How will the Covid-19 crisis impact corporate sustainability? Many academics and business leaders have already reflected on this question and more are sure to follow. While opinions vary, it is clear the pandemic could change corporate sustainability as we know it.
A recent survey of senior sustainability professionals from 102 companies found that only 2% felt the crisis would not have any implications for their companies’ sustainability activities. The biggest impacts were expected with respect to the companies’ efforts on sustainable supply chains.
The pandemic’s impacts on sustainable supply chains are potentially wide-ranging. For example, governments, companies, and consumers have been repeatedly urged to re-evaluate the resilience of their supply chains, including their visibility, flexibility, and redundancy. A World Economic Forum article argues that the crisis underlines the need for a stronger focus on continuous improvement, transparency, and shared responsibility in supply chains.
As sustainable supply chain initiatives change, the pandemic will also compel companies to re-think how they measure the performance of those initiatives. Reliable, accurate metrics that reflect the current status of a supply chain are needed to guide action in this time of rapid change. While sustainability metrics will likely continue to vary widely between supply chains, the Covid-19 crisis also has a number of general implications for measurement in this area.
Going forward, companies should consider the following:
- Raise the prominence of supply chain resilience. The ability of a supply chain to respond to unexpected shocks has taken on new urgency. The need to reconsider assumptions on just-in-time delivery and measures of appropriate inventory levels have been widely noted, but a renewed emphasis on resilience has many other implications for measurement. For example, companies may need to identify concerns regarding geographic clustering of suppliers in areas particularly vulnerable to climate change.
- Reassess performance trade-offs. Trade-offs between conflicting objectives, such as cost, working conditions, and environmental performance, are common in sustainable supply chain management. Metrics help make these trade-offs clear. The pandemic underscores the need for companies to revisit the trade-off decisions they’ve previously made. This could mean rethinking how metrics are interpreted by giving, for example, greater weight to resource stability, workplace safety, or emergency preparedness for key parts of the supply chain.
- Move towards measures of real-time performance. Most existing metrics provide retrospective measures of sustainability performance, meaning decisions are being made using out-of-date information. The ability to measure performance in real-time, however, is becoming a reality through the use of technologies, such as cheaper, more reliable drones and sensors. For example, satellite imaging is already being used to monitor real-time changes in forest cover, while social media and other apps are increasingly being used to monitor working conditions.
- Go beyond the first tier of suppliers. Companies reasonably focus much of their attention on the suppliers they directly interact with. However, many of a company’s most important impacts can happen deep in the supply chain. Yet, these suppliers are often poorly equipped to address sustainability requirements. The pandemic highlights the need for metrics that emphasise greater supply chain visibility. This will help companies better understand their potential vulnerabilities, as well as make a full accounting of their supply chain’s true sustainability impacts.
- Link measures to the wider world. Finally, the Covid-19 crisis has underlined that supply chains are embedded in larger economic, environmental, and social contexts. The sustainability of a supply chain cannot be assessed without explicit reference to that broader context. Metrics must therefore focus on linking a supply chain’s sustainability performance to external reference points, whether they be focused on climate change, water usage, or a global pandemic. Assessing a supply chain’s performance relative to itself or to that of a competitor is important, but could miss the bigger picture.
Read the rest of Cory Searcy and Payman Ahi’s article here at LSE Business Review