Youâ€™re a B2B operation, so â€˜greenâ€™ consumer choices donâ€™t affect you right? Wrong. They affect everyone right across the value chain, hereâ€™s why and how.
As their understanding of the world around us grows, consumers are increasingly demanding ethically-sourced products that are made with the smallest environmental impact possible.
For instance, 42% of adults in the UK claimed to have purchased items for ethical reasons in 2012, in comparison to only 27% in 2000 (Co-operative Bank, 2012).
If you donâ€™t sell directly to the public (B2C) then itâ€™s easy to see why you might not think this trend is important, but it is because it shapes the sustainability expectations of everyone across the entire value chain.
Canny retailers, eager to outcompete their high street rivals, have cottoned-on to the fact that sustainability sells. Look at M&S, for instance, and it’s Plan A initiative – whilst it appears to be delivering real ethical and environmental improvements, there’s no doubt that it’s also attracted new customers.
Brands, too, have also reacted to the trend for ethical shopping. Levi Strauss & Co, for example, has established itself as a sustainability leader in the fashion apparel market.
But here’s the thing: they can’t and don’t make all the improvements on their own, and rely on their suppliers to make significant changes to their products and processes.
Supply chain sustainability pressures
That’s how consumer buying behaviour impacts your B2B business.
You can think of it like this:
Consumer awareness changes buying behaviours and drives demand for change.
That demand for change often drives political intervention and stricter legislation.
At the same time, major retailers and brands adapt in order to compete in a changing trading environment and ensure compliance with emerging legislation, all of which drives changes in procurement and supply chain practices.
In turn, those changes in procurement and supply chain management practices drive improvements in the environmental, social and governance (ESG) performance of suppliers right along the entire value chain in order to meet consumer demands.
Whilst the pressure to change is to some extent linear, because it flows down through the hierarchy of suppliers, it’s also a circular process because consumer behaviour continues to change and that means sustainability expectations are continually being recalibrated.
Take paint as an example. For a long time, most of the paint products available from DIY retailers contained relatively high levels of solvents. In response to concerns from consumers, consumer groups and environmental NGOs, retailers sought to limit the VOC content of the paints they stocked, leading to paint manufacturers having to find ways to alter their products in order to offer the same qualities but with a lower solvent content. Now, we see a similar move to paints that are entirely water-based or that use non-hydrocarbon solvents, and so again the pressure is on for paint manufacturers to adjust their product formulations. This has knock-on effects for R&D expenditure and then also the supply chain of paint manufacturers themselves.
The pressure is often brought to bear in the form of pre-qualification standards when applying to join an Approved Supplier List or participate in tenders for services, and also in product specifications.
What can you do to improve your B2B sustainability performance?
No matter where you sit in it, the chances are that you and those higher up in the value chain are all being expected to improve and verify your commitment to sustainability. Here’s how:
1.Create a sustainability policy. The first thing you should do – if you haven’t already – is create a sustainability and CSR policy. This is your statement of intent, and should set out broadly the actions you plan to take in order to ensure you do business responsibly. A good policy document is reviewed and updated at least annually, or when circumstances change, and it’s perfectly acceptable to set out with pretty minimal commitments, like how you will…
2. Measure your performance and establish targets. Before you get stuck into thinking about improvements, you need to know what improvements are necessary and possible. Our unique maturity model assessment is a great tool for this – it considers up to 30 separate areas, and codifies your performance in each as either Beginning, Improving, Succeeding or Leading, resulting in a report packed with intelligence and actionable insights that can act as the basis for target setting. Use it to update your Sustainability Policy now you have a better idea of your direction.
3. Let your sustainability performance evolve. Our maturity model is intended to be used iteratively, that is to say that in each area where improvements are possible, you should endeavour to move from where you start out to where you want to get to in a sequence: it’s not always possible, or even desirable, to jump from Beginning to Leading, for instance. This is the same no matter what tool you use to identify and manage your performance; try to do too much, too quickly, and you’ll hit problems.
4. Align your sustainability, operational and financial goals. To really embed sustainability and CSR, you need to link it to your other performance metrics – it’s no good viewing it as a standalone function, it has to be part and parcel of everything you do. Build sustainability factors into job descriptions, workflows and procedures, and make it part of your procurement processes.
5. Report your progress. As your performance improves, report it – internally, at every level of your organisation – but also to your wider stakeholders. Especially, tell your existing and prospective customers about the actions you’re taking, and invite your suppliers to follow your lead. Put the details in your management and statutory accounts, a dedicated web page or blog, and press releases to relevant media.
â€œThis is all very interesting, but what’s in it for me?â€ you ask. Simple:
More customers, trust, profits and growth.
Less consumption, risk, adversity and cost.
There is now a growing body of evidence that tells us how businesses that do good also do well, out-competing their rivals and achieving more growth.
Take Project ROI for instance. Itâ€™s research found the potential Return On Investment (ROI) stemming from doing business responsibly includes:
Being able to raise revenues by as much as 20%; being able to charge a price premium of up to 20%; being able to avoid revenue losses of up to 7% of a firm’s market share; being able to reduce staff turnover by up to 50%; being able to increase staff productivity by up to 13%; and being able to increase employee engagement by up to 7.5%.
The fact is that you’re going to find your customerâ€™s customers increasingly demanding higher sustainability and CSR standards throughout the entire value chain as a response to consumer demand and political pressure. It makes good business sense to rise to the challenge and use your improved credentials to help you win more work.
Want a hand crafting your sustainability and CSR policy? Want to understand your current performance and where improvements are possible? Email us today, [email protected]