Prioritization of Supply Chain Sustainability is Here
The benefits of prioritizing sustainability for any business or industry are extensive, but why is 2021 the year of further prioritization within the supply chain? Our recent research study, “Sustainable Supply Chain Management: Driving a Smarter, More Sustainable Future,” found that 81% of supply chain professionals say their company is more focused on sustainability today than they were three years ago. But why is this the case?
The study found that this is due in part to pressure members of the supply chain are feeling from key stakeholders to apply additional efforts toward sustainable operations and practices. This is because the supply chain has a lot to gain from implementing sustainability programs, with the benefits being three-fold: they support their customers’ desire to do business with environmentally conscious companies, deliver a tangible return on investment (ROI) and reduce the industry’s overall impact on the environment.
Consumers increasingly prefer to give their business to companies that have sustainable practices and operations. Coyote’s new study analyzed 250 global shippers across various industries, company sizes, verticals, and seniority levels to explore buying habits and perceptions about the evolution toward a more sustainable supply chain. Notably, 84% of respondents said they were likely to base a purchase decision on a brand’s sustainability practices.
Consumer loyalty is, needless to say, vital to the success of every business. This new consumer demand for sustainable operations is pushing companies to readjust priorities. For example, 77% of companies with revenues between $1M–$199M have increased their focus on sustainability due to the realized importance sustainability has on customers, according to the study. This reinforces the importance of green practices for consumers and the corresponding acknowledgment among shippers.
The need to create or advance supply chain sustainability programming resonates with business leaders across all industries once the potential ROI is considered. Companies in our study reported an ROI from implementing sustainable practices within the key performance indicators (KPIs) of cost savings (67%), benefits to company reputation (59%) and reflection of industry leadership (52%), to name a few.
While the initial expense associated with implementing sustainability efforts should be a determining factor, the potential cost savings offered down the road are likely to outweigh the initial spend. To ensure the output of this spend is maximized, 98% of global shippers in the study noted that they currently have at least one team member dedicated to owning and advancing green initiatives.
The greatest immediate ROI from sustainability investment comes from building a more efficient approach to fuel types and usage, whether that be through reducing driver idle time, optimizing routes to reduce consumption or leveraging alternative fuels. Advancing inventory forecasting and working with green carriers can also provide immediate cost savings.
While consumer loyalty and cost savings are significant benefits of sustainable supply chain practices, it’s important not to forget the positive environmental impact. However, achieving real results requires a collective buy-in among consumers and members of the supply chain. 61% of respondents noted they are willing to wait longer for a purchase to arrive if they know it’s being shipped in an environmentally friendly way. But while consumers are clearly showing that they care about sustainability, it’s ultimately up to shippers and carriers to also prioritize green supply chain initiatives, report the impact and communicate it to their customers.
When determining the necessary steps to improve their environmental impact, shippers have a variety of options, whether they utilize long or short hauls. Short and regional hauls generally do offer the most opportunity for direct investment in today’s market, such as purchasing electric and lightweight assets. However, intermodal conversion and dynamic route optimization are viable solutions for longer hauls, where fewer turns reduce modal complexity. Efficient warehouse optimization and operations are critical regardless of the length of haul. Eliminating waste, whether by reducing empty miles or idle time, can go a long way towards becoming a more sustainable shipper.
Where to Start
Building a sustainable supply chain can’t happen overnight. Driving positive change requires a consistent, collaborative effort across all business units. By understanding the current landscape and establishing a baseline in 2021, shippers can build long- and short-term supply chain sustainability strategies that will deliver the maximum impact for their business.
The supply chain has “woken up” to the fact that sustainability should be prioritized if lasting success is to be achieved and 2021 is the year to further prioritize.