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The Value of the Sustainable Supply ChainWhat Do Consumers Think?Accenture explores the value of sustainability in the supply

chain by looking at the issue through the eyes of consumers

Nick Blonkowski, Derek Jones, Sundip Naik and Saurabh Raman


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Historically, manufacturers have viewedsustainability as primarily a brandenhancer. But its impact extends farbeyond brand image. Sustainability is atangible benefit, and one that touchesvirtually every facet of a businesssoperations, from risk managementand cost reduction to new revenuegeneration (see Figure 1). Supply chain

executives must therefore be activeparticipants in the strategic conversationabout sustainability, so that theycan understand the importance oftheir decisions and practices to thisincreasingly consequential goal.

Recent research suggests that agood starting point for this strategicconversation is understanding whatmatters to the customer. To gain deeperinsight into consumer attitudes aboutsustainability and how sustainabilityaffects their buying decisions, Accenturerecently surveyed 4,000 consumersthroughout the Americas, Europe, and

Asia (see About the Survey). Lets look atthese attitudes and their implications forsupply chain practices.


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Figure 1. Sustainabilitys wide-ranging impacts.

Revenues Creating new business models

Collaborating to develop new markets

Innovating to develop new products

and services

Cost Reduction Improving energy efficiency

Streamlining supply chain and logistics

Innovating with suppliers and customers

Brand Focusing on and showcasing innovation

Collaborating to increase transparency

Engaging employees and investors

Risk Management Protecting license to operate

Integrating sustainability triple bottom

line consideration with corporate risk management

Diversifying business model and operations

Less Certain/Long-term

Mitigate

Innovate

Certain/Short-term

2


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About the SurveyIn a 2010 and 2011, Accenture conducted several surveys on sustainabilityamong C-suite executives in North America, the U.K., and China. Severalkey findings illustrate the many ways in which executives considersustainability valuable to the organization. Among them:

93 percent viewed sustainability as being important to their companys

future success 72 percent said that the benefits of their sustainability initiatives

exceeded expectations

72 percent cited sustainability as being important to maintaining brand,trust, and reputation

96 percent believed that sustainability issues must be fully integratedwith their strategy and operations (only one-third said that theircompanies were actually integrating them)

58 percent of the CEOs cited consumers as the single most

important group driving their sustainability policies 1


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Executives are right to be concernedabout the impact of their sustainability

practices on brand, trust, and reputation,because a companys environmentalpolicies matter to consumersthroughout the globe. Nearly two-thirds of the consumers we surveyedsaid their perception of a company isstrongly influenced by the companysenvironmental and sustainability policies.Only 10 percent of respondents claimedsuch policies have little or no influence(see Figure 2).

Geography affectsattitudesMore than 80 percent of Chinese andBrazilian consumers say their perceptionsare strongly influenced by a companyspolicies, versus around 40 percent ofconsumers in the United States and theU.K. Although clearly, these percentagescannot be extrapolated to representall developing economies, it is nooverstatement to note that the rapid

industrialization in such markets (withoutaccompanying regulatory protections)has raised environmental concernsamong their populations. Consideringthat China and Brazil are projected togrow more rapidly than the developedeconomies over the next two decades,the importance of sustainability to amultinational seeking growth in thesemarkets (and other emerging markets)becomes all the more elevated. 2

Increasingly, SustainabilityMatters to Consumers

Figure 2. Sustainability matters to consumers.

US UK China BrazilOverall

To what extent do the environment or sustainability policies and actions of a companyaffect your perception of the company?

Very stron

Strong

Moderate

Weak

None6%

4%

29%

39%

22%

11%

5%

43%

26%

15%

8%

5%

45%

29%

12%

25%

57%

16%

2% 4%3%

11%

44%

37%

61%


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The Carbon Disclosure Project (CDP), a not-for-profit that aims toreduce greenhouse gas emissions and promote sustainable water use bybusinesses and cities, recently released the findings of its fourth annualinformation request from its 50 global member corporations and theirsuppliers. The CDP Supply Chain Report 20123(produced in collaboration

with Accenture) reveals not only that the disclosure practices andperformance scores of Asian-based and European-based companies arecomparable, but that they also exceed the scores of companies fromNorth America and the rest of the world. The report, which includesquestions about suppliers practices, shows that suppliers in Asia andEurope are more likely to have comprehensive climate-change strategiesin placeand better sustainability resultsthan their competitors in NorthAmerica and elsewhere. As Asian and European companies improve theirsustainability disclosure practices, these strategies could translate into acompetitive advantage as environmental factors become more importantto stakeholders.

