As environmental degradation, resource depletion, and climate change continue to threaten the delicate balance of our planet, the need for sustainable practices is more urgent than ever. Among various industries, the supply chain sector is in a unique position, with the potential to drive significant change and pave the way for a greener and more resilient future.
As the current leader on Gartner’s Magic Quadrant, sustainability is central to our Kinaxis practices. Our brand promise is “Know Sooner. Act Faster. Remove waste.” – so sustainability is integral to what we do. At Kinexions '23, we also announced our new Sustainable Supply Chain, which allows companies to embed emissions factors (including Scope 3 emissions) directly into RapidResponse. That means they can design scenarios that estimate, project and simulate supply chain-related CO2e in real time. Not only does Sustainable Supply Chain create visibility into emissions data, it also empowers planners to understand its impact in seconds.
Another first at Kinexions drew upon Nashville’s music roots. We hosted exclusive “Jam Sessions” pulling perspectives from a diverse background of thought leaders, customers and other luminaries to talk about specific themes that are top-of-mind.
The perspectives from our sustainability Jam Session and a Kinexions breakout panel have spurred thoughts on the many considerations for change management on the ongoing operationalization of sustainability practices. Afterall, it’s not sustainable if it’s not sustainable (pun intended).
A new perspective to the income statement
While sustainability is the right thing to do, it’s not always easy to make decisions that go against the behaviors that have been engrained in our corporate mindsets for hundreds of years – maximizing profitability. To create potential traction for sustainability to take hold, we can assign a dollar amount to sustainable practices and its impact to the bottom line.
In this sense, we create a multi-faceted WIIFM (what’s in it for me) statement to influence people to bring about change. First, people will be intrinsically motivated by the want to contribute positively to progressing ESG (environment, social and government). Second, they will be extrinsically motivated to improve ESG practices because it ties in with their existing goals to maximize stakeholder value.
To start shifting how we begin to incorporate ESG as part of the bottom line, here are some questions our panel of experts discussed:
- Determine the cost per revenue dollar: For every dollar we make, how much emissions do we create, and what cost do we assign to the emissions?
- Is “greener costs more” a reality or a perception? Are there ways we can make greener practices more cost effective?
- Approximately 37 million metric tons of CO2 are emitted every year. It’s a lot, but it’s also hard to visualize. How can you turn that into something that people can visualize and act on?
While these considerations require deeper work to address, the good news is the top line benefits are potentially more significant. After all, sustainability is increasingly important to consumers, especially in Europe.
That said, consumers want to know details about how sustainability plays out in real life. Research by MIT experts found that only 50% of consumers would make a more sustainable choice when offered a small discount – however, if the benefit was expressed in the number of trees saved, over 70% would make a more sustainable choice.
Understanding our audience and what resonates with them is a critical piece to driving change. Going back to creating WIIFM, if customers are intrinsically motivated to do good for the environment, supply chain companies should consider what benefits their business practices ultimately contribute to the environment. Then, they must ensure they communicate that to retailers and eventually trickled to consumers to influence their buying behavior.
Finally, when we talk about top and bottom line, the CFO cannot be excluded from the conversation. A good CFO does not look at sustainability through green-tinted spectacles; they look at sustainability from the perception of minimizing business risk – this could be in terms of reputational damage, shareholder pressure and risk of failure to comply with regulatory requirements.
Regulation as a “push tactic”
When it comes to assigning metrics to ESG practices, the role of regulations and standards play a big role. For example, the European Union (EU) recently announced the introduction of the carbon border tax on certain imports. Now, there is certainly a cost associated (impact to bottom line) with producing and exporting goods to the EU that do not follow their guidelines. (Un)fortunately, the EU is only a start to revolutionizing the way businesses run their operations through an ESG lens.
People need a compelling reason to want to change and often need to be guided in the right direction. Governments and regulators hold the power to shift people’s behaviors. Governing bodies carry significant influence, and if they aren't making sustainability a priority or taking action, it can be much harder to convince companies and individuals to care about it.
In the world of change management, we use levers to drive change. Push levers are typically those that bring about compliance, such as government regulations. Pull levers are those that directly motivate the individual on a personal level. In this case, government regulations stand as a push lever, forcing businesses to think and operate in sustainable ways or they may choose to suffer the repercussions. The best approach to driving change is a combination of push (like government regulations) and pull (financial or personal motivations).
Ultimately, the end goal is for ESG to be embedded into our everyday practices. When that happens, we will be “in line” and not look at it as “end of line.” Our group of experts also believe that if companies focus on ESG scope 3, they will automatically see scope 1 and scope 2 go down.
Harnessing change management for sustainable success
Shifting business to be driven by ESG practices is a revolutionary change to how we work, how we think and what decisions we make. It requires involvement and buy-in from all layers of the organization from the CEO all the way to an administrative coordinator, who may want to continue ordering loads of water bottles even though we decided to install a refill station.
Having an effective change management strategy can help drive the adoption of ESG practices across the organization. Here are a few key areas where change management can add value:
- Stakeholder engagement: ESG initiatives involve multiple stakeholders, such as executives, employees, investors, customers, partners and the broader community. The change management process considers how each group is impacted (WIIFM) and engages each accordingly, addressing their concerns and gaining their support.
- Cultural transformation: Embracing ESG will require a shift in organizational culture, values, and behaviors. Change management helps create awareness, build understanding, and foster acceptance of new ESG principles. A successful transformation will encourage employees to embrace sustainable practices and align their behaviors with ESG goals.
- Employee buy-in: Change management fosters employee buy-in and participation in ESG initiatives. By involving employees in the change process, providing training and recognizing their contributions, they become more motivated, committed, and empowered to come along the ESG journey.
Elevating the conversation
Through collective efforts, we can build a more sustainable and inclusive global economy, where environmental stewardship, social responsibility, and good governance are at the forefront of business practices.
With Kinaxis’ new sustainability module, business leaders are turning to this pioneering solution as a catalyst to bringing sustainability into the S&OP agenda and to elevate the conversation. Combine a well-thought-out execution and change management plan with a powerful tool and together it’s a formula to create a better future for generations to come.
For even more insights about incorporating sustainability into your supply chain, check out the following:
Driving sustainability goals through supply chain innovation, with Colgate-Palmolive's Ann Tracy (Big Ideas in Supply Chain podcast)
How operationalizing sustainability drives business (Big Ideas in Supply Chain podcast)
How supply chain planning can drive sustainability (Big Ideas in Supply Chain podcast)
Raconteur | The low carbon supply chain (white paper)