APICS-PwC Joint Research Study on Supply Chain Sustainability · years are concerned about energy...
Transcript of APICS-PwC Joint Research Study on Supply Chain Sustainability · years are concerned about energy...
10/21/2013
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Sustainability Delivered —
Interpreting and Executing the
Vision for Tangible Benefits
APICS-PwC Joint Research
Study on Supply Chain
Sustainability:
Panel
Rocco P.
Ciccolini
PwC
Operations
Advisory
Manager
Nic
Delaye
PwC
Sustainable
Business
Solutions
Director
Jonathan
Thatcher
APICS
Director of
Research
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Introduction & today’s session objectives
In today’s session, we will:
• Share our perspective on supply chain sustainability (SCS)
• Provide real-life examples of SCS in action
• Report findings of the first phase of a multi-series APICS-PwC joint
research study aimed at exploring how supply chain professionals
interpret and deliver on their company’s sustainability vision
• Provide an interactive forum for you to share your perspectives
• Offer actionable next steps to drive SCS initiatives in your role
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Corporate sustainability is about improving the societal impact of an
organization in a way that is meaningful, measurable, and makes
business sense and the supply chain is a key aspect
Supply Chain Sustainability
Overview
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Companies are facing multiple supply chain
sustainability challenges…
Environmental
• Resource scarcity and price volatility
• Energy/greenhouse gases
• Hazardous materials/waste
• Water quality/quantity
• Weather volatility & other climate risks
• Biodiversity impacts
• Transportation/logistics/ packaging
Social
• Forced labor/ child labor/ trafficking
• Workplace health & safety
• Freedom of association
• Overtime, wages & benefits
• Discrimination, worker diversity
Economic
• Job creation
• Use of local workforce and suppliers
• Fair pricing
• Supplier diversity
• Increasing consumer income disparity
• Chronic labor market imbalance
Ethical
• Conflict minerals
• Bribery and corruption
• Intellectual property
• Privacy and confidentially
• Misrepresentation of product
5
2%
5%
6%
11%
12%
20%
22%
22%
26%
28%
34%
38%
41%
47%
53%
Cyber attacks
Telecommunications outages
Other
Counterfeiting
Unplanned IT disruptions
Change in technology
Geopolitical instability
Supplier/partner bankruptcy
Rising labor costs
Raw material scarcity
Environmental catastrophes
Energy/fuel prices volatility
Market changes
Currency fluctuations
Raw material price fluctuation
…many of which they see as the greatest risks to
the supply chain
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Source: “PwC and the MIT Forum for Supply Chain Innovation,” 2013
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Not surprisingly, supply chain sustainability
challenges are resulting in greater executive
scrutiny…
Source: PwC’s 16th Annual Global CEO Survey, 2013
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plan to
increase
investment in
natural
resources over
the next three
years
are concerned
about energy and
raw material
costs and say
energy costs are a
threat to growth
42%of US CEOs
are not satisfied
with their firm's
framework for
ethical behavior
50%of US CEOs
35%of developed
market CEOs
52%of emerging
market CEOs
…and are causing sustainability to become the
fastest growing supply chain trend
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Source: “PwC Global Supply Chain Survey 2013”
+34%
+31%+26%
+19%
+19%
+18%
+15%+14%
+14%
+12%
+10%+6%
2015 vs 2013 growth
0% 25% 50% 75% 100%
Reducing total SC cost
Managing profitability
Responding to regulatory requirements
Meeting customer requirements
Preparing for volume flexibility
Ensuring supplier performance
Responding to competitive pressure
Acquiring/developing talent
Supporting emerging market demand
Automate and increase transparency
Managing SC security and risk
Making supply chain more sustainable
Critical/Moderate in 2013Same Importance/Increase in Importance by 2015
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Supply chain sustainability requires a multifaceted
approach
Design & Plan Source Make Deliver Use & Return
Environmental Practices
Economic Practices
Ethical Practices
Social Practices
• Supply chain sustainability minimizes risk, reduces costs and drives
growth through positive environmental, social, economic and ethical
practices
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Manage impacts of owned, upstream and downstream operations on
living and non-living natural systems, including ecosystems, land, air,
and water.