When it comes to the substance ofsustainability, what matters? Althoughclimate change tends to grab thesustainability headlines, consumersconcerns run broader. We asked

consumers to rank their top threeconcerns. Reducing air and waterpollution were at the top of the list: 43percent of consumers ranked them amongtheir top-three concerns, compared with33 percent, who placed greenhouse gasreduction/global warming mitigationin their top three. Overall, greenhousegas reduction was ranked fourth-mostimportant to a companys environmentalpolicy, below the increasing useof renewable energy (second mostimportant) and reducing the amountof waste going to landfills (third) (SeeFigure 3).

At the more granularlevel, consumers tend

to think local.Priorities vary significantly acrossdifferent geographies. Reducing the useof traditional fuel sources is much moreimportant to consumers in China (a bigimporter of oil and the worlds largestuser of coal) than in Brazil (a major oilexporter). Reducing landfill waste is moreimportant to respondents from the U.K.(a smaller, space-constrained country)than the other three, much larger,countries. And controlling pollution is amuch greater concern in Brazil and China(heavy-industry economies) than in theU.K. (a primarily service-based economy).

To think about Have you observed any

differences in regional sentiment

about environment issues acrossyour different areas of operation?How do your observationscompare with the findings notedin this paper?

Do you know what customersthink about sustainabilitypractices in your industry?

Do you think consumersmight appreciate the use of

locally sourced ingredientsin your products?

Asian and European companies leading the way


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Figure 3. Consumers concerns about sustainability.

Reducing pollution of air and water

43%43%

32%50%

47%

Increasing use of renewable energy (solar,wind, hydroelectric)

39%36%

33%49%

40%

Reducing waste going to landfills or increaseduse of recycling

37%40%

48%25%

37%

Ethical treatment of animals

13%

10%22%

18%16%

Using less water or recycling water for activitiessuch as cleaning, manufacturing and irrigation

36%36%

20%

17%27%

Reducing impact on land or animal habitat

28%29%

26%27%27%

Using less energy from traditional sources

32%33%

30%43%

20%

Minimizing global warming by reducingcarbon/greenhouse gas emissions

36%

42%30%

23%33%

OveraUSUKChinaBrazil

Which of the following do you believe are most important to a companys environmental or sustainability policy?


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Another important finding was the gapbetween sentiment and awareness.Although consumers say sustainabilitymatters to them, they also revealed thatthey arent fully informed. Less than halfof the respondents claimed to be familiar

with the policies of the companies theybuy from the most. And 25 percent saidthey are familiar with very few or none ofthese companies policies.

So while consumers are stronglyinfluenced by the sustainability policiesand actions of companies, they arentalways equipped to make informedpurchasing decisions. Here, too,significant geographical differencesemerged. Consumers in Brazil and Chinaconsider themselves better informedthan those in the U.S. and the U.K.Our analysis suggests this is due tothe fact that the populations of Braziland China are younger and thereforemore inclined to care about long-termsustainability. It may also be becausethey are more tech-savvy and moreopen to new ideas. Or, such awarenessmight matter more to people in rapidly-growing economies that are still moreheavily manufacturing-based.

Companies have a significant hurdleto surmount: once theyve formulatedan environmental policy or instituteda sustainability initiative, they need tomake sure consumers know about it. Newtechnologies and consumer resources

will help close the knowledge gap. Alongwith the explosion of smartphonesand apps, a new class of green appshas emerged, allowing consumers tobe green with less effort. As morethird-party apps enter the market,sustainability information will becomeincreasingly available and influentialon consumers buying decisions.

The Knowledge Gap


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Figure 4. Channels for learning about sustainability policies.

Media such as TV, newspaper, magazines, online

news etc.

77%67%

74%

78%89%

Company advertising or product marketing, includingpackaging, displays, etc.

35%22%

28%54%

36%

Social networking or mediatools (i.e., Facebook,Twitter, YouTube)

26%14%

16%42%

34%

How do you typically learn about environmental or sustainability policies and actions of companies?

OveraUSUKChinaBrazil

Where are consumersgetting theirinformation?According to the survey, an overwhelmingmajority of consumers (77 percent) hearabout the sustainability policies and

actions of companies through traditionalmedia outlets, such as newspapers, TVand radio news, and magazines. For lessthan half the number of consumers (35percent), company-controlled informationchannels, such as advertising andproduct packaging, represented the keyinformation source (See Figure 4.) Thatmeans that a companys effort to expressits green edge to consumers is not evenhalf as effective as traditional media.Clearly, companies could be doing more.

