Sustainability initiatives are catching on with top global supply chain executives, but for the economic rather than for the environmental benefits, a new survey has found.
The survey, conducted in the spring by New York-based business advisory firm Alix Partners LLC and released earlier this month, found that 72 percent of the roughly 150 respondents had sustainability policies or sets of sustainability objectives in place. The survey results, however, indicate that most of these programs are driven by potential cost savings rather than altruism. According to 84 percent of survey respondents, their customers (mostly other businesses) value the cost savings generated by sustainability initiatives more than their environmental impact. Likewise, two-thirds of the respondents said they would not pay their own vendors a premium for developing green programs. The remaining one-third said they would be willing to pay suppliers a mid-single-digit premium for their sustainability efforts.
The respondents were comprised mostly of high-level executives across 10 industries, the vast majority being shippers. Most of the executives were based in the U.S. and Europe. About 55 percent worked for companies with annual revenues exceeding $1 billion. About 21 percent represented firms with revenues of more than $10 billion. The survey represents Alix's first global effort to measure the behavioral impact of sustainability initiatives.
The survey results demonstrated what many already knew: European companies are ahead of their U.S. counterparts in their commitment to sustainability. About 88 percent of European respondents have sustainability programs in place, compared with 76 percent of U.S. companies. About one-third of European executives said green initiatives were either extremely or very important to their companies, compared with 26 percent of U.S. executives.
Alix Partners also tried to assess commitment among Asian companies but with little success. Foster Finley, managing director at Alix, said the survey was distributed throughout Asia but, outside of Japan, it elicited virtually no response. Many developing Asian nations, notably China, are focused on industrial growth and don't place environmental issues high on their priority lists, Finley said in an interview. China, in particular, has the reputation for being the world's most notorious polluter.
Finley said in a phone interview that the most important message from the survey was that sustainability has expanded from the realm of social consciousness into the economic mainstream. In the past, sustainability programs were considered a luxury that generated little more than public relations benefits for business. Today they are being developed with a primary eye towards the bottom line, Finley said.
Finley said he was impressed with the finding that one-third of companies would reward their suppliers with what is tantamount to bonuses for their investment in sustainability initiatives. "Three or four years ago, that number would have been close to 5 percent," he said.
As perceptions about sustainability change, these programs are being subject to the same performance requirements required of other segments of an organization. For example, 60 percent of respondents investing in green programs said their companies require a return on investment within 18 months; only 17 percent said their firms are willing to wait longer than that. Here too, however, the attitudes differ by continent. Less than a third of American executives said they would invest in green logistics initiatives that didn't produce positive financial returns. By contrast, 62 percent of European executives said they would invest in green programs even if they failed to turn a profit.
Overall, the lack of an adequate financial return within what is viewed as a reasonable time frame was the main roadblock toward making greater progress in this area, according to the survey. About 43 percent of respondents said they were undecided as to whether their companies would invest in a sustainability plan in the next year.
In Europe, half of the respondents said recycling raw materials, energy conservation, or switching to alternative energy forms were the primary drivers of sustainability programs. By contrast, in the U.S. the consolidation of less-than-truckload shipments into fewer but larger truckload shipments was seen as the main initiative. Nearshoring came in last on both continents as a way to advance sustainability programs.