Which stakeholder are you? Which role are you playing in your supply chain? At some point in time, you may be a supplier, a client, or both, even! You may also be your client’s client.
Take the example of a packaging manufacturer: you receive raw materials from your suppliers, you transform them into packaging products which you sell to your clients. If your client is a brand, it will probably sell to retail stores, whom you are a client from. You see where I am going…There are multiple touch points and interactions involved. Let’s broaden the perspective. As a business, you may have taken some loans from a bank. Your operations are located in a city, a province, a country with specific laws and regulations you have to be compliant with. You seek to hire and retain the best talents to develop your business. You are known among your communities as a local employer. And most of the time, you have competitors in your industry, with the same markets to serve, maybe competing for the same clients and the same employee base.
Now, who are your most critical stakeholders?...Your employees? Your clients? Your investors? All of them? Any other you can think of?... Do you know what matters to them when it comes to sustainability? Why will they choose your products? Why should they trust you more than another business? Why would they work for you or invest in you? How are you perceived ? Which trends and new regulations may hit you?
You may ask yourself : " Why should I worry about what all stakeholders think? I could focus on one of them only or just do what I feel is right. " Well, reality is more complicated than that.
Let’s start with your clients or your clients’ clients. Recent surveys are showing an increase in sustainable choices and behaviors among consumers. This trend has gained momentum since the Covid-19 pandemic.
A survey conducted by the World Economic Forum found that 66% of all respondents, and 75% of millennial respondents, consider sustainability when making a purchase.
The 2023 survey from PWC on Canadian Consumer Insights shows that 63% of consumers said they’d pay a premium for products made by a company with a reputation for ethical practices. And 64% would pay more for products made from recycled, sustainable or environmentally friendly materials.
In the US, 66% of consumers and 80% of young adults (ages 18-34) surveyed said they were willing to pay more for sustainable products versus less sustainable competitors, according to the most recent Business of Sustainability Index by GreenPrint.
In this context, brands and retailers are developing more sustainable products and are diving deeper in their supply chains to identify the most sustainable suppliers aligned with their ambitions. It is what I call the domino effect and demonstrates a true interconnection of stakeholders in the supply chain.
When you look at a product’s carbon footprint, 80% of its greenhouse gas emissions on average is happening up- and downwards the supply chain. Raw materials and semi-finished products are an important part of it. It is therefore critical for brands to understand where and how these are produced. Even social aspects are important, such as knowing under which working conditions products are made.
Take the example of a product outsourced abroad. The quality meets your expectations, and the price is attractive. A few questions arise though. What is the carbon footprint of this product? How was it manufactured? Does it meet safety standards? Under which labor conditions was it made? What happens if the country of origin is on a blacklist due to debatable labor rights or any other reason? What will you answer to your customers? Which reputational risk are you facing?
Now, let’s look at the environmental impact of a product you sell to your customers. Because you are an important partner in their supply chain, they will probably ask you to find ways to produce or to provide your services more sustainably. In many cases, you will receive surveys asking multiple questions to help your client evaluate your current footprint and how this could be improved. Many brands and retailers have started to use these pieces of information as a point of comparison between various supply sources. If they want to fulfill their sustainability engagements, they also rely upon their suppliers to help them.
Have you already experienced requests from your clients to shift from fossil fuels to renewable energies in the facility you are producing from? Have you been requested to reach a minimum sustainability performance – both environmental and social - as a prerequisite for being listed? If not yet, you should be prepared!
Some brands are also taking a proactive approach to educate their suppliers and to build communities where best practices are exchanged. We live in supply chains where collaboration is key and where the great challenges the world is facing are not resolved in isolation but rather in a collective effort.
Let’s shift to another group of stakeholders: your employees. What are their expectations when it comes to sustainability?
In their Sustainability@Work study, Adobe recently surveyed 1,400 employees in the U.S. to understand their stance on environmental impact. About 35% said sustainable business practices would boost productivity rates, 31% mentioned it would position their company as a leader and 37% said it would open more opportunities for innovation. In PWC’s 2022 Hopes and Fear survey, 48% of Canadian employees said transparency on environmental issues like climate change was very or extremely important, but only 39% were highly confident their employer was transparent on this. 56% of Canadian generation Z employees felt their employer’s transparency about its record on diversity and inclusion was very or extremely important, but just 44% were highly confident that the organization they work for actually was transparent.
Have you experienced similar comments from your employees? Have you run interviews where candidates asked questions related to your sustainability vision and practices? Did they mention that working for an employer with long-term sustainability commitments was important to them? Have you run employees’ surveys and which comments came out of it? Did they come with ideas on how to improve your sustainability and diversity and inclusion roadmaps? Taking their reflections into account is an opportunity to develop a workforce that is highly engaged, who thinks out of the box and who is proud to contribute to your progress. Who would not want to build and retain the best talents?...
There are other important stakeholders you should speak to when evaluating your sustainability strategy priorities. Investors are increasingly questioning and challenging companies to take action. There is growing evidence that best ESG practices have a positive impact on a company’s financial performance, reduce risks and are more sustainable in the long-term. Institutional investors and pension funds are considering environmental and social impacts of companies in their portfolios and are monitoring sustainability strategies and performance closely. In fact, over the past five years, I've went from investors meetings spent with only one or two questions on sustainability to meetings dedicated to these topics, with extremely well-informed participants and increasingly specific questions. So, prepare yourself for this !
Gaining a better understanding of your stakeholders’ priorities on environmental, social and governance matters and identifying where you stand compared to their expectations will help inform your business strategy in a more holistic and accurate way and eliminate blind spots. Ultimately, you will identify which topics are more material, what is your current sustainability maturity level and performance and where you need to take action to be even more attractive to your stakeholders and to ensure long-term success. The rest is in your hands!
Yours sustainably,
Magali
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