Stakeholders increasingly reward sustainable supply chains – and expect regenerative approaches
By Pendragon Stuart, former Consultant at Sancroft.
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Sustainable supply chains are increasingly recognised as critical to enhancing business success, not just a background compliance question. As seen in a flurry of recent announcements, every stakeholder group is demanding – and rewarding – action:
- Consumers: People are paying more attention to how goods are produced – so much so that H&M’s CEO has publicly spoken about the sizeable business challenge of people being encouraged to buy less and buy higher quality – this is no longer simply a niche discussion, but something that is drawing attention of the major companies. He also mentioned this came with a ‘social’ danger – that reducing consumption for reasons of climate change mitigation could have “terrible social consequences” in the fight against poverty. These remarks have been controversial, but what they demonstrate is both the complexity of responsible supply chains and that CEOs now do not dismiss these issues as minor, or ‘anti-business’, but have to respond in terms of other aspects of responsible supply chains.
- Investors: Environmental, Social and Governance (ESG) questions are becoming a higher priority for investors as they recognise the financial value this delivers and the risks it hedges against. Already £30.7 trillion in assets are invested in ‘socially responsible’ – and strongly performing – businesses – a 34% increase over the past two years. Now investors are getting access to more tools to help judge who has more sustainable and reliable supply chains – like the World Benchmarking Alliance’s just released Seafood Stewardship Index that ranks the performance of the top 30 most influential seafood companies. This is only the first step in their ambition to benchmark 2000 leading companies globally across all major industries with comparable metrics that incentivise businesses to raise their game to access capital.
- Legislators: Across the world, new laws and standards are coming in to encourage businesses to focus more on what exactly happens in their supply chains, including what happens overseas. In the UK, all three main parties have proposals to require UK firms to reduce overseas deforestation they may be accountable for, while the Lib Dems have advanced ambitious proposals that would mean UK businesses have a ‘duty of care’ for the full social and environmental impacts they have overseas. The government has already started this journey, with new official procurement guidance that suggests companies can be excluded or preferred based on how robust their approach to tackling modern slavery risks is.
This isn’t just about negative expectations for what to avoid – now there is a growing focus on ‘regenerative’ and ‘net positive’ approaches that move beyond sustaining to, for instance, improving soil health and biodiversity and therefore raising productivity and increasing resilience. For instance, Timberland have announced their steps towards a ‘regenerative’ leather supply chain that sequesters more carbon than it emits while also delivering a boost to biodiversity. Similarly, Whole Foods have announced they see ‘regenerative’ agriculture as one of the biggest trends for 2020 that their customers and suppliers will be engaging with, while major mass market players like General Mills have announced the goal of applying regenerative agricultural practices to 1 million acres of farmland by 2030.
Upcoming complimentary event and report
Given the speed of this change, we are excited to host a panel discussion next week on the 6th November to synthesise the biggest shifts and discuss what it means in a business context with leaders from John Lewis, Pearson publishing and Supply Chain Scotland. If you are interested in attending, or hearing about the report we will be publishing after, please see the event details here, or get in touch directly at hello@sancroft.com.
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