Three sustainability trends to watch in the supply chain.
Among Covid-19’s far-reaching repercussions is the heavy disruption of supply chains. As businesses rebuild and redesign, there is a marked opportunity to align supply chains with values of the future – sustainability, socio-economic equality, fairness, etc – all of which have taken on renewed meaning in the wake of the pandemic.
“The past year already saw a shift in consumer preferences towards more authentic and purpose-driven companies, a trend which will be enhanced in 2021,” said Daniel Pedersen, a Senior Consultant at boutique sustainability consultancy NewForesight. For him, this shift will likely manifest via three notable trends.
Price: from market-driven to purpose-driven
When companies buy produce off suppliers, they traditionally take a narrow approach to pricing – with a clear focus on market value and profit margins. Primary producers and suppliers bear the brunt of this strategy, often receiving a pittance for their produce.
Pederson expects socio-economic factors to have a bigger influence on pricing in 2021, with a focus on fair pricing to ensure that suppliers and producers are taken care of. “Companies such as Tony’s Chocolonely’s, Ben & Jerry’s and The Body Shop have already taken big strides on paying prices that ensure a decent living.”
Smallholders: from supplier to customer
In agri-commodity segments such as coffee, tea, cocoa, etc, producers with small land holdings – smallholders – often make up a large share of primary produce. As they struggle to keep pace with market trends, smallholders have received some support in the form of training or agricultural inputs over the years – pro bono on the back of corporate social responsibility (CSR) initiatives.
More recently, companies have started charging for their expertise – particularly in the omnipresent domain of sustainability – creating a two-way business relationship with their suppliers. A notable example is NKG’s Bloom programme – an initiative aimed at enabling farmers to be more profitable, sustainable and transparent.
“In 2021, we expect more and more initiatives to provide actionable solutions to allow for this trend to take full shape. One necessary development is to further understand smallholder’s customer characteristics to enhance returns on investments,” said Pederson.
Compliance: from problem to opportunity
“In the next five years, we expect more companies taking a more proactive approach towards environmental sustainability, moving from risk mitigation by complying with regulation to becoming sustainability front-runners by taking a business-driven approach to environmental performance,” said Pederson.
Indeed, with consumer consciousness growing greener by the day and regulations getting tighter, an environmental, social and corporate governance (ESG) approach to business can actually improve the financial performance of a company – while also benefitting society. As a result, pressure to make the supply chain more sustainable has emerged as an opportunity to improve overall business resilience and profitability.
“Several companies such as Smithfield, FrieslandCampina and Danone are already looking at the business case of improved environmental sustainability for their supply chain partners,” concluded Pederson.