Manage impacts of owned, upstream and downstream operations on
economic conditions of stakeholders and on economic systems at local,
national, and global levels.
Manage impacts of owned, upstream and downstream operations on
social systems, including labor practices, human rights, society, and
product responsibility.
Manage impacts of owned, upstream and downstream operations on
applicable laws, regulations, and moral systems.
Supply Chain Sustainability
Research Study
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2012 APICS Sustainability Research Summary
Key Takeaways:
Maturity in Practice
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53%
Said employer
sustainability history is
unknown or less than
5 years old
62%Said sustainability risks are
creating more supply
chain complexity or cost
57%
Could not quickly determine
relative sustainability
performance of major
supply chain partners
Despite an increase in sustainability maturity for supply chains from 2011, responses revealed several areas for growth opportunities:
• Gaps persist between senior management and supply chain and operations management
• Practical support is sometimes missing
• Risks and challenges remain
Why do these
challenges continue?
2013 APICS-PwC Joint Sustainability Research Study
• Intrigued by the results of last year’s supply chain
sustainability study, this year’s study was designed to
examine the following supply chain sustainability factors:
– Challenges impeding wide-spread implementation
– Perspective and commitment differences between
different management levels
– Existence and pervasiveness of messaging, training, and
metrics
– Differentiating factors that led to tangible business value
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Survey demographics spanned multiple leadership
levels, company sizes, and industries
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9%
9%
48%
34% Executive/Senior Leadership
Director
Manager
Asst. Manager or Below
6%7%
17%
23%
24%
8%10,000-24,999
5,000-9,999
1,000-4,999
250-999
25-249
Fewer than 25
• No single industry
represented more than
13% of respondents
• Respondents’ roles also
varied, including:
engineering, planning,
production, sourcing, and
warehousing. No one
group represented more
than 21%
• Over 40% of respondents
had direct responsibility
for managing supply
chain initiatives
• No single industry
represented more than
13% of respondents
• Respondents’ roles also
varied, including:
engineering, planning,
production, sourcing, and
warehousing. No one
group represented more
than 21%
• Over 40% of respondents
had direct responsibility
for managing supply
chain initiatives
Supply Chain Sustainability
Research Study: Barriers and Voice of the Practitioner
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Top challenges encountered with regard to
implementing supply chain sustainability initiatives
Ranked as the #1 obstacle to supply
chain sustainability
“Leadership does not provide the mandate,
incentives, and resources to turn
sustainable strategies into action.”
Generally marked as a challenge by
larger ($1bn+) companies
“The impact on shareholder value is not
measurable”
Respondents were less likely to
indicate an increase in supply chain
sustainability focus for the next 3 years
“Our customers are not asking for it”
The clearer a company’s strategy and
goals are, the more likely the company
achieves value from sustainability
“There is significant confusion about the
scope and company goals on sustainable
supply chain”
Respondents indicated that ethics and
compliance are the major
sustainability drivers
“Compliance drives the majority of actions”
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Question: Check all the applicable challenges within your organization, then rank the top three
challenges with regard to implementing sustainable supply chain initiatives. (N=109)
Supply Chain Sustainability
Research Study: Management Level Perspective Differences, Messaging &
Metrics
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Very supportive leadership
Supportive leadership
Neutral leadership
Unsupportive leadership
Don’t know
42%
48%
10%
0%
28%
42%
23%
3%4%
• 90% of Executives and Directors say that they are supportive of staff ideas
• 26% of Managers and Assistant Managers say that their leadership is neutral or
unsupportive of staff ideas
Executive & Director Manager & Below
Executives/directors say they are enthusiastic about
staff ideas towards sustainability, but managers and
below see it differently
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(N=29) (N=114)
Strategy does not exist
General discussion exists, but the corporate
strategic approach is not documented
Strategy does exist, but the plan is not
communicated to all levels of the organization
Strategy exists and is fully communicated
across the organization
• More managers say that an SCS strategy does not exist at their companies
• Almost half of respondents, regardless of level, don't have a documented SCS
strategy
