased focus on corporate ESG efforts, we have seen a progression towards a broader scope and accuracy of reporting.  We are also sensing a shift in the drivers of sustainability from responding to external pressure to an opportunity for market differentiation.”

Rob Barrett, Principal, US Supply Chain Advisory Leader, KPMG

“We remain focused on strengthening business resilience, advocating for climate action, and reducing emissions in our operations.”

Ella Chan, Vice President of Business Initiatives, Sam’s Club

2020

A Year of Disruption

The year 2020 began with growing awareness of and interest in sustainability issues. In the prior year, sales for products with sustainability-related labels grew seven times faster than previously recorded levels, [2] and the amount of engagement on social media around climate change issues had tripled. [3] Companies increasingly used sustainability as a marketing strategy, and multinationals touted a commitment to sustainability with more intense efforts to measure and monitor impacts across the supply chain. [4]

In the first few weeks of 2020, many high-profile companies unveiled ambitious sustainability goals and investments. [5] However, by February, Covid-19 had put a stranglehold on the world’s economy. [6] The impacts on companies and supply chain professionals were swift and extreme. Some businesses were overwhelmed with demand for their products due to shifts in consumer behavior associated with public heath lockdowns and the urgent need to provide essential services. Other businesses shut down as demand plummeted and the risk of infection spiked. Many of these businesses closed permanently. [7]

While the pandemic dominated headlines, other events drew attention to supply chain sustainability. Examples include clear-cutting of the Amazon rainforest for grazing cattle in Brazil [8] and increasing volumes of waste from discarded single-use personal protective equipment (PPE). [9] Social issues also gained prominence, such as the vulnerability and poor treatment of front-line supply chain workers [10] and the fallout from the mistreatment of Uyghurs in the Xinjiang region of China. [11] Our research indicates that these occurred while firms continued or increased their commitments to and investments and practices in supply chain sustainability. Corporations also became eager to show their commitment to different stakeholders’ concerns with actions such as pledges to achieve net-zero greenhouse gas emissions; promoting workplace diversity, equity, and inclusion; and instituting front-line worker protections.

January

Deforestation and palm oil


Richard Whitcombe / 123RF

Brazil’s National Institute for Space Research reported that the rate of deforestation in the Amazon in 2019 was at the highest level in over a decade. Reports by the World Wildlife Fund and the Rainforest Action Network found that some of the world’s biggest consumer brands were failing to meet their commitment to eliminate deforestation in their supply chains by sourcing sustainable palm oil by 2020. [12]

Plastic ban in China

Ocean Plastics
Naja Bertolt Jensen / Unsplash

The Chinese government announced efforts to crack down on plastic pollution in the country’s manufacturing economy. China accounts for close to 30% of global plastic products, and the government plans to phase out all single-use plastic usage by 2025. This domestic regulation of plastic consumption comes after China’s decision to stop accepting plastic waste from other countries for recycling due to environmental concerns. [13]

February

Coronavirus spreads

Cornavirus
CDC / Unsplash

After the initial outbreak of a novel coronavirus strain in Wuhan, China, cases spread throughout Asia, Europe, and the US. Despite significant efforts to contain the spread of the virus, including a travel ban to and from eight cities in Hubei Province, more than 65 countries reported new cases, including India, Italy, Iran, Japan, New Zealand, and South Korea.

March

Human rights concerns in supply chains linked to Xinjiang


Pixabay / Pexels

The Australian Strategic Policy Institute (ASPI) released a new report on forced labor in Xinjiang, China, which revealed that more than 80,000 Uyghur and other ethnic-minority citizens from Xinjiang were transferred to factories across China between 2017 and 2019 under conditions that strongly suggest forced labor. These factories, along with other programs in Xinjiang accused of abusing human rights, have been tied to the supply chains of many well-known global brands. [14]

Pandemic and lockdowns


Anna Shvets / Pexels

Coronavirus-related lockdowns were imposed in parts of major western countries. The impact was felt immediately across all major industrial and retail supply chains. The US declared coronavirus a national emergency, and all 50 states in the US mandated statewide shutdowns of nonessential businesses. On March 11, the World Health Organization declared Covid-19 a pandemic. [15]

April

Impact of the pandemic on procurement and logistics


Wesley Tingey / Unsplash

The pandemic’s impact on industries sourcing predominantly in China exposed a lack of diversification in their supplier base. Third-party logistics companies observed a sharp drop in import volumes across the manufacturing, automotive, and healthcare industries. Disruption in Chinese manufacturing, exports, and port activities resulted in a severe cargo backlog. According to reports by DHL, container volume handled at Chinese ports decreased by more than 10%. The trucking industry in the US faced similar constraints as capacity was severely reduced due to additional demand allocated to medical and food supply transportation. The volume of air freight carried on passenger flights fell by roughly 20%. The overall demand-capacity mismatch resulted in significantly higher air freight rates. More than 60% of air capacity between China and Europe was reduced by the end of March. [16]

May

Carbon emissions drop during pandemic

Flights cancelled
NicoElNino / Shutterstock

Global carbon emissions fell 8% in the first four months of 2020. The aviation industry experienced one of the most dramatic declines, with emissions falling by more than 21% in the first four months of the year. The largest absolute emission reductions were in the electric power and ground transport sectors. [17]

June

What companies are doing to fight systemic racism


Cameron Thomsen / Shutterstock

The murder of George Floyd on May 25, 2020, by a Minnesota police officer sparked global outrage and a global movement bringing attention to systemic racism and inequality in policing, workplaces, and other areas of society. Many companies made substantial commitments to tackling inequality in their own workplaces, donating to social justice organizations, and using their platforms to promote racial diversity, equity, and inclusion in the business community. [18]

Supply chain agility


True Touch Lifestyle / Shutterstock

Companies shifted focus to supply chain agility instead of accurate forecasting. At Unilever, demand for essential products such as cleaning supplies increased by up to 600%. In response, the company converted production lines and reduced the total number of SKUs it produced by 65%. [19]

July

Medical supply chains in focus with Defense Production Act


Pgallery / Shutterstock

Camera maker Kodak was enlisted to assist the US government in manufacturing vaccines and drugs for Covid-19 by virtue of the company’s experience manufacturing chemicals under the US Defense Production Act with an expected loan of $765 million. This news came after Fujifilm Diosynth Biotechnologies, a joint venture between Japan’s Fujifilm and Mitsubishi, was tapped to support coronavirus vaccine manufacturing through a $265 million contract between the US Biomedical Advanced Research and Development Authority and Texas A&M University. [20]

Women CSCOs


KeyStock / Shutterstock

A 2020 survey conducted by Gartner found that 17% of chief supply chain officers were women, an increase of 6% from 2019. However, the total number of women in the field overall remained stagnant at less than 40%, an increase of only 5% from 2016. Consumer goods and retail industries saw women in 25% of CSCO roles, whereas only 13% were in industrial companies. [21]

August

California wildfires


Stratos Brilakis / Shutterstock

California experienced record-breaking wildfires, creating hazardous environments for workers and disrupting supply chain and logistics operations in places like warehouses, retail stores, manufacturing plans. It also forced the closure of essential road links, such as Pacific Coast Highway, and power outages occurred in many areas. By early September, a combination of a record-breaking heat wave and Diablo and Santa Ana winds sparked the largest wildfire on record in California. [22]

