Sustainability is becoming much more important to stakeholders and consumers across industries. Stakeholders are finding much value in what’s called ESG investment while consumers believe brands bear as much responsibility for positive change as governments.
Consumers increasingly prefer a sustainable lifestyle and engage in sustainable activism. According to a global study by Unilever, 1 in 3 customers purchased from brands with perceived social or environmental impact. In the age of social media, companies involved in ESG controversies are heavily prone to consumer backlash that could cost them millions.
Investors are incorporating ESG (environmental, social and governance) data into the investment process to gain a fuller understanding of the companies in which they invest.
Why is the shift happening?
In 2019, more than 180 CEOs of leading U.S. businesses threw their weight behind ‘Stakeholder Capitalism’—a concept that holds a business accountable to all its stakeholders. This idea signaled a shift away from the longstanding notion of the primacy of shareholder capitalism.
In addition, science came into the picture. Increasing evidence showed that climate change is accelerating, and large corporations are the ones mainly contributing. Here are the facts:
The average supply chain generates emissions that are 5.5 times greater than operational emissions.
Supply chains are responsible for more than three quarters of greenhouse gas emissions for several industry sectors.
McKinsey, in its study of supply chain impacts in the consumer sector, found supply chains responsible for over 90% of natural capital impact.
Other issues like massive energy transitions, widening economic disparity, rapid digital transformation and compounding resource constraints are all factors that have led to ESG becoming increasingly material for businesses and their stakeholders around the globe.
Why are companies struggling to meet sustainability goals?
The COVID pandemic has shown the world just how easily global supply chains can be disrupted. In a post-COVID world, business leaders will have to address issues within their supply chains to achieve ESG and sustainability goals.
According to the UN Global Compact, supply chain practices are the biggest roadblock to achieving sustainability and require an extensive commitment. Global supply chains are a complex network of various tiers of suppliers that are heavily interdependent and interconnected, and the more intricate a supply chain is, the more prone an organization is to uncertainties and hidden risks.
Many companies are making supply chain sustainability an integral factor in achieving overarching ESG targets. Setting targets can help companies better understand their baseline performance, identify areas of improvement, and streamline efforts to move forward.
Avetta—a leading supply chain risk management provider—is working with major organizations across industries to provide real, cost-effective solutions. Through the Avetta ConnectTM platform, we’ve successfully helped businesses with their sustainability management and reaching their ESG goals.