Purpose-driven supply chains: a myth or an opportunity?
By Claudia Freed, EALGreen
“Winning with purpose” is Pepsi’s newest tag line. Its goal is to be the global leader in convenient foods and beverages by integrating “purpose” into the core of its business strategy and doing even more for the planet and employees. Dow’s campaign to “stop looking at plastic as waste and start looking at (used) plastic as a new resource” was highlighted by Haley Lowry, Global Sustainability Director and Social Innovation Intrapreneur during her presentation at the U. S. Chamber of Commerce Foundation meeting in Washington DC. Dow’s commitment to change the lives of one billion people by redefining the role of business exemplifies the fresh new tone of business discussion in the board room.
According to a recent study by Korn Ferry, a global giant in management consulting, companies that focused their employees on the organizations’ purpose achieved growth rates triple to others in the same industry sector. And on November 5, 2019 Korn Ferry published its most comprehensive survey on the subject under the title: Purpose Pays. This study offers the clearest evidence to date that companies’ mission and values are the top reason employees choose one employer over another. Whether your business has been operating under a clear purpose or not, it is becoming apparent that purpose beyond profit is powering success.
But how do enterprises become purpose-driving businesses? It all starts with understanding the impact the enterprise’s products or services impose on human and environmental capital. Peter Burgess, of True Value Metrics makes a clear case by stating that “The corporate world has measured profits for decades and the profit performance has been spectacular. At the same time the measurement of social impact and environmental impact has been completely missing and the results have been disastrous... massively destabilizing inequality and a climate crisis on top of environmental degradation. We know how to number profits using money, but we don’t seem to have made much progress on numbering social progress and issues related to natural capital.”
Now more than ever, employees are choosing to join companies with purpose over those less “woke” ones. And not just millennials, those re-entering the workforce after training and re-skilling prefer to be parts of teams with a clear understating of the impact they have on their communities and the planet. Once business leaders declare a business purpose – and there are now a growing number of companies doing this, then business operations must adapt to transform purpose into practice.
Many businesses are launching strategic partnerships to accelerate their progress to become purpose-driven organizations. No company is succeeding in business alone anymore. Competitors are collaborating under new “coopetition” agreements; many for-profit and non-profits are entering into “strategic alliances” and businesses are finding innovative private sector-solutions to public problems.
W. W. Grainger, Inc., AFX Lighting, Kohler, Cole Parmer and American Airlines among many others illustrate how to use their supply chains to create positive impact. These successful companies saw a need to improve the handling of excess and surplus inventory returns, including scratched, dented and obsolete materials. By working with social innovation non-profit organizations, these purpose-driven companies are helping solve problems in the communities where they operate, affecting societal problems such as, for example, the level of student loan debt. Based on a reverse-logistics model, industrial materials can be converted into scholarships for students with financial need.
These students, in turn, earn a broad array of degrees including in critical need areas like STEM, health care and education while graduating with less debt. More than 18,000 scholarships have been awarded to low-income students bettering their lives through education.
In another example, reverse logistics operations partner with the Red Cross and other disaster-relief organizations providing life-saving assistance during emergencies. These highly efficient supply chain collaborations are good for society, as they empower individuals to achieve their potential through education or well-being; for the environment, as they reduce waste and extend the useful life of manufactured products and for the economy, as they improve business efficiencies adding value to the bottom line.
Additionally, reverse logistics in social innovation delivers a “halo effect” to the corporate brand. With a strong interest in sustainability, reverse-logistics can capture and redirect products away from the waste stream and into new product flows creating a virtuous loop of cost savings and new market opportunities for companies. Take, for example, SAP’s “One Billion Lives” initiative to improve lives by increasing visibility and traceability into our food supply chain. Or, Salesforce’s co-CEO, Marc Benioff’s Op-Ed Piece in The New York Times declaring an era of capitalism beyond profits.
Although voices are getting louder and progress is being made in technology and business models that return value to all stakeholders, much more needs to be done to convince shareholders that social innovation is, for now, an investment.
The United Nations (UN), an international organization responsible for maintaining international peace, security and promotes international cooperation provides a powerful framework for purpose-driven business through the Sustainable Development Goals or SDG’s of 2015. These cross-sector goals aim to improve the human condition and the planet’s well-being by defining 17 specific targets from Quality Education (SDG#4) to Responsible Consumption and Production (SDG#12) and in the process, helping purpose-driven organizations to embrace metrics as part of their Environmental, Social and Corporate Governance (ESG) policies. In fact, benchmarking stakeholders including Edelman Trust Barometer and financial analysts including Yahoo Finance and Fidelity now rank companies on their ESG performance as well. These new metrics are shifting the way prospective employees evaluate where they want to work. Investors too rely on these scorecards to determine the long-term viability of their business partners and whether to invest or not. Morgan Stanley, for example, offers a toolkit of compelling reasons why ESG style investing is good for your portfolio. KPMG has published a white paper on future-proofing a company’s reverse logistics in which Governance and the issue of the management of surplus materials plays a significant role in the selection of a reverse-logistics partner.
Without a doubt, the business purpose of all companies – large and small - remains firmly anchored on returning financial value to shareholders. However, as CEO’s increase their public commitment to operating with purpose because employees and customers demand it, the pressure will only increase for reverse-logistics to integrate these values into business operations to deliver positive social and environment outcomes, not just financial results.
Social responsibility in all aspects of business is here to stay. And that’s a good thing.
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Claudia FreedClaudia Freed, President & CEO of EALgreen, is an accomplished and dynamic business leader with 25 years experience managing purpose-driven partnerships. She received the first scholarship created by EALgreen from excess inventory in 1982. Claudia’s commitment to education and sustainability originated in her native Argentina. Using her EAL scholarship, she earned a degree in Economics from North Park University (Chicago, IL). After a successful career in corporate finance, she returned to lead EAL becoming a champion for corporate social responsibility recognized by Crain’s Chicago Magazine, the Global Summit of Women and the Corporate Responsibility Group of Chicago. Under her direction, EAL has been hailed a social innovation pioneer coordinating a national network of Fortune 500 companies, colleges and universities to create positive social impact that adds value – and purpose - to businesses’ bottom line. More about EALgreen at
www.ealgreen.org