Executive & Director Manager & Below
The perceived existence and communication of
sustainability strategy differs between levels
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(N=20) (N=85)
21%
34%
28%
17%
5%
40%
25%
30%
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We have no measurement or tracking in place
for supply chain sustainability initiatives
We have specific metrics and goals for
individual supply chain sustainability initiatives,
and they are measured periodically
We have an aggregation of functional supply
chain sustainability initiatives only, which have
associated targets to meet
Sustainable supply chain initiatives are
measured functionally and built into a
company-wide scorecard
• Unlike Managers & below, Executives believe their company has specific metrics
and goals – confirming that SCS plans are poorly communicated and monitored
• Additionally, managers have little measurement or tracking mechanisms in
place to handle sustainability initiatives
Executive & Director Manager & Below
Executives/Directors believe there are more metrics
and goals in place than staff below them
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(N=20) (N=85)
15%
45%
20%
20%
45%
25%
14%
16%
We do not receive sustainable-specific training
or education
We are provided passive training and
education through company website, informal
communications
We are provided general training and
education on sustainable supply chain
concepts and how they can impact our
function
We are provided tangible, job-specific training
and education which should improve our
performance
• Executives have exposure to additional sustainability education, but in general,
all levels feel that education is inadequate
• Other questions show that all levels feel that their companies do not provide
sufficient budget and incentives for SCS initiatives
Executive & Director Manager & Below
There is a pervasive feeling that education and
training is inadequate
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(N=20) (N=85)
25%
40%
25%
10%
44%
27%
15%
14%
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Supply Chain Sustainability
Research Study: Tangible Business Value Enablers
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The likelihood of revenue gains or cost reductions
drops if there’s no clear mandate from leadership
26%
54%
10%
29%
0%
15%
30%
45%
60%
Revenue gains Cost reduction
With Mandate Without Mandate
• 38% of respondents indicated that
“Leadership does not provide the mandate,
incentives, and resources to turn supply
chain sustainability strategies into action.”
• Within that group:
51% Had no measurement or tracking in place for
supply chain sustainability initiatives
72% Saw a lack of responsibility within the
organization or had unclear goals
67% Had no supply chain sustainability strategy or
the strategic approach was not documented
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A strategy does not exist
General discussion exists, but the corporate
strategic approach is not documented
A strategy does exist, but the plan is not
communicated to all levels of the organization
A strategy exists and is fully communicated
across the organization
• 77% of those who did not achieve value from sustainability said their strategy
does not exist or strategic approach is undocumented
− “Realized value”: those who indicated revenue gains, cost reduction, market share gains, market size
gains, or environmental impact reduction from sustainability efforts
− “Others”: those who did not indicate value achieved in any of the five areas above
Realized Value Other
Those who realized value from sustainability efforts
were far more likely to have an established strategy
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(N=60) (N=35)
8%
34%
35%
23%
37%
40%
14%
9%
We have no measurement or tracking in place
for supply chain sustainability initiatives
We have specific metrics and goals for
individual supply chain sustainability initiatives,
and they are measured periodically
We have an aggregation of functional supply
chain sustainability initiatives only, which have
associated targets to meet
Supply chain sustainability initiatives are
measured functionally and built into a
company-wide scorecard
• Two thirds of companies who have not realized value from supply chain
sustainability do not measure or monitor performance
− “Realized value”: those who indicated revenue gains, cost reduction, market share gains, market size
gains, or environmental impact from sustainability efforts
− “Others”: those who did not indicate value achieved in any of the five areas listed above
• Value from monitoring and measurement can be achieved even with
broad/aggregated targets that are monitored periodically
Realized Value Others
Measurement and monitoring, even broadly, is a
key enabler to driving value from SCS initiatives
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(N=60) (N=35)
22%
38%
18%
22%
66%
17%
8%
9%
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Companies with individual and functional
