Q&A with Sabu Mathai, Research Director, Gartner Supply Chain Practice
Nearly two-thirds of companies today regularly deprioritize sustainability for resilience, according to Gartner research. Faced with frequent disruptions and a wide range of long-term risks, supply chain leaders today devote more attention and resources to resilience than they did in a bygone age of supply chain sustainability.
While turbulence and a lack of bandwidth contribute to this imbalance, so do perceptions that sustainability has marginal value to the business. Yet as environmental risks pose a growing threat to the supply chain and the enterprise, sustainability and resilience converge.
We talked with Sabu Mathai, Research Director with the Gartner Supply Chain Practice, to discuss how some companies and their Chief Supply Chain Officers “build-in” sustainability at the core of their business.
Members of the media who would like to speak with Sabu in more detail on this topic can contact Justin Lavelle to schedule an interview.
Q: What’s at stake for organizations if they can’t find a balance between sustainability and resilience that enables more progress on sustainability objectives?
A: There are growing downside risks from a continued imbalance between sustainability and resilience. Delayed progress on sustainability can leave organizations unprepared for environmental risks. Today, fast-moving changes in both environmental regulations and the environment itself (e.g., extreme weather, natural resource degradation) create increasing operational and strategic exposure for the supply chain and the entire enterprise.
A Gartner survey of 336 supply chain leaders in March 2023 showed that 52% of leaders cited competitive differentiation as their biggest motivation to increase supply chain sustainability over the coming three years.
Indeed, organizations can better position themselves for an emerging low-carbon economy by taking advantage of sustainability’s opportunities. If they don’t reach for opportunity, others might get there first. Nearly 60% of leaders responding to our survey said a failure to balance sustainability and resilience could result in lost market share to present-day or future competitors.
Q: How can organizations break out of the cycle of deferring sustainability initiatives amid continuous turbulence and find a better balance?
A: The most important factor is making sustainability a key aspect of doing business, and not a “nice-to-have” that’s easily set aside when disruption hits.
Through interviews and survey research, Gartner has identified an approach to balancing sustainability and resilience that only a minority of organizations utilize today. These organizations “build-in” sustainability at the core and make it essential to an evolving business, rather than “bolting-on” sustainability at the margins where it is more likely to be deprioritized.
Building in sustainability starts with a recognition of the growing connection between sustainability and resilience, but it goes further. For instance, build-in companies take a whole-of-enterprise approach to explore the business case for sustainability. They see sustainability’s high costs in the context of the rising costs of inaction, and they lower the net costs of sustainability by finding new ways of doing business.
Companies that “build-in” sustainability are 3.7 times less likely than “bolt-on” companies to deprioritize sustainability for resilience even though they face nearly equal rates of disruption. And better balance brings benefits.
Q: What are some practical recommendations for CSCOs who want to begin the process of “building in” sustainability to their organizations?
A: Once we identified build-in companies, we saw that their approach leads them to do four things differently than others.
First, they build sustainability into supply chain capabilities and network changes, envisioning a long-term supply chain transformation that takes both sustainability and resilience as core design principles.
Second, they integrate sustainability into jobs and business processes, opening bandwidth for sustainability by prioritizing critical objectives and recovering misallocated resources.
Third, they ease the costs and first-mover disadvantages of sustainability through ecosystem partnerships, sharing sustainability’s benefits and burdens with competitors and value-chain partners.
And finally, they frame sustainability’s high costs together with the rising cost of inaction and delayed progress, and they make sustainability a key driver in their risk management processes.
Ultimately, supply chain sustainability isn’t something CSCOs can achieve on their own – it requires an enterprise approach. However, less than a third of supply chain leaders report that their internal business partners appreciate the connection between sustainability and either risk management or business performance. This means CSCOs will need to start by making sustainability’s risks and opportunities much more apparent for other senior leaders.