While the previous administration spent four years prioritizing emissions reduction and green manufacturing through the Inflation Reduction Act and other legislation, current U.S. leadership has gone in a different direction by making moves to deregulate industry as it seeks to advance American energy independence and reduce reliance on China and other foreign manufacturing destinations. As a result, many business leaders are wondering if their environmental, social, and governance (ESG) efforts remain worth investing in through 2025 and beyond.
The short answer? Yes, you should keep investing. When evaluating your current sustainability efforts, supply chain professionals must remember that just because something is not required, that doesn’t mean it shouldn’t be done. In this article, we’ll discuss supply chain sustainability and some of the benefits it provides to businesses.
Making the Business Case for ESG Programs
As the United States moves forward into a period of economic uncertainty, organizations are turning to their supply chains to find ways to reduce costs and help mitigate rising costs. Many companies are implementing artificial intelligence (AI) solutions to streamline processes, reevaluating their supplier networks, optimizing warehouses, locking in lower rates through longer contracts, and more.
At Phoenix Logistics, we have been talking about this connection between resilience and sustainability since the COVID-19 pandemic was in full swing.
Frank P. Crivello, Phoenix Investors’ Chairman and Founder, offers the following information for anyone looking to make a business case for sustainability initiatives.
1. Sustainable companies are more resilient
Amidst this flurry of supply chain activity, it can be easy to forget a lesson learned during the early days of the pandemic. That lesson? Eco-friendly companies fare better in a crisis than companies without established ESG policies. This is because sustainable companies have:
- Better visibility into down-tier suppliers and vendors, so potential problems get addressed earlier.
- Fewer data silos, allowing faster, more holistic decision-making across the organization.
- Improved compliance with health and safety regulations, minimizing the risk of fires and other disruptive events.
2. Sustainability doesn’t have to drive up long-term costs
The implementation of ESG programs might have some short-term, upfront costs involved for software and technology, consultants, certifications, and so on. However, supply chain sustainability pays for itself over time, eventually creating an ongoing return on investment (ROI) for the organization, such as:
- Lower energy/utility bills
- Material savings through reduced waste
- Lower transportation costs due to optimized packaging, consolidated shipments, etc.
- Reduced storage costs thanks to optimized inventory practices
Yes, sustainability sometimes has a price tag, but, ultimately, it’s important to view ESG as an investment rather than a cost center.
3. Operating sustainability reduces brand risk
Time and time again, consumers tell survey panels that they not only support sustainable brands, but that they are willing to pay more for sustainably manufactured products. In case you aren’t convinced, here are a few examples:
- 78% of consumers say that a sustainable lifestyle is important to them.
- A strong majority (85%) of consumers will pay almost 10% more for sustainably produced or sourced goods in spite of inflation and cost-of-living concerns.
- When making a purchase decision, 71% of consumers favor a brand that is actively reducing its carbon footprint, while 83% would like those brands to be more transparent about sustainability.
With only a quick online search, you can find countless other surveys from the past few years that all essentially say the same thing: Consumers expect sustainability from the brands they support.
When the Going Gets Tough
We recognize that this may not feel like the easiest time for supply chain professionals to focus on sustainability efforts. But difficult times are exactly when ESG efforts show their true value. Businesses that invest in sustainable practices now will find themselves more resilient against future disruptions and climate risks.
About Phoenix Logistics
Strategic Real Estate. Applied Technology. Tailored Service. Creativity. Flexibility. These fundamentals reflect everything we do at Phoenix Logistics. We provide specialized support in locating and attaining the correct logistics solutions for every client we serve. Most logistic competitors work to win 3PL contracts, and then attempt to secure the real estate to support it. As an affiliate of giant industrial real estate firm Phoenix Investors, we can quickly secure real estate solutions across its portfolio or leverage its market and financial strength to quickly source and acquire real estate to meet our client’s need.