sustainability metrics are more likely to achieve
value from SCS initiatives
37%
59%
30%
11%
48%44%
0%
12%
37%
10%
4%
29%
18%
31%
0%
15%
30%
45%
60%
Revenue gains Cost reduction Market share gains Market size gains Environmental
impact
Customer
satisfaction
None
Companies with individual and functional metrics
Companies without individual sustainability performance metrics
• The biggest barrier to SCS success is "deploying individual and company-
wide functional metrics"
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Summary of findings• Challenges continue to prevent the wide-spread adoption of
supply chain sustainability practices
– The most common barrier to success was deploying individual &
company-wide functional metrics
– Education and training is often inadequate
– In many cases, leadership does not provide the mandate, incentives &
resources to turn sustainable strategies into action
– There is significant confusion about the scope and company goals on
supply chain sustainability
• Interestingly, SCS perspectives vary by management level
– The perceived existence and communication of sustainability strategy
differs between levels
– Executives/directors say they are enthusiastic about staff ideas
towards sustainability and believe there are more metrics and goals in
place, but managers and below see it differently
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Summary of findings
• Business value is achieved through supply chain
sustainability practices when there is…
– Clear mandate from leadership
– Existence of a formal SCS strategy
– Individual and functional metrics
– Measurement and monitoring processes in place
Business value includes revenue gains, cost reduction,
market share gains, and market size gains
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Actionable next steps• Leadership:
– Develop a communication plan, engage practitioners, and clearly
articulate your strategic vision for SCS and business value goals
– Develop and cascade education & training
– Set specific supply chain sustainability goals which align with broader
supply chain / operations goals
– Incentivize staff and lead by example
– Define metrics at both the company- and individual-levels
• Practitioners:
– Seek training & development opportunities
– Take ownership of an idea, articulate the business case, and execute
on the plan
– Think horizontally – your idea may impact product design or disposal,
and may drive business model / product innovation
– Continuously engage leadership to align on goals and expectations
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For additional perspectives on supply chain
sustainability, please visit:
• APICS
– http://www.apics.org/sustainability
• PwC
– http://www.pwc.com/sustainability
– http://www.pwc.com/us/sustainability
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For a copy of today’s presentation, survey data, and
complementary SCS thought pieces, please visit:
• 2013 APICS Conference App
– http://www.APICSconference.org/app
Questions?
Comments?
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Survey
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www.tinyurl.com/lc3s3fm
Thank You!
Please complete the evaluation for this session by QR code or paper form
Panelists Contact information
Nic Delaye
San Jose, California
PwC, Sustainable Business Solutions Director
Rocco P. Ciccolini
Florham Park, New Jersey
PwC, Advisory Operations Manager
Jonathan Thatcher
Chicago, Illinois
APICS, Director of Research
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Appendix
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Additional Thought Pieces
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Additional PwC Supply Chain Sustainability Thought Pieces
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Sustaining the supplychain, 2012 (link)
Next-generation supply chains, 2012 (link)
Driving CO2 out of the supply chain, 2012 (link)
Value of sustainable procurement, 2010 (link)
Supply chain risk management, 2009 (link)
How integrity can transforma supply chain, 2008 (link)
Eco-efficiency, 2013 (link)
Sustainability valuation: An oxymoron?, 2012 (link)
Environmental and social risk, 2012 (link)
Research Study:
Survey Data
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Which best describes the operations function to which your role is
aligned within the organization?
12
13
8
18
3
0
2
6
35
16
32
5
0
4
2
7
0 5 10 15 20 25 30 35 40
Other
Warehousing and Distribution
Training
Sourcing/Procurement
Sales & Marketing
Research & Development
Quality
Professional Services
Planning
Materials
Manufacturing & Production
Information Technology
Human Resources
Forecasting
Finance
Engineering
Total Responses: 163
37
Which best describes your current role?
15
15
77
55
0 10 20 30 40 50 60 70 80 90
Executive/Senior Leadership
Director
Manager
Asst. Manager or Below
Total Responses: 162
38
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Please select the industry which best describes your company.
