Report: 5 ways to create a purpose-driven supply chain

Supply chain professionals are increasingly seeing the value in creating purpose-driven supply chains, echoing a shift away from profit-centric operations at many companies, according to a recent Gartner study.

The research firm polled 573 industry professionals and found that 85% of supply chain leaders said they believe their organization’s primary purpose is to connect to the customer through product offerings while also providing a sense of “positive societal and environmental impact.” Second on their list of priorities: Achieving investor return, at 61%.

“Purpose-driven enterprises deliver benefits for stakeholders while also generating long-term profits,” Sarah Watt, senior director analyst with the Gartner Supply Chain practice, said in a statement announcing the findings. “With this approach, supply chain leaders must consider their positive and negative impact across stakeholder groups and balance the trade-offs.”

To do that, chief supply chain officers (CSCOs) should focus on five actions to create a purpose-driven supply chain organization. Gartner describes those actions as follows:

Show executive commitment. Rhetoric on purpose without concrete actions risks loss of authenticity and employee trust. That’s why CSCOs should make purpose a vital part of the overall supply chain strategy, as well as decision-making processes and metrics.

Get engaged in portfolio management. All decisions made about products, their purpose, and subsequent market positioning impacts the supply chain organization–which must deliver on given promises. For example, if a product is marketed as being made partly from recycled material, the supply chain organization must make sure that this is the case and provide traceability and evidence to prove it. “CSCOs and their teams should play a more active role in product development and portfolio management. For example, the supply chain organization is uniquely equipped to review the product pipeline for unintended consequences or advise on raw materials selection,” Watt said.

Align partner ecosystem to purpose. An organization cannot be fully purpose-driven unless its critical partners align to the same purpose. Supply chains can amplify the enterprise purpose by embracing collaborative partnerships across the ecosystem. This can lead to innovation, the creation of new products, and shared value. However, survey results show that less than half of supply chain leaders perceive ecosystem partnerships as a key factor for enabling purpose.

Foster employee engagement. Employees will not buy into the purpose of the supply chain if they don’t feel included and heard. CSCOs must communicate the supply chain’s purpose to employees, empowering them through decision-making processes and the opportunity to ask questions. In addition, purpose must also be communicated externally to attract future talent. “Building a purpose-driven culture means providing employees with autonomy, decision-making principles, and opportunities to ask questions and contribute. This can be through innovation days, town hall meetings, open-door policies and one-on-ones. Internships and interviews must also be designed in a way that communicates the supply chain purpose to external and future candidates,” Watt said.

Be accountable. Purpose without accountability risks undermining the approach, with stakeholders viewing it as a marketing or cultural ploy rather than a mechanism for change. This means that supply chain metrics focused on profitability and shareholder value, such as revenue and cash flow, have to be counterbalanced by metrics that display the interests of other shareholder groups, such as supplier engagement, as well as diversity, equity, and inclusion (DEI) metrics. “Enterprises aren’t charities. Still, CSCOs and executive leaders need to decide if they want their purpose to enable long-term profits or if the enterprise is purely profit-centric, with purpose relegated to being an employee engagement tool. If they choose the former, they must implement the metrics to prove that they can walk the talk,” Watt said.

Gartner leaders will discuss the value of purpose-driven supply chains at its upcoming Gartner Supply Chain Symposium/Xpo, to be held online.