Among the other primary informationsources consumers rely on wereenvironmental organizations (29 percentof respondents) and consumers ownactive research (27 percent). Socialmedia served as the primary informationsource for 26 percent of respondents.The impact and explosive growth ofsocial media suggest that this channelwill become an increasingly powerfulsource of consumer information andinfluence. Perhaps as important as thechannels themselves is the general

assessment of the spin. Consumersconsider most of the information they getregarding sustainability as either neutralor negative. No wonder: sustainabilityhas become such a buzzword thatpeople are often skeptical of self-servingclaims of environmental consciousness.As with corporate social responsibility,many companies have jumped on the

bandwagon, without truly committingto the goal.

Eye on the supplychain: Nestl, palmoil, and the power ofsocial mediaIn March 2011, Greenpeace took

aim at Nestl for buying palmoil, an ingredient used to makechocolate, from a supplier that wasengaging in illegal deforestationpractices. Greenpeaces campaign,waged aggressively through socialmedia (including YouTube), capturedwidespread consumer attention andprompted Nestl to take action. ByMay, the company had suspendedpurchases from the supplier.

To think about Does your organization formally

recognize sustainability as animperative? Is sustainabilityincorporated into theorganizations strategic goals?

Has your organization recognizedthe link between your supplychain practices and sustainability?

Have you measured theenvironmental impacts of yoursupply chain practicesoftransportation, packaging, oreven the practices ofkey suppliers?

Do you have sustainability

initiatives under way in anysupply chain processes?


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Consumers base their buying decisionson sustainabilitybut only until it hitsthem in the wallet. Most consumers (56percent) say they choose to buy productsfrom companies that they believe operatemore sustainably than companies that

dont, if the price point is the sameor less than competitors. A smallminority (15 percent) are even willingto pay more. For twice that number (29percent), price remains the decidingfactor, regardless of the companysenvironmental or sustainability policies orpractices. Respondents showed significantgeographical variances. Following thecommon theme, consumers in China andBrazil are more likely to choose productsbased on sustainability, while U.S. and

U.K. buyers are more influenced by price.Its possible that the findings in the U.K.and the U.S. reflect temporary buyinghabits related to the downturn.

But generally speaking, these findingsimply that for certain niche markets andsegments, sustainability can be a marginlever. Its greatest potential, however, is asa competitive differentiator and market-share lever, when price is constant.

To think about Is your company unique in its

industry or product area for itssustainability practices, or are

they common practice?

Have you examined the pricingof competitors who promote thesustainability of their products?How does it compare to yours?

Sustainability and Price


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Clearly, there is much more to be learnedabout consumer attitudes towards

companies sustainability practicesandwhat shapes these attitudes. Still, ourfindings offer some important earlylessons for supply chain executives.

First, assess andreduce your risksDo you know whats lurking in yoursupply chain? Are there substandardenvironmental practices being carried

outwithin a small division in a far-flunglocation, or elsewhere in the supplychainthat could do real harm to theenvironment and to your companysreputation? The Carbon DisclosureProjects Supply Chain Report 2012indicates that 30 percent of membercompanies experienced a supply chaindisruption due to weather-related events.In the future climate scientists predictthat storms will become more frequentand more intense, leading to further riskto the supply chain.

Investigate the practices and record ofyour suppliers, and proactively seek toencourage responsible environmentalpracticesor rethink relationships withsuppliers whose environmental practicesare questionable. The media still hold thegreatest sway on consumer opinion. Andnowadays, news travels at viral speed.Companies cannot expect to be insulatedfrom the policies and practices of theirsuppliers or strategic partners.

In any case, when it comes tosustainability, companies as a whole arespending more time on defense thanon offense. A company that has alreadyestablished a reputation for havingsustainable practices would likely weathera negative event more easily than onethat has not.

Take your rightful

seat at thesustainabilitystrategy tableCEOs believe their companies shouldbe integrating sustainability into thesupply chain. As a supply chain executive,are you aware of this? Get alignedwith your companys sustainabilitystrategy. Many of your decisions mayalready be contributing to it, whetherintentionally or not; some cost-drivendecisions, for instance, may also beenvironmentally friendly, such as usingmotion-sensor lighting in warehousesor reducing packaging. If so, the supplychain and the brand itself shouldget credit. Scrutinize your function:is there anything noteworthy aboutyour current managementsourcingpractices, ingredients, manufacturingprocess, packaging, distributionthat issustainable and merits attention?

