As we move into 2012 one of the main conversations in our sector is the extent to which companies will continue to build out their sustainability programmes in the face of economic uncertainty and recession.
In Hong Kong much of this conversation is about supply chain sustainability – a theme of corporate interest that has grown considerably over the past 2-3 years. As orders soften and projected revenues are revised downwards, will brands continue to engage their supplier base – and in particular their Asian and Chinese factories – on sustainability?
In practice the answer to this question is likely to depend on how the brand has engaged on sustainability issues in the past and – crucially – the extent to which supply chain sustainability is perceived to be delivering value to the company.
The value proposition around supply chain sustainability is often not well understood – we see a lot of brands ‘engaging’ suppliers on sustainability without a clear internal understanding of the value of this engagement to either party. Such brands are less likely to aggressively pursue or expand these programmes through 2012, because internally the programme is perceived as a cost centre or a ‘nice-to-have’, particularly by people outside of the sustainability teams.
On the other hand companies that have clearly investigated, articulated (and hopefully internally communicated) the value proposition should continue to build out their supply chain sustainability initiatives. There are a number of reasons for this:
- Supply chain sustainability programmes need not be very expensive, in fact if designed properly they should bring value to suppliers as well as brands which provides opportunities to share costs with the supplier base.
- Mothballing programmes means interrupting a conversation with the supplier base. Not only will this reduce supplier confidence and buy-in, but it will also likely increase future costs when programmes have to be re-started.
- Well-designed supply chain sustainability should save money by focusing on efficiency opportunities, in particular energy saving opportunities, which are usually accompanied by attractive ‘recession consistent’ payback periods.
As a result tough economic conditions may drive a wider ‘sustainability gap’ between leaders and slower moving brands, as leaders continue to evolve their approach whilst slower movers – who tend to have a less well articulated understanding of the commercial value of supply chain sustainability – put the brakes on. The ‘gap’ may end up piling more pressure on poor performers in the future. NGOs such as Greenpeace and the Beijing-based Institute for Public and Environmental Affairs (IPE), who both ran effective, supply chain campaigns against major brands in 2011 (see IPE’s latest report on Pollution Information Transparency Index released with NRDC), will be able to leverage this ‘gap’ to great effect by highlighting the differences in performance between competing brands.
It’s going to be an interesting year…….
by Liam Salter,CEO