September

Women leave the workforce at high rates


David Pereiras / Shutterstock

In the US, women left the workforce at four times the rate that men did during the month of September. The trend was attributed to a lack of childcare options and other economic disruptions that have had a disproportionate impact on women. An analysis of Indeed job postings across 22 countries showed a significant gender gap in job offerings as well. Postings for jobs with low female representation fell 37% and ended the year down 18%. Postings for jobs with high female representation, in contrast, fell almost 43% and ended the year down 25%. There was a similar gap based on skill level, with low-skilled postings dropping almost 45% at the height of the pandemic, compared to a 35% drop for higher-skilled jobs. [23]

The lithium “gold rush”


one5zero / Shutterstock

In California, a new state government initiative was established in September to explore how best to develop lithium deposits in the deserts east of Los Angeles and San Diego. According to the California Energy Commission, the Salton Sea, a shallow lake in California’s Imperial County, could supply 40% of global lithium demand. [24]

October

Supply chain workers serve on the front lines and risk exposure to Covid-19


Frederic Legrand / Shutterstock

Warehouse, transportation, and other supply chain workers worked tirelessly on the front lines of the pandemic to ensure that medical supplies and consumer goods were available as needed. Nearly 20,000 Amazon workers tested positive for the Covid-19 during this timeframe. [25]

Seafarers stranded at sea


Alexander Schedrov / Shutterstock

Over 300,000 seafarers—20% of the global workforce—were stranded at sea waiting for relief from extended deployments. Meanwhile, shipping companies, labor unions, and maritime authorities navigated a patchwork of pandemic-related crew restrictions and significant disruptions to global trade flows. [26]

November

Coronavirus vaccines

Pharmaceutical manufacturing
Kontstantin / Shutterstock

After a remarkable effort by biotechnology and pharmaceutical companies to develop and start production of Covid-19 vaccines, the spotlight shifted to the challenges of distribution, including the need to build a cold supply chain for temperature-sensitive vaccines. [27]

Port congestion


Syda Productions / Shutterstock

West Coast ports in the US faced a severe container backlog, impacting supply chains across the US, Canada, and Mexico. The backlog was caused, in part, by an increase in imports (especially ahead of the holiday season) and challenges associated with the handling of ships in port. The backlog contributed to a global imbalance of container availability, led to sharp increases in ocean freight rates (with massive surcharges), and led to third-party logistics companies pushing for the use of 20-foot containers instead of 40-foot containers. [28]

December

Brexit


Lightboxx / Shutterstock

The last week of the year brought a new political and economic landscape in Europe with the UK officially leaving the European Union after a 2016 referendum. A last-minute trade deal announced on Christmas Eve brought some relief to British companies faced with the monumental task of learning how to navigate complex new trade rules. Regulators gave companies a few months to grasp the new rules before they need to start submitting UK customs declarations and EU rules-of-origin paperwork. [29]

Positive train control in the US


J5M / Shutterstock

On December 29, the Federal Railroad Commission (FRA) announced that positive train control (PTC) technology was successfully deployed on all 57,536 miles of required track (40% of the nation’s Class I rails). [30] PTC technology tracks a train’s position and automatically deploys braking to prevent collisions, speeding, and trains entering danger zones.

The Report

The State of Supply Chain Sustainability offers a comprehensive examination of supply chain sustainability across industries, geographies, functions, and roles, giving professionals and executives a holistic view of sustainability in the supply chain domain. The MIT Center for Transportation & Logistics (MIT CTL) and the Council of Supply Chain Management Professionals (CSCMP) published the first annual edition in 2020.* The first report established a baseline for subsequent research. Our goal in undertaking this research is to explore how supply chain sustainability is being implemented in global supply chains, to identify broad trends across industries and regions, and illustrate what that means for companies and professionals.

Our research for the inaugural report included a broad survey of industry professionals and in-depth interviews with executives. We found that commitment to supply chain sustainability is a focus for many large (1,000–10,000 employees) and very large (10,000+) companies. We also observed that the tangible investments companies make in supply chain sustainability do not always match their ambitions, especially concerning human rights protection, worker welfare and safety, and fair pay/fair trade. However, companies facing pressure from multiple sources often invest more in these areas of sustainability than those that are not incentivized by pressure from stakeholders.

These early insights provided a snapshot of the state of supply chain sustainability at a macro level. They also left many questions unanswered. Are there underlying patterns in how companies act? How do supply chain sustainability goals, investments, practices, and other measures change over time? What is the impact of the Covid-19 pandemic?

We attempt to answer some of these questions in the current report by refining our analysis and building off the foundation established with last year’s report.

The current report has four dimensions: First, we establish a framework for examining supply chain sustainability in 2020 based on the same measures of pressure, commitment, investment, practices, disclosure, and engagement established last year. Next, we explore the effect of the Covid-19 pandemic on supply chain sustainability and changes between 2019 and 2020 to understand how these measures change over time. We then develop a quantitative typology of firms based on their level of commitment to supply chain sustainability. Finally, we conclude with an outlook on what is to come for supply chain sustainability.

Building off of last year’s report, our second survey included input from twice as many supply chain professionals. We also conducted a new round of executive interviews with a wide range of professionals and companies to explore supply chain sustainability trends more deeply. Finally, we refreshed and extended our analysis of reports, press releases, media articles, and other documents to track activity in the public sphere.

The report provides a platform to observe how supply chain sustainability changes over time and how supply chain professionals react to these changes. It does not take a stance on whether industries are doing enough (or too much) or on what they should (or shouldn’t) do; it is simply a gauge of the direction of supply chain sustainability.

Through this journey, we have developed a more nuanced understanding of supply chain sustainability, and we believe the report’s findings will help professionals make better strategic decisions and companies achieve sustainability goals in their supply chains.

Defining Supply Chain Sustainability

The events of 2020 brought widespread attention to the social and environmental impact of global supply chains. However, the term supply chain sustainability (SCS) is still not well understood. News coverage of the topic has been wide in scope with varying interpretations. Figure 1 demonstrates this by summarizing the key words found in the top 200 news stories from 2020 that discussed SCS. What jumps out immediately are words such as “new”, “more”, “global”, “demand”, and “environmental”. These words signal interesting trends in the public discourse around this topic. It also shows that SCS interfaces with many complex and overlapping concepts.

In this report, our definition of SCS has not changed from the first State of Supply Chain Sustainability [1] and is based on both the environmental and social concerns of sustainability. We define supply chain sustainability as the management of environmental and social impacts within and across networks consisting of suppliers, manufacturers, distributors, and customers in line with the UN Sustainable Development Goals. This spans every phase of the supply chain, from raw material sourcing and extraction to product use and end of product life.

Figure 1: A treemap diagram illustrating the frequency of words found in the top 400 articles extracted from Google News when searching “supply chain sustainability” in 2020. N = 400 articles.

Research Approach

2,400

Survey respondents*

21

Interviews

250+

Documents reviewed

Our three-tiered research effort comprises a large-scale survey of supply chain professionals, executive interviews, and an analysis of relevant news items, social media content, and reports. The triangulation of these three sources allows for a more comprehensive and systematic view of the state of SCS. See Appendix A for more details about our research methods.

The number of survey responses we received this year was more than double the number received in 2019. The majority of responses came from North America and Europe (see Figure 2), with a greater share from Europe in 2020 compared to the previous year.

