COVID-19 revealed the risks of a global supply chain optimized entirely for the bottom line – and inevitably, some crisis, whether geopolitical or a global pandemic, was bound to break it. Now, the consumer goods industry has an exciting opportunity to build a more resilient and modernized supply chain in the next 1-2 years (the reforming will happen quickly).
As you consider your business’s supply chain, you have the opportunity to account for new global priorities. You’ve likely already felt building pressure from consumers and investors to be more transparent about your supply chain’s environmental and labor impact, and now is the time to rebuild with this in mind. Thankfully, we have arrived at an age of digitalization – new supply chain sustainability software makes deep data collection possible across your value chain. To be truly resilient, your business should seek technology providers that help you collect data that is trusted, granular, and contextualized enough to help you track and reduce impact over time. And of course, this information will make sharing progress with public stakeholders possible.
As you rethink your supply chain over the next few years, look for technology partners that will help you achieve these three goals:
#1: Develop a Worker-Centric View
Consider how laborers fared at the beginning of the pandemic. Some businesses rushed to conserve cash by halting production. Suppliers didn’t get paid, and the millions of workers who support global manufacturing were left without the income they rely on. It became clear that no safety net existed for these laborers. Not only was this a catastrophe in terms of human welfare, but also an economic disaster. Equal partnership is essential in the 21st century, and by collecting data that helps you to stay close to your on-the-ground suppliers, you can avoid these oversights in the future.
Your new supply chain must use sustainability measurement tools that can track your value chain partner’s commitments to human welfare. Find a technology partner who can help you track key metrics such as fair wages, worker benefits, and health and safety practices. Increasingly, consumers want a look into the laborers behind their products, and by collecting this data, you’ll be better equipped to tell this story.
#2: Track Beyond Scope 1 Emissions
When it comes to measuring your environmental impact, there are so many areas to address, from water, to chemical use, to waste, and carbon emissions. However, with the EU soon to launch a carbon cap and trade system, and other countries including Canada, China, and the US having already implemented or developing similar programs, there is no better time to start building the muscle of measuring carbon output.
Currently, many businesses track and optimize their Scope 1 emissions, which relates to a company’s direct emissions – typically those from corporate offices and vehicles. However, Scope 1 emissions only account for a fraction of your full value chain’s impact. Though adding solar panels to your offices and purchasing an electric vehicle delivery fleet is laudable, businesses looking to drive meaningful impact cannot ignore their Scope 2 and 3 indirect emissions – which have been known to comprise more than 90% of a company’s total emissions. A truly modernized supply chain will deploy sustainability reporting software that can measure emissions across the value chain. Look for a data partner who can help you understand your full carbon footprint.
#3: Design for New ESG Investing Trends
Governments and investors are evaluating environmental social and governance (ESG) claims with greater scrutiny. Firms wanting to make ESG investments are more frequently looking for businesses that can quantitatively prove their sustainability programs. In response, your supply chain partner should help you reveal historical data built on industry-wide agreed-upon metrics and methodologies that makes it easy for external stakeholders to evaluate your work.
As you rebuild your supply chain, focus on establishing stronger communication channels that allow you to collect more insightful, granular data at each step in production. Your technology partner should serve as the connective link that helps you share information with your value chain stakeholders. They should also help you analyze your data, helping you form insights and support decision making. When the time comes to report on your ESG programs, you’ll be armed with key environmental and social impact data that enables you to transparently share progress and tell the full story to stakeholders.
As consumer goods manufacturers adopt these principles, the supply chain will take a promising new form. No longer will this system only be optimized around dollars and cents. We have a rare chance to re-optimize not only for the bottom line, but also for environmental and social impact.
While this mapping and driving down impact is complex in the modern world of disaggregated global production, companies that invest in the foundational work today, and find the right partners to help them, will be able to make the most impactful improvements tomorrow.