Supply Chain Sustainability Pressures Persist

Supply chains continue to ramp up sustainability efforts, but they are facing outsized pressure from investors.

Those are just two of the insights inside the 4th annual State of Supply Chain Sustainability 2023, jointly published last month by the MIT Center for Transportation & Logistics (MIT CTL) and the Council of Supply Chain Management Professionals (CSCMP).

“With four years of global observations and thousands of survey responses, we are in a unique position to see where progress has been made,” said David Correll, MIT CTL research scientist and lead investigator on the study. “We have found that topics within the realm of supply chain sustainability are complex; some trends have changed over four years while others remain consistent. Indeed, the supply chain sustainability journey is a long one, and it contains multitudes.”

One of those trends is the growing pressure outside investors are placing on companies to build sustainable supply chains. The survey of over 2,300 global supply chain respondents, found that economic and social pressures are creating dynamic challenges for supply chain sustainability efforts.

“Social policies have grown significantly over the past few years driven by societal movements that have driven focus on diversity, equity, inclusion, individual health, and well-being,” said Taylor Allis, chief product and marketing officer for Avetta. “Company executives, investors and HR teams are focused on implementing social programs to ensure happier and healthier employees to meet this growing societal demand. People also wish to work in environments that focus on the whole person, and not just the well-being of the company.”

Conversely, economic pressures are forcing many companies to scale back programs.

“Commitment to supply chain sustainability appears to sometimes thrive when supply net¬works are unexpectedly broken. But fears of economic contraction in 2023 turned out to be a more pernicious kind of supply chain disruption. Commitment to supply chain sustainability appears to wither when overall economic health seems to be in jeopardy,” the report said.

Companies are also facing challenges as more reporting requirements are instituted around Scope 3 emissions.

“Scope 3 continues to be elusive at scale because of still evolving definitional boundaries that vary by region and vertical, as well as the sheer complexity of managing and monitoring the supply chain where much of Scope 3 lies,” explained Katie Marin, principal lead for sustainability & ESG at Avetta. “Many businesses are forced to use estimations, which open risk to green-washing, or set their own scope, which opens risk to shifting metrics year over year.”

The report did find that companies are working together more than ever to reach achievable goals. Rachel Schwalbach, vice president for environmental, social and governance at C.H. Robinson, said more companies are outlining expectations, but at the same time, they are also looking for partners on the value creation side.

“Another piece is on the value creation side, where the shippers will say, ‘Not only do we require this of you as a bare minimum of what you’re doing with your own work, but how can you help us? What are some of the basic things we can do together to reduce emissions,’” she said.

MIT’s researchers found that sustainability “appears to be resilient to certain types of crises, but vulnerable to others.” Large-scale event, such as the COVID-19 pandemic and Russia’s invasion of Ukraine, serve to galvanize commitment to supply chain sustainability at many firms, but 2023’s negative economic forecasts seemed to have the opposite effect.

The report found that 79% of firms increased their supply chain sustainability strategies during COVID-19, but that dropped to 61% when Russia invaded Ukraine and just 44% increased their commitment in light of the economic forecasts in 2023.

“One way to interpret these results is to consider the difference between a network disruption and an economic crisis. The former demands a new network, whereas the latter demands a leaner, more cost-effective one. Arguably, some sustainability investments reduce measurable costs in the long run. But in times of projected economic malaise, the long run recedes from worried supply chain planners’ field of vision. This appears to have had a chilling effect on many firms’ supply chain sustainability efforts in 2023,” the report noted.

MIT also compared the report’s four-year data collection and found a few interesting trends.

“Supply chain sustainability appears to have no canonical priorities. That is, there appears to be no central core of environmental or social issues that always take clear precedence over the others. Rather, over four years of observation, we see some surges and plateaus in importance. These dynamics are evident in both environmental and social issues. As examples, supplier diversity, equity, and inclusion (DEI) and natural resource protection stand out as especially ascendant over the last four years, while supply chain circularity and fair pay/fair trade programs have been comparatively stagnant in our observation,” it said.

In other findings, almost half (47%) of respondents either have no plan or don’t anticipate reducing Scope 3 emissions in the next five years. More than a quarter (27%) have no plan for reducing Scope 1 emissions currently.

Read the full report online or in PDF format.

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