As shown in Figure 3, the majority of responses came from men, skewed toward younger professionals working in a supply chain department. We also received responses from different industries including manufacturing, transportation and warehousing, business consulting, retail and others. The age, gender, industry, and company department/function profile were similar to the 2019 report.

* A subset of this total number of survey responses was used for analysis based on how much of the survey they completed. See Appendix A for more details on how the survey responses were analyzed and the limitations of survey data.

Figure 2: Breakdown of respondents by region. N = 1,492.

Figure 3: Breakdown of respondents for 2020 by age, gender, industry, and business function. N = 1,537.

Covid-19’s Unexpected Effect

In the 2020 report, some supply chain executives suggested there may be a setback or “pause” in commitments to and investments in supply chain sustainability until businesses recovered from the disruption caused by the Covid-19 pandemic. Many supply chain experts expected businesses to focus on “core” objectives of getting product to customers and managing cash flow.

Based on publicly available evidence, some industries negatively impacted by the pandemic, such as travel and hospitality, [31] scaled back their sustainability efforts. However, our research shows that many large companies in a variety of industries announced new, bold goals on climate change mitigation; employee health and safety; fair pay; diversity, equity, and inclusion; and other issues despite the severe impacts of 2020.

In fact, some executives said that the pandemic had a limited impact on SCS and may have propelled or “accelerated” their sustainability efforts. The pandemic, social justice movement, and other events of 2020 particularly increased awareness of certain social aspects of SCS including worker welfare and safety, fair pay, and social justice issues.

Kyra Whitten, Vice President of Corporate Marketing, Communications, and Sustainability for electronics manufacturer Flex, said that SCS has gained momentum since the start of the pandemic: “We’ve reached somewhat of a tipping point with sustainability amplifying the momentum that [it’s] not going to stop. We see the increased requirements from customers, from employees, from governments to act sustainably. This focus had really taken hold, and then Covid accelerated it.”

In the survey, approximately 80% of respondents said their firm’s commitment to SCS had either increased or stayed the same since the start of Covid-19, while 9% said it had decreased, and another 9% said they weren’t sure (see Figure 4). A similar number said that the pressure on their firm to increase the sustainability of their supply chain stayed the same or increased since the pandemic’s start, and only 6% said that pressure had decreased.

“I think not just because of Covid-19, but because of the combination of Covid-19 and other social challenges, there’s actually an increased awareness. Firms need to care about people in a way that’s a little bit different, whether it’s employees or communities. I think it’s actually been a very positive shift in a way.”

Adam Schafer, Director of Supply Chain Sustainability, Intel Corporation

Figure 4: Breakdown of respondents by how their firm’s commitment to SCS has changed since the start of the pandemic. N = 1,557.

Figure 5: Supply chain sustainability pressure amid Covid-19 by region. N = 1,555.

Firms in North America and Europe were more likely to have experienced similar levels of pressure for SCS in 2020 compared to before the pandemic. The greatest increases were seen in the Middle East, Mediterranean, and Asia, with over 40% of respondents in these regions saying pressure has increased since the start of the pandemic (Figure 5). This is likely due to growing customer awareness [32] and increasing regulatory requirements in both regions. [33]

Radu Palamariu, Managing Director for Asia Pacific at supply chain recruitment agency Alcott Global, echoes this trend in Asia: “The shift that has already happened since 2019 and is now accelerating, in that the general public, the stock market, and the investors are demanding that sustainability be [at the] top of the agenda. Hence, especially MNCs have continued to invest and develop the directions around it, even if maybe less intensely than if Covid-19 had not happened.”

As shown in Figure 6, the majority of companies of any size either increased or maintained their commitment to SCS. Eighty-seven percent of respondents from very large companies with 10,000+ employees did so, but so did 76% of the smallest companies with fewer than 100 employees. For the small percentage of companies that did scale back on their commitments, small companies represented the largest share: 14% decreased their commitment, compared to 6% of very large companies. This suggests that larger companies where able to withstand the disruptions of 2020 and maintain their commitment to SCS compared to smaller companies.

Of the industries represented in the sample, three saw the most significant increase in commitment to SCS since the start of the pandemic. Between 41% and 53% of survey respondents in construction, retail, and healthcare reported an increase in commitment to SCS. While statistical tests did not show significant differences between industries due to Covid-19, these industries showed increasing SCS activity and faced more scrutiny of sustainability-related actions.

Figure 6: SCS firm commitment amid Covid-19 by company size. N = 1,550.

“Earlier on in the pandemic, there [were] definitely quite a few skeptics around. But, if anything, you’ve seen an acceleration in corporate efforts and a huge increase, I think, in disclosure and transparency because we’re being asked. That’s why we issued our inaugural ESG report, and not just us, everyone is.”

Ezgi Bercenas, Global Vice President, Head of Sustainability, Anheuser-Busch InBev

Pressure for Supply Chain Sustainability Continues

While Covid-19 turned the attention of the world to a global public health crisis, the pressure on firms during the 2019–20 period to become more sustainable did not abate. As seen in Figure 7, in both 2019 and 2020, approximately 47% of respondents reported that their firms received pressure to increase SCS. However, fewer respondents said their company felt no pressure between the two years.

The pressure on firms to support SCS initiatives may be due in part to the continued influence of events in 2019, such as wildfires in the US that thrust climate change into the spotlight. [34] Public concern about the social and environmental impacts of supply chains was amplified further by developments in 2020, such as the need to adapt to shifting product shortages and redefining supply chain front-line workers as essential workers.

“Interest from our shipper customers has increased drastically, even in the past 6-18 months. In 2020, our customer survey revealed that sustainability issues were the second highest concern after capacity. At the core of achieving sustainability is the ability to solve some of supply chains’ toughest issues.”

Rachel Schwalbach, Vice President of ESG, C.H. Robinson

Figure 7: Year-over-year change in respondents reporting whether their firm felt pressure to act on SCS; totals may not sum to 100% due to rounding. N = 2,171.

The pressure on firms to adopt SCS practices came from various sources, including governmental and international bodies, mass media, local communities, and NGOs, external corporate buyers, employees, and company executives. While there was an increase in pressure exerted among almost all groups, the largest year-over-year rise in pressure came from investors, governments, and international governing bodies (see Figure 8).

The pressure from investors reflects the growth in sustainability-related investment opportunities. These include environmental, social, and governance (ESG) investing and risk-based opportunities where investors evaluate companies’ vulnerability to climate-related impacts and how much enterprises are investing in efforts to reduce their environmental impact and improve social conditions. Even though the focus during the pandemic shifted to survival and resilience, ESG still outperformed other investment categories.

Similarly, new regulations, such as the European Green Deal [35] and the proposed US Slave-Free Business Certification Act of 2020, [36] are a testament to the increasing influence government will have on social and environmental compliance in the supply chain.

The executives we interviewed had a slightly different take on the sources of SCS-linked pressures their companies were experiencing.

Half of executives said that customers were the main driver for change, while only 20% said that governments, investors, and NGOs were a source of pressure on their companies. The reason for this finding might be that executives view SCS through a customer-centric lens; while they are aware of the many sources of pressure, they are especially sensitive to feedback from consumers and buyers.

