Sustainability: Our planet is our home and we ought to protect it. In the past, many organizations believed that sustainability is a luxury they are not necessarily interested in; a corporate social responsibility rather than business objective. There was a belief that the more they focus on eco-friendly operations, the less competitive they would be, since it increases their operating costs without realizing immediate financial earnings. Sustainable processes require new technological equipment and innovations but it was believed that customers would not pay a premium price during the economic recession for environment-friendly products. Therefore voluntarily action of companies towards a sustainable environment was limited, not to say utopia.
Governments and activists, however, kept pressuring for a change and the regulations started to become stricter for companies. But legislation was not enough. It was time for organizations to take responsibility too. In recent years we can notice a trend towards sustainability across all industries. Nowadays, consumers are highly concerned about climate change and the impact that supply chains are having on our planet. By 2030, the global population will reach a record 8.3 billion people, the demand for food and energy is projected to increase 48% and water demand to increase by 27%. Production costs will skyrocket when the demand for natural resources begins to outpace the supply. Most companies have already begun their Sustainability journey, but companies must adapt to this “new normal” and innovate with sustainability in mind while ensuring they adopt the latest technologies to minimize their carbon-footprint. People have the environmental safety as number one priority in 2016 and they are willing to pay more to guard their interests. Thus, businesses are forced to adapt to new market preferences in order to remain competitive and not lose their share.
Benefits of Sustainability
Sustainability drives organizational and technological innovation and yields both top line and bottom line return on companies’ investments. Innovation is the key to success and progress, especially in times of economic depression. The competitive landscape is being transformed and acts as an initiator for crucial changes in supply chain management and new business models. Due to consumer pressures, organizations now realize benefits from being environment friendly.
First of all, their costs are lower as companies end up reduce their inputs. At the same time, sustainability creates extra earnings from improved products or new market opportunities. An additional indirect benefit of sustainability for companies is the public perception. Consumers are sensitive to environmental issues and will be loyal to organizations that promote their social responsibility. The turn towards acts such as free advertisement for organizations that can reach different target customers and increase profit margins by selling at premium prices. By prioritizing sustainability, companies gain competencies and competitive advantages that other organizations would struggle to match.
Sustainability Practices across Supply Chain
One of the most difficult parts of the transformation to sustainable business is the lack of suppliers that are environment-conscious, especially in countries where regulations are not strict and where suppliers do not face constant criticism for their practices. However, organizations should try to give them incentives and set an example. Corporations work with suppliers and retailers to create and develop environmental friendly raw materials in order to reduce waste. A relevant example is Starbucks when they publically announced their cooperation with farmers around the world to develop sustainable practices in sourcing, cultivation of coffee beans, and sustainable-yield forests for all their paper-based products.
Methods like carbon footprint analysis and life-cycle assessment enable organizations to identify the origins of waste in energy, water, and other resources across the supply chain to focus their efforts in creating more sustainable operations in these particular components of the supply chain. Technology challenges conventional wisdom. It is evolving fast and now there are many ways for organizations to improve their energy efficiency and reduce the consumption of nonrenewable resources like fossil fuels. Furthermore, it is beneficial for companies to schedule reusing their returned products, as in this way cost centers turn into profitable operations to satisfy unmet needs. Additionally this would build a positive brand image for the companies which will promote they are concerned about environmental damage, about our future, and not only about aggravating sales. It is a win-win situation for both sides.
However, creating new business models and adopting sustainability is not only about reevaluating the customer value proposition and identifying how to deliver a new one. Supply chain optimization with a scope of sustainability is needed, such as the development of novel ways to generate revenues and providing services as FedEx did in 2008 with the integration of Kinko’s print stores. FedEx acquired Kinko in 2004 but it was four years later that they took advantage of this initiative. FedEx thought that it could minimize costs and at the same time offer better quality of services to consumers if they enable customers to print the document at the destination, bind it, deliver it the next morning. This way, FedEx improved customer satisfaction for fast delivery, reduced operational costs and became super eco- friendly. This is only one of the numerous examples that depict the link between sustainability initiatives and business results.
Humans have raised their social and environmental awareness nowadays and do not hesitate to voice their concerns. Each and every one of us need to guard our planet. Companies cannot avoid participating in this global initiative if they want their share of the pie, so they just examine how to be more competitive in the new markets and business models of our times. Sustainability is the only alternative for the planet we all live in, and consumers can and do force organizations to create a better future for the constantly growing global population and to maintain the health of the world as a whole.