2021 will not only see the further mainstreaming of sustainability for businesses and citizens, it will also be the year when previously underplayed or ‘niche’ supply chain questions come centre stage as commercial and legal implications become clear. Though this will be the year of carbon and COP26, new demands around biodiversity and equality in supply chains will create new opportunities. The key is not to expect to fix them in 2021, but to quickly understand the implications and decide how to navigate the issue and avoid impending crisis.
As we highlighted in our 2020 roundup, the momentum around sustainability continues to grow, from investor focus on ESG to growing requirements to engage on climate change. 2021 will only accelerate this as all stakeholders demand it. Three-quarters of UK businesses see sustainability as a key part of rebuilding their profitability in the wake of Covid-19. Normally in times of recession, ethical consumption is seen as a luxury and is an early casualty – but globally 60% of consumers say they are making more ethical and environmental purchases since the start of the pandemic. Meanwhile governments need green taxes to fill budget holes and investors need better ways to manage risk in what has become a more volatile environment.
What will be different about 2021 is that topics that used to seem too complex, or outside the responsibility of businesses, will increasingly be subject to legislation, have clear commercial impacts to businesses and attract the focus of citizens and consumers.
Biodiversity – growing attention to the next environmental crisis:
The term has always seemed complex – it has not connected well with citizens and even sustainability professionals have been slow to engage. However mounting evidence makes clear that the loss of plant and animal life worldwide is a catastrophe on the same scale as climate change. This will have similarly damaging impacts on soil, agriculture and fisheries, damaging the essentials of our survival, while the habitat destruction that causes this loss will also further increase the risk of the next pandemic.
2020 was meant to see the global summit in China to advance an international agreement on this critical subject, but this has been rearranged for 2021 – with that will come more government and legislative focus, already seen in the new UK Environment Bill. This is already coming through in corporate commitments to becoming ‘forest positive’ to restore critical habitats (see the Forest Positive Coalition launched in late 2020) and faster embracing of ‘regenerative agriculture’ that helps restore damaged ecosystems (see General Mills for example). With all this focus, we also expect citizen engagement to grow, especially since the loss of wildlife is something that can be seen and felt in every part of the world, so this can be a global story made locally relevant. It is only a matter of time before our next ‘Blue Planet II’ moment when public awareness suddenly grows.
Fairness for workers and communities – tackling rising inequality and the role of business:
Businesses have always talked about treating workers in their supply chains fairly, but since this was hard to measure, and often seemed to suggest a tradeoff with paying people more and eroding margins, action was slow. However, the pandemic is having such a fundamental and long-lasting impact on lives and livelihoods that this will attract much more attention this year – both out of moral duty and a recognition that inequality weakens reliability of supply chains. Research has already shown how the economically vulnerable have been hit hardest by the pandemic, including ethnic minorities – as highlighted by many Black Lives Matter protests last year. Oxfam also suggests that it may take a decade to return to get back down to pre-Covid levels of poverty – unlike billionaires who grew wealth by $3.9 trillion in the past 9 months. Similarly, studies have suggested that the burden of additional childcare under lockdowns as schools are shut is falling largely on women, setting back the progress on gender equality by up to 25 years. Inequality will not only make supply chains fragile as people struggle to survive, it will depress consumer markets and will likely increase instability and social unrest, so corporates need to understand the risk this creates across their business model.
Because it is so widespread, felt in every market, this will no longer be a niche issue where consumers and governments accept poor practices – there will be higher demands on care for workers at home and abroad. Unilever is already taking note – stating that the two biggest threats faced globally are climate change and inequality. They have announced plans to address fairness and equality in their supply chains – that all businesses in their supply chains will pay the local living wage by 2030 and that they are committed to spend over £1.4 billion with suppliers owned and managed by people from under-represented groups by 2025 in a bid to improve diversity. They know this is both a responsibility and one that will enhance the resilience and effectiveness of their supply chain. So, the question for businesses will be what are they doing to look after both their own workers, but also the workers who are making the goods and services they rely on.
So we have two structural challenges coming that will attract more attention from consumers, citizens, investors and governments and demand a response. Previously they have been dismissed as too hard, too structural to address, but as we are seeing from the actions of leading companies, the best approach is to understand the threat and plan how to tackle it. What they know and others are waking up to is that this will not be solved in 2021, but if companies wait until the pandemic is over to start planning, their supply chains – and public trust – will be that much closer to collapse and opportunities to start mutually beneficial partnerships will have slipped away. The first step is coming to terms with the risks – and identifying the opportunities.
One simple tool that can help you do this is the framework for supply chain risks and opportunities we laid out in our report New Shocks, Better Solutions, freely available here. Get in touch with email@example.com if you want to know more.
At Sancroft we seek to challenge business to think differently and to make sustainable profits they can be proud of. Please do get in touch to find out how we can help. For more insights from the Sancroft team, please sign up to our newsletter here.