On an industry level, most executives reported consistent pressure from multiple sources to pursue SCS initiatives. According to CSCMP Interim President and CEO Mark Baxa, “Companies are experiencing increased pressure to pursue sustainable business practices. There are companies receiving pressure from stakeholders, investors, boards, and employees. Furthermore, companies are being asked more questions in this space with greater expectations that companies make a positive impact in supply chain sustainability.”

“We had quite a lot of ‘internal pressure already’ as we had ambitious 2020 targets set already in 2009-2010. Today the pressure is both internal and external. This is creating a lot of momentum to innovate in this area.”

Sergio Barbarino, Research Fellow in Sustainability, Procter & Gamble

Figure 8: Range and average intensity of reported pressure by source and the change from last year. A statistically significant increase (t-test, p < 0.05) was seen from investors and government bodies both at 8% year over year. N = 284 (2019) & 722 (2020).

A key question is which sources of pressure drive commitments to SCS. Using logistic regression analysis, we found that pressure from executives is most strongly correlated with SCS commitments, suggesting that when executives champion the cause, companies commit to improving SCS performance. As can be seen in Table 1, the results were statistically significant for each commitment area, from climate change mitigation to human rights protection. The other sources of pressure, including industry associations and local communities, were not correlated.

This discrepancy suggests that without executive ownership of SCS, a firm may be less likely to take action. To make progress on SCS, firms must bake it into the core duties of leadership roles.

Less clear is what are the most influential pressures on executives to take on an SCS mantle. This is an open question that will be explored in a future report.

Table 1: Pressure sources with statistically significant regression coefficients for goal setting. See Table 7 in the Appendix for full results. N = 1,557.

Table 1

Sustainability Commitments
Increase in Scope

Many companies went public with bold commitments to various sustainability-related goals in 2020. For instance, Microsoft announced its 2030 carbon-negative goal, [37] Walmart promised to become a regenerative company by 2040, [38] and Unilever committed to the use of carbon labels on all its products. [39] There were standout pledges to achieve social goals as well. Intel announced new diversity and inclusion goals and increased its spend with diverse suppliers. [40] Nike extended its commitment to traceability and improving human rights protections in its supply chain. [41] These commitments came amid calls for protections and hazard pay for front-line supply chain workers who risked contracting Covid-19. The high-profile announcements stoked the pressure on companies to pay attention to SCS.

“When a sustainability program is aligned with the purpose of the company and signs up for challenging, ambitious goals, even when the solutions do not exist, they then commit to be a part of the solution through innovation.”

Halide Alagoz, Chief Product and Sustainability Officer at Ralph Lauren

When asked why these corporate commitments were prominent in 2020, the 21 supply chain and sustainability executives interviewed for this report had differing opinions, including:

  • Commitments were a reaction to pressure from stakeholders in 2019 and 2020.
  • Several executives suggested that the beginning of a new decade generally provides an opportunity to transition to new and bold commitments.
  • And, notably, they highlighted that the extreme volatility experienced in 2020 provided an opportunity for significant change in organizations, and even accelerated certain programs.

The heightened profile of sustainability-related issues and goals was echoed in our survey. More than half of the respondents (52%) confirmed that their companies have SCS goals, an increase of 4% from the year prior. One-third said their companies do not have SCS goals, and 15% were unsure.

Figure 9: Commitment by issue areas related to SCS in 2020 and the change in commitments year over year. The most statistically significant increases (t-test) were in employee welfare at 9.7%, natural resources and biodiversity, 9.8%, and energy savings/renewable energy, 7.1%. there was also a notable dip in end-of-life management by roughly 5.3%. N = 289 (2019) & 794 (2020).

Out of the 10 issue areas included in our survey, commitments increased from last year in eight areas, with the most statistically significant increases seen in employee welfare and safety; natural resource and biodiversity conservation; energy savings and renewable energy; and supplier diversity, equity, and inclusion (see Figure 9). Notably, there were decreases in both supply chain circularity and climate change mitigation which is surprising given growing attention to plastics and climate change in the media.

End-of-life product management and supply chain circularity may have been impacted by an increasing need for disposables due Covid-19 safety precautions. [42] The increased attention paid to social issues may have temporarily sidelined some of firms’ climate change efforts.

Our survey results illustrate that commitments to employee welfare and safety grew for all industries in 2020 as companies reacted to employees’ safety concerns and risk of exposure to the Covid-19 virus. Many in the supply chain worked on the front lines of the pandemic, playing a critical role in meeting the need to dramatically increase production of personal protective equipment (PPE) [43] and other medical supplies as well as keeping goods moving in transportation networks to supply dynamic demand. [44] As front-line workers strived to meet these demands, calls emerged for hazard pay and improved health protections. [45]

“I think the other thing that’s been really interesting with Covid-19 is the increased inquiry and attention around the S of ESG. Customers want to know – how are you treating your workers?”

Kyra Whitten, Vice President of Corporate Marketing, Communications, and Sustainability at Flex

Commitments to the conservation of natural resources and biodiversity gained ground in 2020, a development that can also be linked to the publicity surrounding these components of sustainability. For instance, the year started with significant media coverage of clear-cutting in the Amazon rainforest for cattle grazing and beef farming. [46] Pandemic-related shutdowns highlighted the environmental impact of transportation and other industries when economic activity sharply decreased, and emissions levels and air pollution plummeted. Natural features usually obscured by smog suddenly became visible. [47] Interest in sustainable agriculture in the form of regenerative farming also received a boost during this time. [48]

The growth in commitment to energy savings and renewable energy is clear. Energy savings often translate into cost savings, and many firms are investing in new supply chain processes and technologies that reduce the cost of energy and its associated environmental impacts. Additionally, the cost of renewable energy has fallen significantly in the last decade, with solar and wind hitting record-low prices last year. [49] These trends make renewables an attractive opportunity for reducing costs and for environmental stewardship. [50]

As can be seen in Figure 9, commitments to employee welfare and safety measures showed the greatest increase from 2019 to 2020. Some of these changes may reflect a temporary refocus on localized issues (employee welfare and safety) as opposed to more global issues (climate change mitigation) as the pandemic forced firms, governments, and individuals to focus on issues that were nearest to them: [51] Rising infection rates, lockdowns, and other pandemic-related challenges brought awareness to social issues which may be reflected in an overall growth in commitments in this area.

Figure 10: Level of commitment to SCS by industry grouped into environmental (E) and social (S) categories; percentage of total respondence broken down from low to high (colors). N = 794.

For example, it is likely that respondents in transportation and warehousing ranked social issues highly due to concern for quality of life and protections for drivers and warehouse workers. The industry also ranked environmental issues highly, which may be in response to growing awareness of the lack of progress in reducing emissions from transportation combined with growing interest in electric-powered vehicles. [52]

New regulations in road transportation also increased pressure on transportation providers and users, a finding that suggests a relationship between commitments by companies in this industry and regulatory pressures.

In June 2019, California’s Air Resources Board approved the state’s Advanced Clean Trucks regulation, which mandates that 5% of all Classes 7–8 tractors sold be zero-emission vehicles starting in 2024. [53] That percentage increases with each new model year, rising to 40% by 2032. California also is one of 15 states, plus the District of Columbia, that has signed an agreement to cooperate on advancing the electric truck market, with a goal of achieving 100% zero-emission medium- and heavy-duty truck sales by 2050. [54] These regulations reflect growing commitments in the public sphere, which are having an impact on corporate SCS goals.

