Sustainability vs. profitability: Is it one or the other?

How 25 multinational companies achieved sustainable supply chains

I’d like to think that most companies have moved beyond the point of believing that sustainable business practices aren’t a priority. I hope they recognize the importance of environmental protection and the value of leaving the planet a little better than they found it. Sadly, the reality it seems for many is that it’s all about the tradeoffs. Do we implement greener policies at the cost of our bottom line? But does it really have to be one or the other? In my opinion, thankfully not. And I’m not alone in my assessment. Building sustainable supply chains has been a growing trend for years, and as it turns out, those early adopters may actually be seeing an increase in profits.

Sustainability increases revenue

According to a World Economic Forum report, companies like UPS, SABMiller, DHL, Unilever and Nestle are among 25 multinational companies that focused on sustainability and ended up increasing revenue by up to 20% while cutting supply chain costs as much as 16% as a result. Beyond Supply Chains: Empowering Value Chains outlines 31 best practices for businesses to follow to see similar results. The primary idea behind the best practices is simple – work to achieve profitability through measures that also benefit society and the environment. Some of the more interesting ideas covered in the report include collaborating with competitors and implementing innovative new technologies to drive savings. Nestle combined parts of its supply chain for fresh and chilled products in Belgium with PepsiCo, a clear rival. They bundled warehousing, packing and outbound distribution, and synchronized deliveries to fill trucks. The result was a 44% reduction in transportation costs, 55% lower carbon emissions and higher customer satisfaction levels. With the implementation of a more aerodynamic trailer, DHL realized fuel and CO₂ savings of up to 12%. Companies who brought down their carbon footprints saw a direct increase in profitability as a result. The report shows carbon gas reduction between 13-22% uplifted revenue by 5-20%. Brand value also increased an average of 15-30%.

Three factors driving companies toward sustainability

Manish Bapna, Executive Vice President and Managing Director of the World Resources Institute, says there are three driving factors pushing companies toward sustainability, but profitability isn’t actually one of them. In a Forbes article, Bapna lists the following factors as drivers:

1. Reputation
2. Risk
3. Opportunity

Reputation is due to the growing scrutiny companies are under from customers, investors and the media. People want to see sustainability efforts and are willing to spend their hard-earned dollars with companies that prove they care. Risk is a result of environmental factors that could impact supply chains – things like the increase in natural disasters and other recent extreme weather events, which can cause millions of dollars in lost productivity if operations are suddenly shut down. Opportunity comes in the form of uncovering hidden efficiency and cost savings. Just look at the revenue boost those 25 multinationals experienced when cutting their carbon footprints. That’s good news for people like me who have a soft spot for our planet, because it’s evident when it comes to supply chain, it doesn’t have to be sustainability or profitability. You can have both. Companies just need to realize it.

Does your company have any sustainability measures in place?

Do you believe it’s possible that sustainability and profitability can go hand-in-hand? I’d love to hear your thoughts and opinions, so please post away!