Excellence in Supply Chain Sustainability

The goal of the study “Excellence in Supply Chain Sustainability” was to investigate sustainability in today’s companies, its implementation and also to identify both driving and impeding factors. The study is the result of the cooperation between the Supply Chain Management Institute of the EBS Business School, which supplied the scientific capabilities, and Logica, a business and technology service company, which accompanied and supported the study with business insights required to accomplish such a project. Over 100 companies from a variety of industries participated. The majority of operations are based in Europe but many of the participating companies are globally active. Data gathering took place between November 2010 and February 2011. In the analysis a special focus was placed on the logistics and transportation sector due to its importance as one of the three largest industries in Germany, and its large impact on the environment. Within the sample 49% of the participants came from the logistics and transportation industry.

The most important finding exposes the relationship between sustainability and companies’ performance. The more companies engage in pollution prevention activities in production and in sustainable development, the better their economic performance is. The more companies pursue activities such as switching modes of transportation or fleet modernisation, the more sustainable their competitive advantage is likely to be compared to the industry average. Furthermore, the following key results were found:

Companies declare sustainability to be a high-priority objective

• Sustainability is a priority objective for companies across all industries and is dealt with at the highest strategic level – according to the study’s participants. However, when it comes to resource dedication, companies’ support is substantially lower. Still, 68% of the participants stated that the share of corporate annual budgets dedicated to sustainability would increase over the next three years. Top-performing companies devote twice as much attention to sustainability as low-performing ones do. Although logistics companies often lack direct contact to end consumers, they dedicate almost as much effort as non-logistics companies do to sustainability.

Company leadership and customers push firms towards sustainability

• There is a gap between different groups of stakeholders. Overall, competitors, investors, employees and suppliers play a side role in sustainability.
• The most important drivers for sustainability are company leadership, governments and customers. This picture is going to intensify in the future: 87% of the participants believe that customers will become even more important, and 75% think the same of company leadership. It is not the prospect of a surplus on the regular price that motivates companies but customer demand for sustainability and the risk that customers might switch to competitors.
• When it comes to governments as a driver, best practice companies show a strong emphasis on future regulations, i.e. they try to anticipate them and prepare accordingly, while low-performing firms confine themselves to fulfilling current regulations.
• Logistics providers perceive customers and the general public as even more pressing drivers than non-logistics firms do.

The lack of commitment is more obstructive than the cost of sustainability

• The lack of customers’ willingness to pay a surcharge for sustainability and insufficient management commitment are the strongest barriers to sustainability. Also, the necessary time commitment to sustainability is perceived to be more hindering than high upfront investments and operational costs related to sustainability are. In the future, the lack of resources such as time, human and financial resources, is going to become more important.
• Logistics companies as well as low-performing companies perceive all types of barriers to be more obstructing than non-logistics companies and top-performing companies do.

Companies start with their own production sites when it comes to practising sustainability

• The focus is set on pollution prevention in production and service delivery rather than on pollution prevention in logistics. 80% of the companies engage in activities to reduce water consumption, 65% in waste reduction and 63% in material consumption. Top-performing companies are clearly more active in this respect than low-performing companies. Logistics companies are obviously leading in activities such as switching modes of transportation, consolidating shipments and modernising their fleet.

Top-performers pursue the holistic integration of stakeholders into the sustainability strategy formulation

• Internal stakeholders such as employees and customers plus the general public are the groups that companies integrate to the highest extent into their sustainability strategy formulation, while most external stakeholders such as investors, governments or competitors lag far behind in terms of being integrated into the strategy formulation.
• Low-performing companies seem to set their focus only on employees and customers, while top-performing companies take a more holistic approach in the integration of stakeholders. Non-logistics companies integrate their employees to a wider extent then logistics companies do.

ISO certifications play the greatest role

• The quality management certification ISO 9000 and the sustainability management certification ISO 14000 are the certifications that companies pursue the most, with all others (e.g. SA 8000, EMAS) lagging far behind. Top-performing companies have considerably more experience with certifications than low-performing companies do. The latter even seem to have no expertise at all with some of the certifications under scrutiny. Non-logistics companies have certainly more experience with certifications than logistics companies do, which could be explained by the smaller degree of applicability of many certifications to logistics companies.

Survey data provides recommendations on how to become a sustainable corporation

• According to the theoretical framework of Nidumolu, Prahalad and Rangaswami (2009), a company can be classified as being a dreamer, a qualifier, a follower or a winner in terms of how it approaches sustainability. From the analysis of the survey data, we can give clear recommendations on how to reach each category.
• Dreamers fulfil only the minimum requirements for sustainability such as meeting current legal regulations. To become a qualifier companies need to engage in pollution prevention activities such as reducing water and energy usage. In order to reach the next level and become a follower, a company needs to integrate customers and the general public closely into their sustainability strategy formulation. To reach the top class of the winners and thus the maximum performance, companies do not only need to perform all of the above activities but also dedicate substantial resources to sustainability, pursue new technologies and integrate investors, employees and competitors in order to create a sustainability strategy together with them.

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