Investments See Limited Growth

In many ways, the litmus test for companies’ degree of commitment to SCS is whether they “walk the walk” by backing their promises with tangible investments. Our research shows that while there have been bold commitments in the public sphere, there has been limited change in companies’ willingness to invest in SCS programs.

The percentage firms that invested in SCS increased by a mere 1.4% to reach 58.7% (see Figure 11). The lack of progress in SCS investments may reflect the financial impact and risks associated with the Covid-19 pandemic. [55] In addition, we found that small- and medium-sized firms—which were hit harder by the pandemic—invested fewer financial or human resources in sustainability efforts. [56]

The findings related to patterns of investment were more striking (Figure 11 and Figure 12). The biggest gains between 2019 and 2020 were investments in human rights protection, employee welfare and safety, and supplier diversity. This finding was corroborated in interviews with executives. More than half of respondents in our executive interviews said that social issues were prominent in much of the effort they devoted to SCS in 2020.

Figure 11: Year-over-year change in SCS investment in 2019 and 2020; totals may not sum to 100 due to rounding. N = 614 (2019) & 1,557 (2020).

Figure 12: Investments in 2020 and change year over year from 2019 to 2020. The majority of investments for 2021 either remained steady or increased. Statistically significant changes were in human rights (10%), supplier diversity (9.8%), welfare and safety (7.1%), and energy savings (6%). There was a notable dip in climate change mitigation by roughly 5.7%. N = 348 (2019) & 904 (2020).

The emphasis on social issues is likely related to the increasing importance of these issues in the public sphere and related media coverage. Poor working conditions attracted significant public interest, as did human-trafficked labor, and most notably, forced labor in Xinjiang, China. Reports about the treatment of Uyghur factory workers [57] drove many companies to react swiftly by reducing the risk of being complicit in the alleged human rights violations. Covid-19 outbreaks in production facilities, notably in meatpacking sites in the US, also garnered many headlines that ratcheted up the pressure on companies to protect their workers. [58] Social justice protests became widespread globally following the murder of George Floyd in the US, [59] prompting firms to invest in diversity, equity, and inclusion programs. [60]

While social investments were top of mind, environmental investments in the form of energy savings and renewable energy programs saw a large gain as well. Many companies increased their reliance on renewable energy in their operations and started to drive these investments into the supply chain. [61] However, investments in climate change mitigation dropped 6% from 2019. This result may seem counterintuitive given the prominent commitments made by many companies to achieving net-zero carbon emissions and meeting science-based reduction targets. [62] However, these goals frequently focus on areas where companies have direct control (i.e. Scope 1 and 2 emissions [63] ) and not their supply chain emissions (i.e. Scope 3), which are out of their direct control.

While investments across industries shifted from 2019 to 2020, the wide gap between the SCS-related goals that companies committed to—and the investments required to fulfill these goals—did not change. The shortfall in human rights, fair pay, fair trade, and local community investments was particularly striking. This mismatch is detailed in Figure 13, which shows the difference between commitment and investment as an average (red dot) and distribution (plot area) for each issue, with zero indicating no difference.

A notable example in the real world is how chocolate companies were called out for failing to commit adequate resources to meeting their publicly stated goal of rooting out child labor in cocoa production. [64] Similar stories can be found in other industries such as apparel, where failures have not been properly addressed owing to a lack of investment. For instance, promises to improve working conditions were made after the 2013 Rana Plaza factory collapse in Bangladesh, yet instances of human rights violations are still frequent. [65]

In contrast, commitments and investments on environmental issues are more closely correlated, with the energy sector leading the way. This is partially due to the potential for cost reductions through energy savings and the increasing affordability of renewable energy options. Investments in solutions to social problems are often harder to identify, quantify, and implement. [66]

Figure 13: Comparison of goals vs. investment in different issues areas between 2019 and 2020. The violin chart demonstrates the difference between level of investment and level of commitment and how those responses are distributed away from the mean. The dot is the average difference, showing a more significant difference for human rights and social issues in general, but a better alignment at 0 can be seen for environmental issues, especially with energy. N = 1,252.

Practices: A Mixed Bag

We surveyed professionals on which practices they used in their SCS efforts. The most common ones include company and supplier codes of conduct, supplier collaboration, sustainability standards and certification, improvements in visibility and traceability, supplier audits, supply chain mapping exercises, supplier benchmarking, third-party verifications, supplier training programs, and collaborations with NGOs and other third parties.

According to the survey, 58% of firms use one or more of these practices, and as seen in Figure 14, the use of codes of conduct (firm and supplier) is the most common practice.

Supplier collaboration and sustainability standards were also high on the list in 2020, with mixed trends from 2019 with a 2% decrease in the use of standards and 2% increase in collaboration. Visibility and traceability saw the greatest increase, with a gain of 3% from 2019 to 2020, which may have been driven in part by outages and supply chain disruptions. [67] The adoption of audits dropped by 4% owing to the challenge of visiting supplier sites amid Covid-19-related restrictions. [68]

Figure 14: Practices in 2020 and year-over-year change from 2019 to 2020. N = 616 (2019) & 1,561 (2020).

To better understand how practices are being used in combination, we used correlation-based groupings (see Figure 15 and the Practice Groupings section in Appendix A for more information on the approach) to quantify which practices were most commonly selected together. Three distinct practice groups came out of this analysis: supplier development, supply chain visibility, and environmental impact reduction.

The first and most frequent group of practices was supplier development, which included supplier codes of conduct, audit, benchmarking, third-party verification, and supplier training and collaboration. The next practice group includes supply chain mapping and visibility/traceability. The third practice group was an environmental impact reduction cluster, including environmental technologies and carbon offsets. Three other practices are not used consistently with other practices: sustainability standards and certificates, NGO or third-party collaboration, and information technologies.

The practice groupings of Figure 15 are summarized as:

Group 1: Supplier Development

    • Company & Supplier Code of Conduct
    • Supplier Training
    • Supplier Audit
    • Third-Party Verification
    • Supplier Benchmarking
    • Supplier Collaboration

Group 2: Visibility

    • Supply Chain Mapping
    • Visibility & Traceability

Group 3: Environmental Impact Reduction

    • Carbon Offsets
    • Environmental Technologies

Independent Practices

    • Sustainability Standards & Certifications
    • NGO or Third-Party Collaboration
    • Information Technology
Figure 16

Figure 15: Graphical representation of SCS practices and correlation-based groupings. Three main groupings emerge. N = 1563.

These groupings provide insights into how firms are attempting to reduce their social and environmental impacts. Within the supplier development group, companies are heavily focused on requiring and verifying relevant supplier practices and helping their suppliers adopt and maintain more sustainable practices through collaboration and training. The visibility group demonstrates that firms are keen to get more information about practices and activities deeper in their supply chains. The environmental impact reduction group shows there is a focused effort on minimizing environmental impacts beyond supplier development efforts.

We also see interesting patterns when breaking down these practices by industry (see Figure 16). By and large, supplier development has the highest adoption across industries. This may be representative of the fact that as firms seek to improve their supply chain sustainability, they may need to bring their suppliers along with them on this journey. This cluster includes mandates (codes of conduct and supplier audits), supplier competition (supplier benchmarking), and support (supplier collaboration and training). It is clear that a suite of tools is being used to manage suppliers’ SCS commitments and progress. Pandemic issues may have had an impact here, as smaller suppliers negatively impacted by the crisis needed further support from their buyers.

