MHI Solutions Improving Supply Chain Performance
Feature
BILLION PHOTOS/SHUTTERSTOCK.COM
The call for sustainability in business has been growing in recent years. If your company hasn’t yet been called on to share sustainability metrics, it likely will be soon. In fact, sustainability is poised to become a key part of almost every business. Sustainability is a high-value initiative, but it requires effort.
The good news is that there are likely to be significant benefits to making your business more sustainable—but there will also be costs and some potentially challenging and tense adjustment periods. You might think of sustainability as a garden that will yield roses in the years to come, even though you may only notice the thorns at first.
Let me back up for a second.
What do you think of when you hear the word “sustainability?” Maybe you have visions of flowerchild, tree-hugging hippies holding hands, dancing around a giant sequoia. If you do, you’re not alone. But the origins of Earth Day are nothing like the modern corporate and investor push for sustainability. Today, a central focus of sustainability is on incentivizing businesses to be more judicious and efficient in their use of non-renewable resources. There are also priorities around ethical business practices, risk mitigation, cost mitigation and other operational best practices.
Sustainability will not be optional
Sustainability matters for supply chains because there is a rapidly accelerating trend to make sustainability a business precondition and requirement. In the not-too-distant future, you will likely need to share emissions data, environmental impact metrics, operation practices and sourcing information just to be able to conduct the most basic elements of business, including keeping and acquiring clients, gaining access to capital and even operating as a growing concern.
In short, sustainability is entering the realm of bean counters and their associated audits, records and compliance. As sustainability becomes part of the recordkeeping and accounting in your business, it will become absolutely essential for leaders, alongside audits and compliance.
Sustainability offers business benefits
Sustainability is becoming just another cost of doing business; it is unavoidable and will require your investment and effort, your business and your people. But the good news is that sustainability efforts can also yield tremendous value, with a number of financial benefits, including the following:
1. COST SAVINGS: Implementing sustainable practices, such as using energy-efficient equipment and technologies, can help reduce energy costs and other operational expenses. Plus, using sustainable materials, including recycled or biodegradable materials, can help reduce raw material costs, which are poised to rise for virgin nonrenewable resources in the years ahead.
2. GREATER EFFICIENCY: Sustainability can help improve operational efficiency by reducing waste. For example, implementing lean manufacturing principles or identifying efficient delivery routes can make your business more efficient, and reduce your resources expended.
3. IMPROVED RISK MANAGEMENT: Implementing sustainability initiatives can help mitigate financial risks. By increasing supply chain transparency, disruption risks can be better anticipated or mitigated. Regulatory and compliance risks would also fall with greater sustainability transparency.
4. INCREASED REVENUE: Companies seen as environmentally friendly and socially responsible often benefit from increased consumer demand for their products and services. This is similar to the value of an ISO certification, being an approved government contractor. These things cost money, but they are important for your business and can increase your revenue.
5. ATTRACTING NEW INVESTMENT: Companies with a strong sustainability track record can attract more investments from socially responsible investors. This has become more critical in public markets, but it will also become increasingly important for companies that want to be seen as viable acquisition targets. If you are sustainable—or at least have some provable sustainability metrics for your firm—it is likely to be more valuable than a company that lacks sustainability initiatives, metrics, reporting and audits.