41
2
2
1
7
6
3
22
5
9
5
12
7
5
8
10
6
3
8
0 5 10 15 20 25 30 35 40 45
Other
Utilities
Transportation
Textiles (Apparel)
Software & Hardware
Retail
Plastic & Rubber
Pharmaceuticals & Medical Devices
Oil & Gas
Metal Fabrication
Healthcare
Food & Beverage
Electrical Equipment
Distribution
Defense
Consumer Goods (non-electronic)
Consumer Electronics
Communications
Chemicals
Total Responses: 162
39
How many employees does your company have?
23
10
11
27
37
38
13
0 5 10 15 20 25 30 35 40
25,000+
10,000-24,999
5,000-9,999
1,000-4,999
250-999
25-249
Fewer than 25
Total Responses: 159
40
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Describe your company's annual revenue for fiscal year 2012.
41
16
22
16
28
17
0 5 10 15 20 25 30 35 40 45
$1bn+
$500m-$999m
$100m-$499m
$50m-$99m
$10m-$49m
Less than $10m
Total Responses: 140
41
How supportive do you feel your company's leadership is towards the
following supply chain sustainability pillars?
Very
SupportiveSupportive Unsupportive
Very
Unsupportive
Ethics and Compliance 106 36 1 1
Environmental Performance 74 61 7 1
Social Performance 84 46 12 1
Economic Performance Issues 65 70 6 2
Total Responses: 143
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Do you currently have direct responsibility for managing supply chain
sustainability initiatives?
Yes 58 41%
No 85 59%
Total Responses: 143
43
Support for Sustainability
37
72
34
0
# %
Increase significantly 37 26%
Increase somewhat 72 50%
Stay about the same 34 24%
Decrease somewhat 0 0%
Decrease significantly 0 0%
44
62
29
44
# %
Very supportive 44 31%
Supportive 62 43%
Neutral 29 20%
Unsupportive 4 3%
Don't know 4 3%
How supportive do you feel your company's leadership is towards supply chain sustainability
ideas and initiatives generated by managers and front-line staff? (not from leadership)
How do you expect your company's focus on creating more supply chain sustainability to
change during the next three years?
Total Responses: 143
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Which of the following do you feel are currently barriers in your
organization to supply chain sustainability success? (Select all that
apply)
53
41
55
50
45
58
25
0
10
20
30
40
50
60
70
The existence and
communication of a
sustainable supply chain
strategy
An organization with clear
responsibilities
Measurement and
monitoring
Providing education and
training
Investment in sustainable
supply chain initiatives
Aligning performance
measurement and
incentives to sustainable
supply chain results
None of the above
Total Responses: 144
45
Choose the option which most closely represents your company’s
approach to sustainability
19
3829
21
# %
Strategy does not exist 19 18%
General discussion exists, but corporate strategic approach is not documented 38 36%
Strategy does exist, but plan is not communicated to all levels of the organization 29 27%
Strategy exists and is fully communicated across the organization 21 20%
29
34
23
19# %
Nobody in our organization feels that they are responsible for green supply chain initiatives 29 28%
We have been given responsibility for the goals, but the goals are not clear or measured 34 32%
We have specific roles regarding green initiatives and they are measured, but the responsibilities
are not at an appropriate level.23 22%
Strategy exists and is fully communicated across the organization 19 18%
Organizational responsibilities
The existence and communication of supply chain sustainability strategy
41
30
16
18
Measurement and monitoring
46
# %
We have no measurement or tracking in place for supply chain sustainability initiatives 41 39%
We have specific metrics and goals for individual supply chain s sustainability initiatives, and they
are measured periodically30 29%
We have an aggregation of functional sustainability initiatives only, which have associated targets
to meet16 15%
supply chain sustainability initiatives are measured functionally and built into a company-wide
scorecard18 17%
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Choose the option which most closely represents your company’s
approach to sustainability
42
31
18
14
# %
We do not receive sustainable-specific training or education. 42 40%
We are provided passive training and education through company website, informal
communications.31 30%
We are provided general training and education on supply chain sustainability concepts and how
they can impact our function.18 17%
