SCS Practices: A Staircase Emerges

Figure 13 can be seen as a “staircase” of supply chain sustainability practices in 2021. At the bottom of the staircase are the practices most commonly implemented, and at the top are those least so. In general, anyone looking to assess their next supply chain sustainability investment can look at which stair they find themselves on now to see what typically comes next—or which earlier steps their organization may have overlooked.

Interestingly, all paths lead upward and are mostly convergent. That is, supplier audit, supply chain mapping, and codes of conduct (company and supplier) are the most prevalent practices: an SCS “base camp”.

“We see our clients moving towards practices that will improve transparency—notably supply chain mapping and codes of conduct. There is a strong desire to contribute to ESG values, and it goes beyond technology. We believe you have to incentivize the entire supply chain ecosystem to be transparent and open.”

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

“Supply chain management has never held a more critical and influential role in the world than it does today, and organizations are rising to the challenge. To mitigate ongoing supply chain disruptions, the leaders in the space are becoming more conscientious and intentional in their supply chain monitoring. As a result, we’re not only seeing a rise in sustainability tracking, but also, a push for evaluating all risks, including ESG, safety, business risk and much more, in one centralized location for greater transparency.”

Danny Shields, Vice, President for Sustainability & Risk, Avetta

These practices also saw the greatest increase from 2020. Supplier collaboration, information technologies, and standards or certifications have been adopted by a smaller number of firms, owing perhaps to their comparative cost or lack of familiarity, but this represents a “first ascent”, where the firm that has already reached its “base” can aspire to go to next. At the top of the staircase are the most rarely applied practices among our respondents, including supplier training, third-party verification, carbon offsets, and NGO/third-party collaboration. This “peak” includes initiatives and technologies that most firms as yet consider aspirational or those only on the radar of firms that are particularly aggressive about their supply chain sustainability efforts.

Figure 13: “Staircase” of SCS practices (n = 2,044). Filters will change ‘n’ value and may result in too small of a sample to draw statistically significant conclusions.

SCS Disclosures: A Steeper Summit

Our survey also asks respondents about their firms’ practices for disclosing supply chain sustainability information. Arranged again as a staircase, we see that firms most commonly communicate their sustainability efforts through their own websites, press releases, and corporate CSR reports. These are all, of course, channels of in-house messaging. That is, the company itself both collects the data and reports it. Less often applied are the use of reporting organizations and third-party case studies. These peak stairs require partnerships with specialists and watchdog groups, often requiring added cost and external collaboration. Although they appear less frequently, these kinds of partnerships also represent the most meaningful increase year over year after falling from 2019 to 2020.

In addition to illuminating a possible next step in one’s supply chain sustainability journey, the staircases of practice and disclosure also point towards boundary crossing partnerships as a next frontier in supply chain sustainability. The higher steps are ones that come with more difficult or unpalatable requirements like collaboration with outside entities, and perhaps even sharing sensitive information with those external collaborators and stakeholders.

This, however, is not always easy; through our executive interviews, we learned that this is a real barrier to improving supply chain sustainability. One respondent from the warehousing and logistics sector reflected on this challenge: “The collaboration has to be both inside your company and outside, across industry, and that’s really hard to do, particularly because you have to have a really good culture to do that.”

“Supply chains are so complex that no one can tackle sustainability alone. Collaborating with the right partners who have the right technology is essential.”

Rachel Schwalbach, Vice President for Environmental, Social & Governance, C.H. Robinson

Figure 14: “Staircase” of SCS disclosures (n = 382). Filters will change ‘n’ value and may result in too small of a sample to draw statistically significant conclusions.

Increasing Involvement Across Business Functions

We also asked survey respondents about their level of engagement with supply chain sustainability initiatives. Respondents could report themselves as decision-makers, directly engaged, indirectly engaged, or not at all engaged with supply chain sustainability. In every year since 2019, the respondents reported most commonly that they were indirectly engaged. With the current survey, however, we saw an increase in responses from decision-makers and those directly engaged with SCS initiatives. We also saw a slight decrease in those not involved at all over the three years.

The increase in all levels of engagementespecially the large and growing representation of direct engagement—indicate sustainability awareness and agency spreading throughout firms, beyond the purview of a single “sustainability czar”, and into day-to-day operations.

Figure 15: Respondents by level of engagement with their firms’ SCS efforts (n = 1,522)