Calculate thesustainabilitybenefits of thesupply chainCalculate the sustainability benefitsof supply chain practices and developways to get credit for them. Thisincludes everything from specific actions

you take (e.g., efforts to reduce yourcarbon footprint, partnering with moreresponsible suppliers) to deciding whatto track and how and where you reportand communicate performance. There arenumerous standards in use, some morepopular in certain parts of the world; twocommon ones are the Global Reporting

Initiative (GRI) and the Carbon DisclosureProject (CDP). In addition, share more

information internally to help augmentthe information flow to the outside.

Sustainability can influence consumerbuying behavior, but only whenconsumers know it is being practiced.So beyond the reporting requirements ofregulators, consider the measures thatmatter to consumers: how many gallonsof fuel you saved, how many cars youhelped take off the road, how much post-consumer waste you used in packaging.But beware of greenwashing. Consumers

dont easily fall for superficial claims, andenvironmental groups track greenwashingas much as they do the environmentalrecords of companies.

Monitor your brands and corporateenvironmental image in channels beyondyour companys controlfrom themainstream media to environmentalorganizations websites. Remember,even seemingly local news can quicklycircle the globe. Watch for the positivecoverage, not merely the negative, since

it may suggest potential new valuepropositions, product improvement ideas,or other benefits.

Use the channels that you do controladvertising, website, packaging,public relationsto promote yourachievements. Embrace social mediaby working with your marketing andbranding colleagues to ensure youget mileage out of your efforts.

Putting it in Perspective: What Steps ShouldCompanies Take?


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Putting Sustainability at the Heart ofStrategy: Unilevers PlanCultivating consumer awareness and appealing to consumerssustainability concerns isnt a huge leap if sustainability is integrally tiedto your brand identity (think: the Body Shop, Seventh Generation, andBrazils Natura Cosmeticos). But even companies whose products arent

inherently or explicitly greenthose that either want to attract moreconsumers through good-citizen policies and practices, or who simplyrecognize the importance of sustainable practices as a defensecansurely do more to win consumers goodwill.

Consider Unilever, the multinational personal care products giant, whichhas embraced sustainability as a core strategy. In 2010, Unilever launchedits Sustainable Living Plan, designating three ambitious major goals(with 50 specific targets) to be achieved by 2020. The company aims toreduce the environmental footprint of its products by half, help morethan 1 billion people take action to improve their health and well-being,

and procure 100 percent of its agricultural raw materials sustainably.

As part of these broad goals, Unilever is striving to cut by half the wasterelated to disposing its products. Its waste reduction plan includesquantified targets (interim and final) for reducing packaging, producingreusable packaging, recycling, and cutting waste in the manufacturingprocess. The company also established goals for water conservation andgreenhouse gas reductionby consumers (through product design) aswell as by its own manufacturing and transportation activities. For itssustainable sourcing goals, Unilever has established targets for everycategory of material, from soy and cocoa to paper and board. These goals

and the plan itself are the central message of the companys website andFacebook page.

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Monitor (and safeguard) your brandThird-party environmental rating servicescan help companiesraise consumer awareness. Good Guide, for example, designedfor the iPhone and Android platforms, allows consumers toscan a products bar code and get information about howgreen the product is and how environmentally responsibleits manufacturer is. But such services also underscore

the importance of monitoring your brand to safeguardit. Companies need to be aware of the ratings and themethodologies used: good ones, so they can promote the useof such services within their target markets and quickly takeadvantage of any constructive criticisms; unfair ones, so theycan dispute them and seek correction.


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Think localMany elements are factored into supplychain design decisions, and ultimatelyalign to overall company strategy. Forexample, when superior customer serviceis the goal, a company may operate withmore localized warehouses to speeddelivery of inventory to customers.

Consumer sentiment toward sustainabilityought to be another consideration forsupply chain design. That might wellrequire tradeoffs between businessstrategy and sustainability goals.

An emphasis on locally led procurementimproves supplier outcomes, makesauditing easier, and, in certainjurisdictions, meets legislativerequirements for local content. Reducedglobal sourcing, combined with a moreeffective local sourcing strategy, can

help companies create tailored productofferings. Such differentiated offeringscan, in turn, give companies a competitiveadvantage among certain buyer segments,such as governments, which oftenpromote local-level purchasing.