We are provided tangible, job-specific training and education which should improve our
performance.14 13%
44
17
27
16
# %
Sustainability initiatives are required to be implemented within existing budgets. 44 43%
Current budgets are supplemented if budget surplus exists. 17 16%
Typically, limited and insufficient budget exists for specific sustainability projects. 27 26%
Specific sustainability budget has been created and allocated at a leadership and functional level,
developed from the company's sustainability strategy.16 15%
Investment in supply chain sustainability initiatives
Providing education and training
42
31
13
17
Aligning performance management and incentives:
47
# %
Sustainability is not a personal or functional performance measure. No actual accountability has
been set for achieving supply chain sustainability results.42 41%
Sustainability is not a personal performance measure, but functional targets do exist. Functional
leadership is measured for results.31 30%
Sustainability is a personal and functional performance measure. Targets exist at both levels, and
both are measured for results.13 13%
Sustainability performance is measured at an organization level, and the recognition is filtered
down to both a functional and individual level.17 16%
How significant of an improvement would each of the below factors
drive for your company's supply chain sustainability performance if a
greater focus was developed?*
*Select all that apply Total Responses: 101
Significant
ImprovementSome Improvement No Improvement
Management accountability 47 48 6
A clear link from sustainability strategy into day-to-day supply chain
responsibilities50 42 9
Training and support on the business value of sustainability to the company 51 45 5
Training and support on best practices for meeting supply chain sustainability
goals52 40 9
Monitoring and measuring results through supply chain monitoring systems 45 50 6
Transparency and education of sustainability and compliance requirements
built into day to day responsibilities48 45 8
Supplier engagement on performance management on sustainability drivers 43 49 9
Sustainability metrics and targets built into function/team performance
measures46 49 7
48
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Check all the applicable challenges within your organization, then
rank the top three challenges with regard to implementing supply
chain sustainability initiatives.
Total Responses: 109
41
36
42
32
31
38
33
43
42
31
11
0 20 40
There is significant confusion about the scope and company goals on supply chain
sustainability
No truly global or recognized standards to benchmark companies against
The impact on shareholder value is not measurable
The impact on society is not measurable
Leadership views these types of initiatives as an incremental cost of doing business, not as
a differentiator
Compliance drives the majority of actions
Leadership does not view sustainability as a priority for the business
Leadership does not provide the mandate, incentives and resources to turn supply chain
sustainability strategies into action
Our customers are not asking for it
Our investors are not asking for it
We don’t want to take the risk to lose key suppliers
18
10
12
5
4
8
9
9
8
5
4
0 5 10 15 20
5
9
11
5
9
7
5
14
9
10
1
0 5 10 15 20
12
4
9
4
9
11
6
6
11
1
4
0 5 10 15 20Applicable? #1 Challenge #2 Challenge #3 Challenge
49
In what way is your company measuring the value of supply chain
sustainability initiatives?*
*Select all that apply Total Responses: 95
28
41
19
12
42
34
14
28
35
10
17
0
5
10
15
20
25
30
35
40
45
Revenue gains
($)
Cost reduction
($)
Market share
gains
Market size
gains
Environmental
impact
(reductions in
waste, carbon,
energy savings,
etc.)
Customer
satisfaction
Employee
acquisition,
engagement,
and retention
Reduction in
supply risk
Compliance
improvement
(%)
Brand
protection and
license to
operate
None
50
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Has your company realized value from supply chain sustainability
initiatives over the last 2 years in any of the below categories?*
*Select all that apply Total Responses: 95
18
41
15
6
33
24
9
1618
8
21
0
5
10
15
20
25
30
35
40
45
Revenue gains
($)
Cost reduction
($)
Market share
gains
Market size
gains
Environmental
impact
(reductions in
waste, carbon,
energy savings,
etc.)
Customer
satisfaction
Employee
acquisition,
engagement,
and retention
Reduction in
supply risk
Compliance
improvement
(%)
Brand
protection and
license to
operate
None
51