· 6 min read
The uncertain economic and political outlook might persuade some companies to dial back their efforts to improve the sustainability of their supply chains. Some enterprises may even be more amenable to bolstering their sustainability credentials with greenwashing.
Our extensive research shows that both courses of action are ill-advised. The pressure from various stakeholders—notably investors — to increase the sustainability of supply chains has grown steadily over the last three years and shows no signs of abating. Moreover, global crises have a way of bringing supply chains and sustainability to the fore.
A panoply of other issues and uncertainty
Companies are grappling with the likelihood of an economic recession, increasing layoffs, persistent inflation, an unending war in Ukraine, and the prospect of a presidential election in 2024.
Pushback against green investments is another source of uncertainty. For example, US Senate Energy Committee Chair Joe Manchin, a supporter of fossil fuel interests, recently threatened court action over plans by the US Treasury to publish guidance on electric vehicle tax credits. Lawmakers in the state of Wyoming have said they want to ban electric vehicles to protect the oil and gas industry.
In addition, companies are busy managing the transition to a post-pandemic world. In March of this year, the Federal Reserve Bank of New York declared that global supply chains have returned to normal after three years of turmoil caused by the Covid-19 pandemic. As a result, many companies are rethinking their supply chains to make them more resilient and responsive to changing market demands.
Unrelenting pressure to make supply chains more sustainable
Given these pressures, it is perhaps understandable that sustainability in supply chains slips down enterprises’ list of priorities. However, the State of Supply Chain Sustainability report, published annually by the MIT Center for Transportation & Logistics and the Council for Supply Chain Management Professionals, shows that the importance of such investments is not diminishing.
Over the four years of the survey’s existence, we have collected almost 10,000 responses from supply chain professionals worldwide. We’ve also conducted dozens of interviews in multiple languages with supply chain leaders from various countries and industries to give context to the data we collect.
Every year, we ask our survey respondents to rank the level of pressure that their firm faces to increase supply chain sustainability. We isolate ten sources of pressure, including consumers, regulators, investors, and employees. Most respondents ranked the ten pressure sources as “high” to “very high,” with almost every source showing an increase over the years 2020 to 2022. Investors’ pressure rose dramatically during these years, followed by corporate buyers, executives, and consumers. Our analysis of the 2023 results indicates that this pressure is translating into action. We observed statistically significant relationships between how firms rate pressure from their investors and their declaration of net zero goals.
Interestingly, four years of our research findings indicate that global crises do not dampen firms’ commitments to the cause. For two consecutive years, from 2021 to 2022, roughly 80% of respondents reported that their firms’ supply chain sustainability efforts were undaunted by the global pandemic. In 2023, 70% of respondents said that the projections of global economic contraction ahead did not affect firms’ commitments to improving supply chain sustainability. The 2023 survey also asked about Russia’s invasion of Ukraine on supply chain sustainability efforts. Only 30% of respondents reported an impact — and among those, 70% said that their firm’s commitments to supply chain sustainability increased following Russia’s invasion.
Our qualitative research provides some insights that might explain these findings. For example, in our semi-structured executive interviews regarding the Covid-19 pandemic, we heard several respondents describe how the pandemic brought supply chain management — particularly supply chain transparency and resilience — to the fore in unprecedented ways. Likewise, global crises seem to spotlight the importance of supply chains, bringing more visibility and bigger budgets to sustainability issues.
No easing of pressure on the horizon
While economic and political concerns will continue to attract attention — so will sustainability issues.
The impact of climate change on increasingly severe weather patterns is capturing headlines worldwide. The Intergovernmental Panel on Climate Change (IPCC) issued a “final warning” in March 2023 on the fallout from what it sees as a climate crisis. The warning was part of the IPPC’s comprehensive assessment report.
As more people become aware of the supply chain’s critically important role in any functioning society, they will also make the connection with the critical role supply chains play in a sustainable future. We are confident that this growing awareness will continue to be reflected in the increasing pressure on companies to invest in supply chain sustainability.
