A smarter approach to sustainability is vital for healthy, resilient supply chains

“We’re facing a perfect storm of compounding supply chain challenges.”

This comment from the leader of a food business at a closed-door roundtable at the recent London Climate Action Week will resonate with many, well beyond the food sector.

Procurement teams are facing unprecedented volatility from geopolitical conflict, extreme weather, and shifting stakeholder expectations. A slew of stringent new regulations that impact global value chains within the last two years, such as the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) and Corporate Sustainability Reporting Directive (CSRD), have significantly increased expectations for due diligence and improvements in the social and environmental performance of supply chains, with requirements that extend well beyond businesses’ direct sphere of control.

The temptation for many businesses will be to hunker down and do the minimum needed to comply with this complex and rapidly shifting regulatory landscape. However, the new reality of an increasingly disrupted operating context means that conventional approaches to procurement, which have served businesses well until recently, are becoming less and less effective. A smarter approach to thinking about and engaging with supply chains is needed—especially if leaders are to protect and grow business value in the disruptive decade ahead.

Work smarter, not harder

But what does this smarter way of acting look like? From Forum for the Future’s almost three decades of experience of partnering with leading, forward-thinking businesses, we’ve identified three key principles.

First, using applied futures to anticipate disruptions that could impact your supply chain. Aditya Birla Group’s <2°CDegree Futures scenarios highlight the likely challenges business in India will face as climate breakdown intensifies.

Secondly, adopting systems thinking to navigate the true complexity of these challenges and to find more intelligent ways to influence change in your sphere of influence. Aviva Investors has funded a School of System Change in Finance to engage key actors in the financial system in Europe in support of the deeper changes needed to mainstream more enlightened investment approaches, such as macro stewardship.

The final principle is embracing a more adaptive and agile approach to business in the face of growing volatility and sudden disruptions. IKEA Retail (Ingka Group) has moved from strategic plans based on fixed roadmaps to using scenario planning instead as a more effective way of responding to their increasingly dynamic operating context.

Behind this smarter way of acting lies a smarter way of thinking about how your business relates to your supply chain. It reflects a mindset shift away from win/lose or exploitative dynamics to one that focuses on collective resilience-building and innovation. This mindset breaks down the challenges at hand and focuses not only on how to create more value, but also on how to share this value equitably across the value chain.

Evidence of the private sector waking up to this opportunity for greater equity is starting to appear. In February of this year, Amanda Davies, chief procurement & sustainability officer at Mars Wrigley, announced that she was expanding her remit to become chief R&D, procurement & sustainability officer, pointing to a growing understanding of what a consolidation of these functions can achieve.

However, this is not yet a trend. A survey December 2023 survey of senior procurement leaders in the US and Canada found that 40% of respondents do not consider sustainability at all when making procurement decisions, and only 28% of procurement directors consider sustainability to be central to decision-making processes.

And where attempts are being made, effectiveness is low. Although about 50% to 60% of respondents to the Ecovadis 2024 Sustainable Procurement Barometer reported some form of manual or digital integration of ESG into their key procurement processes, only 30% of these integrations were said to be very or extremely effective.

Integrating smarter, sustainable mindsets in procurement and decision-making

So how does a business get to a point where smart and sustainable mindsets are effectively integrated into procurement and supply chain decision-making processes? How can businesses realize the opportunity for sustainable sourcing to become a lever for significant value creation?

Value levers range from mitigating risk, ensuring security of supply and business continuity, and better navigating volatility to a focus on long-term value creation: actively creating new opportunities to build customer preference and new markets through disruptive innovation in product or business model, or through value chain reconfiguration.

At Forum, we see three steps to demystify the process and successfully deliver this smarter approach in practice: Diagnose, Reimagine, Engage.

1. Diagnose: Help executive, procurement and sustainability teams think systemically, bringing in future trends to understand key vulnerabilities and ensuring an integrated approach to solving environmental and social challenges. This often means challenging internal culture to think differently about the strategic potential of procurement to drive value creation.
2. Reimagine: Run creative exercises to help teams visualize and think about their value chains in radically different ways to illuminate opportunities for value creation. This could be through exploring pathways for disruptive innovation across your product or service offer, business models or market mechanisms across your supply chain.
3. Engage: Make sure to move beyond the brainstorming phase to drive real changes through prototyping, testing, and scaling. Perhaps start by trialling a new approach within a specific area. Remember to keep resilience and fairness at the heart by bringing in actors from different tiers of suppliers and intentionally including lesser-heard voices and historically under-valued supply chain participants, to ensure approaches are truly representative and deliver the value truly needed across environmental, economic, and societal strata.

If business leaders are going to look beyond the ‘minimum viable product’ mindset when it comes to safeguarding the future of their global value chains, a smarter approach to decision-making is essential. Procurement and sourcing can become a lever for significant value creation—through applied futures techniques to improve the quality of decision-making, increasing an organization’s capacity to respond to possible future scenarios, and taking a systemic lens to allow teams to work with, not against complexity.

About the authors:

James Payne is Forum for the Future’s global head – purpose of business, and Henrietta Hunter is Forum for the Future’s global lead – purpose of business. Forum for the Future is a registered nonprofit organization working in partnership with business, government and society as a whole to accelerate the shift to a sustainable future.

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