News / Company chiefs must get strategic to make supply chains more sustainable

Douglas Kent, ASCM EVP strategy and alliances

Supply chain executives can and must do more to combat climate change, the Association for Supply Chain Management (ASCM) has urged.

CEO Abe Eshkenazi pointed to the repercussions of the heat wave that has hit large parts of Europe, producing wildfires that have forced people from their homes, disrupted transport services and destroyed crops.

He added that the economic fallout was “massive”, citing a study last year by European economics and climate experts which found that heatwaves on average have lowered Europe’s annual economic growth by 0.5% in the past decade, because extreme temperatures reduce people’s productivity.

“Supply chains can – and definitely should – take steps to reduce our climate impacts,” he said.

Douglas Kent, ASCM’s EVP strategy and alliances, said over the past 18 months, concerns about disruptions from climate change, as well as the severity of climate-related events, have risen significantly.

A study ASCM conducted with the Economist Intelligence Unit found companies were not prepared strategically to cope with climate-related disruption.

“They don’t have really robust contingency planning, and they don’t have playbooks they can follow,” said Mr Kent, adding that these were self-assessments of respondents in the study.

And approaches to sustainability were becoming more strategic, he noted.

“Sustainability is starting to move from aspiration, to some degree of incorporating it into the supply chain,” he said. It ceases to be something that is nice to do as long it does not carry any cost, added Mr Kent.

Boardrooms and c-suites realise they cannot issue statements about ambitions to be carbon-neutral by a certain year without a plan on how to get there. Invariably the primary focus is on their companies’ direct CO2 footprint, but Scope 3 emissions cannot be overlooked or simply pushed to supply chain services providers.

“I need to take sustainability into consideration for the entire ecosystem I select to work with to get my product to a consumer or to my business customer,” said Mr Kent. The argument that another company has been contracted and paid to manage part or all of the supply chain, so it should assume full responsibility for any supply chain-related issues, is not valid in his eyes.

“It’s very hard these days to divorce myself from the brand reputational impact,” he added.

This leads directly to defined sustainability metrics in the terms of engagement between a company and its supply chain partners. ASCM has a set of standards to establish multi-tier supplier accountability, which has to be part of the tender and contracting processes, Mr Kent said. There must also be metrics to measure compliance and performance.

On their journey towards sustainability, companies have encountered “much fuzziness, lack of precision and clear standards of what is measured and how”, he said.

“Different metrics are very confusing. It’s very important that people align to some universal standard,” noted Mr Kent.

ASCM has embraced Global Reporting Initiative (GRI) standards, a modular system of interconnected metrics that allow companies to publicly report the impact of their activities in a structured and transparent way – “Those are the most commonly adopted,” said Mr Kent.

ASCM is to publish benchmarks in its supply chain operations reference handbook this autumn, which has been updated in part to reflect the higher importance of sustainability. It addresses resilience in economic, ecological and social terms and should be included in every supply chain scorecard, he said.

Can industry move the needle far enough, or will regulatory intervention be required? Mr Kent said: “The sentiment I hear from most of the players is they’d rather do this as a community than as a regulated group, and the likelihood of success is greater if that’s the case.”