In addition, as weve seen, consumerssustainability concerns vary from regionto region. So in China and Brazil, whereconsumers are more concerned aboutfossil fuel emissions than about landfillwaste, an inventory system designed

for delivery speed entails more mileage,and is thus less optimal. In making yourdecisions, consider the role sustainabilityplays in consumers buying decisionsthroughout all of your markets.

In broader terms, consider that indeveloped economies, sustainabilitycan be a way to grab market share fromcompetitors. In the developing world,sustainability can help your companyattract new customers within a rapidlyexpanding consumer base.

Control your destinyThe supply chain offers significantopportunities for advancing sustainablepractices and, in general, your companyssustainability policies. But it can also be asignificant source of vulnerability.

Supply chain executives should recognizetheir role in the companys sustainabilitystrategy and proactively take steps toalign supply chain management to it. Takestock of the potential risks entailed inyour current practices. Conversely, tallythe benefits of these existing practices,ensuring theyre being measured in termsthat resonate with consumers. Work withyour branding peers. Finally, recognizethe variations in consumer attitudes andconcerns from region to region, and takethese differences into account as youdesign your global and regional supply

chain strategies.

Although quantifying the value ofsustainability practices is still in itsinfancy, no one doubts the benefits - toall stakeholders.

To think about Does your company solicit

customer feedback on yourcompanys environmentalpractices or impacts?

Have you developed metrics totrack sustainability initiatives?If so, where and how do youreport performance? Are youmeasuring improvements?

Is there a process in placethrough which the marketingand customer-facing functionswork with the supply chainfunction to develop sustainabilitymessaging? Monitor publicresponse to your practices?


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About the AuthorsNick Blonkowski is a Consultant inAccenture Operations ManagementConsulting practice. Nick has significantexperience throughout the supplychain from demand planning throughtransportation in a variety of industries. Hecurrently leads Accentures North American

Sustainable Fulfillment offering. Basedin Washington, DC, he can be reached [email protected].

Derek Jones is a Senior Manager inAccenture Operations ManagementConsulting practice. He has an extensivebackground in distribution operationsand inventory management for avariety of industries. He currently leadsOffering Development for the IntegratedPlanning and Fulfillment practice area.Based in Tampa, he can be reached at

[email protected].

Sundip Naik is an Executive in AccenturesManagement Consulting practice. Hehas an extensive background in globalsupply chain transformational programsfocusing on network design, fulfillmentstrategy, distribution re-engineering andtransportation operations. He has worked inConsumer Goods, Retail, Communicationsand High Tech industries. Most recentlyhe has led Accentures North Americanthought leadership and offerings within

the Planning, Fulfillment and Sustainabilityareas. Based in Atlanta, he can be reachedat [email protected].

Saurabh Raman is a Consultant inAccentures Management Consultingpractice. He has a wide-rangingbackground in supply chain operations,including warehouse management, private/dedicated fleet management and procure topay services. Saurabhs primary experiencehas been in the Communications and HighTech and Consumer Goods industries.

Based in Philadelphia, he can be reached [email protected].

References1The findings cited here were derived fromA New Era of Sustainability: the UN GlobalCompact-Accenture CEO Study 2010 andDecision Maker Attitudes and ApproachesTowards Sustainability in Business in 2011(an Accenture survey). Both are availableat http://www.unglobalcompact.org/docs/

news_events/8.1/UNGC_Accenture_CEO_Study_2010.pdf.

2Significantly, Chinas latestfive-year plan calls for a shift tomanufacturing higher-value goods.(Source: Marcus Blosch, StephenStokes, Chinas Plan for SustainableGrowth, Gartner, 17 August 2011).

3CDP Supply Chain Report 2012A NewEra: Supplier Management in the Low-Carbon Economy. The report, written forthe Carbon Disclosure Project by Accenture,is available at www.cdproject.net.

About AccentureAccenture is a global managementconsulting, technology services andoutsourcing company, with more than244,000 people serving clients in morethan 120 countries. Combining unparalleledexperience, comprehensive capabilitiesacross all industries and business functions,and extensive research on the worlds

most successful companies, Accenturecollaborates with clients to help thembecome high-performance businesses andgovernments. The company generated netrevenues of US$25.5 billion for the fiscalyear ended Aug. 31, 2011. Its home pageis www.accenture.com.

Copyright 2012 AccentureAll rights reserved.

Accenture, its logo, andHigh Performance Deliveredare trademarks of Accenture. 12-0642 AM

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