“Engaging with our suppliers across the value chain has meant that we’ve had to evolve our mindset from one of compliance into one of competitive advantage. This provides us with the opportunity to work with our suppliers to identify the right target for them and hold each other accountable in our shared ambition.”

Ella Chan, Vice President for Strategic Initiatives, Sam’s Club

The visibility practice group is most common in transportation, manufacturing, and wholesale industries. We also found that the transportation industry is most likely to use environmental impact reduction practices. In addition, retail, agriculture, and manufacturing industries apply the environmental practice group at higher levels.

Jim Hartzfeld, Head of Sustainability, North America, for Brambles Limited, echoes this finding: “Near real-time tracking and tracing of goods and transportation assets across multiple supply chains enhances product visibility, stock control, transport efficiency, and asset productivity—all creating more economic and environmental value.”

Figure 16: The application by industry of different practice clusters represented as a heatmap of the average percentage of companies that have adopted this practice (respondents can select more than one practice). Darker shades indicate more heavily used practices. N = 1,561.

These results corroborate what we learned in executive interviews. Supplier engagement may be a clear goal, but it is also a barrier for many industries when seeking to drive SCS along the supply chain. In short, suppliers are both the barrier and opportunity in achieving SCS. [69] Efforts to improve visibility are increasingly common in certain industries that want to monitor SCS-related practices deeper into the supply chain to ensure compliance.

“We work with many manufacturers of specialized materials, some of which are smaller companies or private firms that that may not have mature sustainability programs. For these suppliers we try to educate them about requirements, set reasonable expectations, and provide clear instructions for how they can assist us in our efforts.”

Andrew Pastor, Director of Sustainability, Waters Corporation

Reporting & Disclosure
Practices Largely Static

Reporting and disclosure of SCS is an important step in measuring progress (or lack thereof) and being transparent with external stakeholders. Companies can share this information on their websites, in press releases, in formal corporate social responsibility/sustainability reports, and through external reporting to organizations such as CDP (formerly the Carbon Disclosure Project). According to a survey of 250 companies by KPMG, approximately 80% of companies had some form of general sustainability reporting process in 2020. [70] This picture changes a bit when set in regards to supply chain sustainability in specific which has lower overall reporting.

We found that reporting and disclosure practices did not change substantially in 2020 from the year prior (see Figure 17). Almost half (45%) of survey respondents said their firms disclosed progress in 2020, an increase of only 1% (not statistically significant) from 2019. More than a third of respondents said they did not disclose progress. The remaining 20% said they were not sure if their company did so, which is 6% more than the previous year.

While the proportion of firms reporting and disclosing supply chain sustainability impacts was relatively stable, overall rates of disclosure varied by geography. As can be seen in Figure 18, Europe has the highest rates of reporting overall. In 2014, requirements increased in the European Union with Directive 2014/96/EU for the non-financial reporting of sustainability practices, including a range of environmental, social, and governance components. In 2020, European organizations held initial discussions about increasing the directive’s scope and released a preview of a modified version. Such a change will likely drive higher levels of voluntary disclosure in EU in advance of these requirements. [71]

Figure 17: Reporting and disclosure did not change markedly between 2019 and 2020. There were no statistically significant changes seen year over year. Totals may not sum to 100% due to rounding. N = 614 (2019) & 1,557 (2020).

Figure 18: Geographical representation of disclosure and reporting rates based on the average of Likert scale (1 to 5) responses, with 1 indicating “not at all” and 5 indicating “very often”. N = 1,557.

As can be seen in Figure 19, with the exception of changes to CSR/sustainability reporting—there was no statistically significant shift here—reporting of SCS progress did not change substantially from 2019 to 2020 for company-owned mediums including websites and press releases. Using these channels remains popular in part because they are directly managed by the companies involved. There was substantially less disclosure of practices when firms reported to external organizations such as CDP. These outside organizations can be more rigorous, especially for firms that have historically avoided disclosing their progress on SCS.

These findings mirror the significant disclosure gap seen for supply chain emissions. Over 5,000 of the world’s largest companies disclose emissions to CDP, for example, but less than 20% disclosed freight transportation emissions in 2019. [72] This disclosure gap is compounded by the magnitude of emissions from supply chains. According to CDP’s Global Supply Chain Report 2019, GHG emissions from supply chains were 5.5 times greater than direct (Scope 1 and 2) emissions. [73]

The lack of progress in reporting and disclosure practices, despite high levels of commitment, may be due in part to firms focusing on assessing their SCS impact and designing public goals for the next decade rather than more formal reporting. Disclosures may gain more attention as firms learn to measure how they are achieving their commitments with key performance indicators and start to disclose their progress publicly.

“Due to an increase in corporate adoption of ESG reporting, we have seen a progression towards an increased scope and accuracy of reporting. Concurrently, we are sensing a shift in the drivers of sustainability from a response to external pressure to an opportunity to differentiate themselves.”

Robert Barrett, Principal of Advisory Supply Chain and Operations, KPMG

Figure 19: Reporting for SCS by firms in 2020 and change from 2019 to 2020; N = 268 (2019) & 687 (2020).

Supply Chain Sustainability
Firm Typology

A critically important feature of our annual State of Supply Chain Sustainability is that it evolves in line with shifting market demands and conditions and as we develop new analytical approaches. In this second report, we have taken a significant step with the introduction of a classification system for companies called the Supply Chain Sustainability (SCS) Firm Typology. We believe this new classification will enable us—and the wider supply chain community—to better analyze and understand the trends that are driving SCS.

The State of Supply Chain Sustainability survey explores SCS behavior across four survey dimensions: pressure, commitment, investment, and disclosure. The results suggest that there are certain “types” of companies in terms of how they view and manage SCS. To test this hypothesis, we applied a machine learning model (k-means clustering) to survey data from 2019 and 2020 (for a graphical representation of clusters and the methodological approach, see the Clustering section in Appendix A). The model identified six clusters, or types of companies, based on their profile for supply chain sustainability gauged in the survey.

Using the distinctive characteristics of each cluster, we created designations for the different types of companies in our SCS Firm Typology. The enterprises range from those with lower SCS scores (Low Effort, Dreamer, Compliant organizations) to trailblazers (Standard, High Effort, Leader organizations). The full classification is described below. To gain insights into their behavior, we then explored the characteristics of these SCS company types by different survey measures including pressure, investment, disclosure, firm size, and whether they are public or private enterprises. The clusters were fairly evenly distributed across industries.

The different company types and their respective characteristics are:

  • Low Effort: Low across all areas of pressure, commitment, investment, employee engagement, practices, and disclosure.
  • Dreamer: Moderate commitment and practice application, but low pressure, low investment, engagement, and low disclosure.
  • Compliant: Low commitment and disclosure, but moderate pressure, investment, engagement, and practices.
  • Standard: Moderate across all areas of pressure, commitment, investment, employee engagement, practices, and disclosure.
  • High Effort: High commitment, investment, and disclosure, but low pressure.
  • Leader: High pressure, commitment, investment, employee engagement, and disclosure.

One way to visualize how the clusters compare across each general measure and the specific issue areas within each area can be seen in Table 2. Leaders score high across all issue areas and are typically large companies with highly engaged employees (see Figure 20). They are also more likely to have practices in place to manage their SCS efforts.

