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Sustainability trends and the impact on value chain collaboration - part 2
Leading companies have moved sustainability from an important area of attention to key part of their strategy, in order to be prepard for the economy & challenges beyond 2020. The focus of their programs goes well beyond own operations, customer communication and supply chain risk. They are collaborating to transform their entire value chain so it can support their continuity and growth.
Last month, 1600 professionals worked in Amsterdam around the theme "Value Chains 2011 - How 21-st century proof is your company?", on the ISMC 2011 congress. While the International Supply Management Congress is traditionally a supply management gathering, I met a lot of sustainability professionals, strategists, NGO's and other 'non-supply management' people attending the keynote speaches & workshops. That may of course have to do with speakers like Michael Porter on Creating Shared Value and Jason Clay of WWF talking about feeding 9 billion people.
It is not a new insight that sustainability and future growth requires better collaboration with a company's eco-system.
What is new then? Well, what looked like a surprise to many, is the extent of this change and the speed at which this transformation is coming to us. It became at times very silent in the auditorium with 1600 people, when speakers from African, Indian, Brazilian and Chinese companies/organizations explained how they think they are well ahead in building 21st century proof value chains, and therefore are growing much faster their business and impact on food value chains than many companies in the 'developed' economy (find selected presentations here).
Insights from Life Cycle Assessment of products reveal that the environmental impact isn't necessarily within manufacturing company's operations - in fact in many cases over 80% is not.
As an example: Unilever shows how only 3% of the GHG footprint in their food and healthcare value chains can be directly linked to their operations. That being said, they cannot be successful if their value chain is not sustainable, so they take a leading role in the transformation of GHG emisiosns in the entire life cycle.
But it's not only the environmental aspect where their value chains' impact is exponentially larger outside Unilever's walls. Unilever expects that by 2020, they wil somehow have to link over 500.000 small companies in their value chain (upstream and downstream; e.g. small farms & small distributors; see Unilever's sustainable living plan here).
In order to get to a sustainable, economically healthy vualue chains that bring well being to both it's actors and consumers, companies like Unilever and their eco-system of consumers, suppliers, retailers, authorities, NGO's, competitors are all involved.
To impact where these supply chains are going, intensive collaboration is already ongoing. It's no longer just focusing on transparancy about today's practices or about the footprint of the products, but on what the new value chain should look like as a system and how to get there as soon as possible. And it's using a holistic view on the entire chain, with a clear vision that increasing the value is no longer a matter of trying to get the biggest piece of the cake, but rather on increasing the size of the cake by working well together, and even on whether well being is eating loads of cake versus enjoying the cake experience also in different & better ways.
Lots of good examples of value chain collaboration were shared and discussed on ISMC 2011. Even the leaders however recognized that this is only the beginning, the tip of the iceberg. Where strategic collaborative projects touch only a handful to a few hundred of suppliers and customers today, the extent will exponentially increase in the coming years.
The urgency on transforming the value chain and shift approaches in value creation isn't limited to food and FMCG supply chains.
Also other leading sectors like electronics are working hard on value chain collaboration. On december 13th, Philips won the Responsible Supply Chain Management benchmark of VBDO, Dutch association of Investors for Sustainable Development. Emile Cornelissen who received the award for Philips testifies here along with other thought leaders how Philips moved beyond risk management to collaboration & value creation in it's value chain sustainability approach.
Ramon Arratia, who I mentioned extensively in part 1 of this article, also mentioned the move from product sustainability to value chain focus, and the radical changes expected in the building materials sector (see Ramon's slide as shown on the Avnir LCA conference).
Transforming value chains isn't happening in one day nor with the innovative ideas of one person or company. We know that. It requires collaborative thinking to discover win-win sustainable processes and collaborative action to move ideas to reality in clusters or throughout global value chains. We know that as well, but we need to move quicker, more pro-actively so we and our eco-systemaren't overtaken in our thinking and practices by a fast changin reality.
That requires vision and leadership to start it and a lot of trust, knowledge exchange, coordinated action between many actors in different organizations, in a time where resources are very scarce. Or vision is that today's collaboration processes between companies are not enabling those key requirements. There are a lot of constraints and barriers to be addressed. That is why we developed our offering.