In contrast, the High Effort cluster stands out with lower levels of pressure to adopt SCS despite highly engaged sustainability professionals; strong SCS practices; and high levels of commitment, investment, and disclosure. They are also more diverse in size than Leaders.

Table 2: Firm typology clusters: Heatmap showing average scores for each firm typology based on the clustering of results. Scores are color coded and categorized as Low, Moderate, or High for simplicity. N = 1,223. See the more detailed heatmap of clustering results in Table 5 in Appendix A.

Table 2
On the other side of the spectrum, Low Effort firms score the lowest across all measures. They tend to be small- and medium-sized enterprises with the lowest level of engagement from their staff and are unlikely to have SCS practices in place.

Interestingly, firm types are represented evenly across all the industries studied. Each group had a similar mix of industry representation that was close to the overall survey sample. This means that these six clusters could be viewed as SCS stepping stones.

Small, private companies in the lower-effort groups may not have the time or resources to achieve significant progress toward SCS. In contrast, large, public-facing companies can devote substantial resources to sustainability initiatives, and many of their employees are involved in the effort. As small companies grow, however, so does their potential to become more impactful SCS players, and they may experience more pressure to act. This evolutionary process from lower-effort to higher-effort company types is a potential direction for future research.

Figure 20: SCS firm types by company size. N = 1,223.

Supply Chain Professional Engagement

It is self-evident that supply chain professionals are central to the drive toward sustainable supply chains. However, the nature of that engagement is still evolving as SCS advances within companies and in the wider business community. The Covid-19 pandemic added a societal dimension to this evolutionary track, as the term supply chain gained common currency.

Jane Franch, Vice President for Strategic Sourcing & Sustainability at Numi Organic Tea, describes the implications for practitioners: “Supply chain professionals are gatekeepers to change. They hold tactical knowledge on how systems work and valuable insights on both motivating and limiting conditions. It is essential that they are better integrated into and empowered in sustainability decision making. This requires thoughtful and sincere redefinition of performance goals and targets, which too often are limited to on-time, cost-efficient fulfillment/delivery and transactional outcomes.”

“Supply chain organizations are no longer thought of as cost centers, but foundational to growth transformation as a roadmap for sustainable supply chains.”

Sheri Hinish, IBM Global Partner & Practice Offering Leader, Sustainable Supply Chain + Circularity

Figure 21A: Respondents’ level of engagement in supply chain sustainability in 2020. N = 1,526.

Figure 21B: Respondents’ level of engagement in supply chain sustainability in 2019 and 2020. N = 611 (2019) & 1,526 (2020).

Our research findings support these sentiments. We identified a shift toward integrating supply chain professionals into corporate sustainability efforts—rather than in separate sustainability departments—in our inaugural report, and the current report reaffirms this shift. Moreover, we found that more SCM practitioners are engaged in sustainability initiatives compared to the prior report.

Although the nature of our survey may be biased toward professionals who are already involved in sustainability, almost half of those we surveyed are decision makers or directly involved in sustainability initiatives (see Figure 21A and Figure 21B). The largest share (44%) is indirectly involved, an increase of 4% from last year. This may be due, in part, to the realignment of business priorities as supply chain professionals were called to serve on the front lines of the pandemic and grapple with unprecedented operational disruptions.

As was the case in last year’s report, our current research shows that the level of practitioner engagement in sustainability programs is not consistent across industries (see Figure 22).

Supply chain professional engagement decreased the most in the manufacturing and transportation & warehousing industries. The decrease may reflect a shift in priority during the pandemic.

Retail professionals were also on site, but their level of engagement declined less, reflecting the broader trend we found with the retail industry experiencing the most pressure to be more sustainable. In response, retail supply chain professionals have become more engaged in sustainability initiatives, and the broader industry has established more aggressive commitments and investments in SCS. According to the results, healthcare professionals were also more engaged in SCS potentially reflecting heightened interest in PPE and vaccine supply chains.

“Supply chain professionals have a large role to play in sustainability, in driving sustainability as one of the top metrics being tracked for the health of the business. Supply network decisions impact not only the total shareholder returns metrics but also in terms of sustainability metrics. How supply chain professionals respond (short- and long-term) in terms of different scenarios has a lasting impact on sustainability.”

Hong Mo Yang, Senior Vice President and General Manager of Manufacturing Sector, Blue Yonder

Figure 22: Respondents’ SCS engagement by industry and change year over year. N = 611 (2019) & 1,526 (2020).

Future Outlook

The inaugural State of Supply Chain Sustainability was published in the early months of the Covid-19 pandemic. The data captured in this second report reflects the first year of the pandemic’s impact. Although Covid-19’s lasting impact on supply chains and SCS is still playing out, our current research offers a glimpse of the evolving effects of the pandemic and their implications for sustainability in supply chains.

SCS’s Star Will Continue to Rise

There was wide agreement among the people we interviewed and surveyed for this report that interest in SCS will continue to increase in the near term. This finding is good news from a sustainability momentum standpoint. However, more interest is likely to bring more scrutiny from stakeholders like investors and customers—which is warranted. This may not be a positive outcome for companies that up until now have chosen not to engage with SCS; these include Low Effort and Dreamer companies as depicted in our SCS Firm Typology. There is likely to be more pressure generally to deliver on SCS promises and report on that progress year over year. In addition, enterprises that have not focused on SCS may feel increasing pressure to join the effort.

Pamela Mar, Executive Vice President for Knowledge and Applications for the (supply-chain-focused) Fung Group, agreed that SCS is increasing in importance, a shift she feels is permanent. “Pre-Covid,” she said, “consumers were becoming aware, but companies could still operate in the ‘bulge middle’, where they make the right sounds but basically pursue business as usual.” Covid-19 changed all that by, for example, driving increased attention to social issues and climate and facilitating the shift to digital commerce. She further suggests that these trends “are leading companies to understand that they do need a sustainability story backed by substance.”

A key part of that story is likely to be improvements in supply chain transparency and disclosure. These are essential tools in the SCS toolbox. Also, important will be a willingness to go beyond the basics. It is notable that when asked what distinguishes the most progressive supply chain sustainability programs in their industry, a majority of the executives interviewed pointed to programs that go beyond compliance, deliver measurable results, and seek to redefine a process or practice.

Supply Chain Will Be Central to the Story

As we describe in this report, supply chain professionals play a critical role in SCS. And this role will, if anything, only take on more significance. Dr. Donna Palumbo-Miele, Founder of Concordia Supply Chain Group LLC and Chair of the CSCMP Sustainable Supply Chain Group echoes this point: “The role of supply chain professionals has been evolving and will continue to do so. As leaders, it is our responsibility to foster an environment for supply chain professionals to be change agents.”

A key part of this role will be helping companies overcome the many formidable barriers to supply chain sustainability that lie ahead. These impediments vary by company and industry, but our research identified some common threads. An example is the challenge of securing the active support of suppliers, especially in large, complex supply bases that encompass broadly different corporate agendas and levels of sophistication in the sustainability area. Aligning sustainability goals across supply chains is another hurdle that will challenge practitioners in the future.

Investors Want a Seat at the Sustainability Table

Investors will increasingly turn their attention to sustainability. In the US, there was a record flow of capital into US Environmental, Social, and Governance (ESG) funds in 2020, and the Biden administration has signaled that climate change is an immediate priority. [74] Investors’ growing participation and scrutiny of companies’ SCS track records is reflected in our research for this report.

Social Sustainability Will Stay Top of Mind

Social issues came into focus in 2020. Social justice protests, heightened awareness of forced labor, and social inequalities laid bare by the pandemic are some of the developments that have helped to increase the pressure on companies to address social issues. As we recover from Covid-19 and start to rebuild our economies, these areas will likely stay in focus.
Michael Milam, Chief Operating Officer of Dr. Bronner’s Magic Soaps, described operating through pandemic constraints as a “moral calculus” where some sustainability commitments had to be temporarily sacrificed to achieve others. For instance, they had to use some bottles not made with post-consumer recycled plastics—which went against their longstanding policy—to continue supplying soaps and sanitizers for employee and public safety when their regular sources of PCR bottles were constrained. Economics also played into this calculus with their need to maintain their business in order maintain a steady demand and thus not adversely affect the livelihoods of their fair-trade material suppliers.

This concept of “moral calculus” is likely to be a key issue going forward for firms. Companies may need to juggle the needs and trade-offs of investing in different sustainability dimensions from social issues like worker welfare and safety that are increasingly in focus with the pandemic to environmental commitments such as climate change mitigation and product stewardship.

Climate Change Mitigation May Define the Coming Decade

A key question is the degree to which companies’ recent net-zero commitments will translate into SCS initiatives over the next five years. This is especially pertinent in light of our finding that climate change mitigation was a lower priority for firms in 2020.

Companies’ increased investments in energy savings and renewables have laid the groundwork for emissions reductions in supply chains, but some of the most difficult challenges, such as decarbonizing ocean shipping, lie ahead.

These challenges to address climate change and broader sustainability are echoed by MIT professor Yossi Sheffi, Director of MIT Center for Transportation & Logistics: “The jury is still out on what the impact of the Covid-19 pandemic will be on corporate priorities, but our initial results suggest that sustainability did not drop as much as we anticipated.

As consumers look toward a return to normalcy and companies grapple with continued supply chain disruptions, the key question will be whether supply chain sustainability remains a tack-on to existing CSR efforts or if it can be embedded strategically to drive risk management and opportunities that more concretely contribute to climate change mitigation.”

Bringing Small- and Medium-Sized Enterprises Along

Our research indicates that while large and very large companies are moving steadily in their sustainability commitments—albeit with investments lagging—many small- and medium-sized companies struggled to make progress in 2020. An important goal is to gain a better understanding of the critical barriers that prevent small and mid-size enterprises (SME) from adopting sustainability and how these enterprises can be engaged. In addition, companies that do business with small- and medium-sized suppliers have an opportunity to incorporate these enterprises into their sustainability efforts to increase overall adoption.

Conclusion

The research carried out for the first two reports in this annual series shows that while the business community is only at the beginning of its SCS journey, the movement is maturing, and its constituency of vested interests is expanding. As industries carve their own SCS paths forward, global transparency will play a vital role in guiding long-term development and vision. Future sustainability aspirations cannot be achieved by any single company but rather by the alignment and coordination of many diverse interests.

Next year’s report, the third in the series, will provide even more clarity about the shape of post-pandemic supply chains and related SCS challenges and opportunities. And it will include innovative analytical approaches, such as the new sustainability typology in this edition that we believe will promote a better understanding of SCS decisions and motivations.

We hope you will join us on this journey and participate in the 2022 State of Supply Chain Sustainability effort.

Acknowledgements

Sponsoring Organizations
Blue Yonder
C.H. Robinson
Intel
KPMG
Sam’s Club

Lead Investigator
Alexis Bateman
Research Affiliate, MIT Center for Transportation & Logistics

Faculty Chair
Yossi Sheffi
Elisha Gray II Professor of Engineering Systems, Massachusetts Institute of Technology

Project Management Lead
Kellen Betts
Project Manager, MIT Center for Transportation & Logistics

Student Researchers
Jason Pang
Master of Applied Science Candidate in Supply Chain Management (’21), Massachusetts Institute of Technology

Aniruddha Suhas Desphande
Master of Science Candidate in Technology and Policy (’22), Massachusetts Institute of Technology

Executive Interview Lead & Contributing Author
Ken Cottrill
Editorial Director, MIT Center for Transportation & Logistics

Survey Recruitment, Marketing, & Web Design
Samantha Varney
Marketing and Communications Administrator, MIT Center for Transportation & Logistics

Design & Communications
Arthur Grau
Senior Communications Officer, MIT Center for Transportation & Logistics

Daniel McCool
Communications Coordinator, MIT Center for Transportation & Logistics

Research Advisors
Chris Caplice
Executive Director, MIT Center for Transportation & Logistics

Lisa D’Ambrosio
Research Scientist, MIT AgeLab

External Academic Advisor
Jon Kirchoff
Associate Professor, East Carolina University

Incoming Lead Investigator
David Correll
Research Scientist, MIT Center for Transportation & Logistics

CSCMP Lead
Donna Palumbo-Miele, EdD
Chair, Sustainable Supply Chain Committee, Council of Supply Chain Management Professionals

CSCMP Team
Chris Adderton
Vice President, Council of Supply Chain Management Professionals

Mark Baxa
Interim President and CEO, Council of Supply Chain Management Professionals

Nichole Mumford
Vice President of Marketing, Council of Supply Chain Management Professionals

Leah Benshoof
Senior Account Manager, Council of Supply Chain Management Professionals

Sponsoring Companies Advisory Panel
Adam Schafer, Intel
Ella Chan, Sam’s Club
Gretchen Hall, KPMG
James Sembrot, Sam’s Club
Jolene Peixoto, Blue Yonder
Kristin Pedersen, KPMG
Rachel Schwalbach, C.H. Robinson

Additional Acknowledgements
Tevita A. Akau
Halide Alagoz
Laura Allegue
Ana Lucia Alonzo
Magali Anderson
Brittany Bama
Ashley Barrington
Sergio Barbarino
Ezgi Barcenas
Patrick Browne
Inma Borrella
Katie Date
Chris Ettery
Jane Franch
Daniel Francois
Suzanne Greene
Toby Gooley
Jay Guo
Jim Hartzfield
Sheri Hinish
Yinjin Lee
Benny Mantin
Pamela Mar
James McCall
Michael Milam
Tyler Morgan
Radu Palamariu
Kris Oswold

Andrew Pastor
Ceclia Pecorari
Pranav Prakash
Eva Ponce
Jim Rice
Wendy Tate
Susana Val
Karen van Nederpelt
Kyra Whitten
Jennifer Wong
Hong Mo Yang

Organizations
Achieving Women’s Excellence in Supply Chain Operations, Management, and Education (AWESOME)
Center for Latin-American Logistics Innovation
Luxembourg Centre for Logistics and Supply Chain Management
Malaysia Institute for Supply Chain Innovation
Network for Business Sustainability
Ningbo China Institute for Supply Chain Innovation
One Step Closer
Retail Industry Leaders Association
Supply Chain Brain
Supply Chain Management Review
Supply Chain Revolution
Zaragoza Logistics Center
MIT Center for Transportation & Logistics MITx MicroMasters® Program in Supply Chain Management
Council of Supply Chain Management Professionals

References

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