Kristin Komives, ISEAL’s Impacts Director, discusses the challenges and benefits for businesses in meeting their sustainability commitments.
It is encouraging to see how many organisations have committed to meeting sustainable sourcing targets by 2020. M&S has extended its Plan A to Plan A 2020 with 100 new, revised and existing commitments. Unilever has committed to source 100 per cent of its agricultural raw materials by 2020 and IKEA aims to source 100 per cent of wood, paper and cardboard from more sustainable sources by 2020. Many others have made commitments to ensure their sourcing activities protect natural resources and enhance producers’ livelihoods.
However, with shifting trading, geopolitical and environmental landscapes, it will be challenging to meet these commitments. In the face of difficult commercial and operational decisions, will these commitments fall by the wayside? Businesses are more likely to follow through on commitments if they find viable approaches and tools to back them up and when the business benefit is clear.
If you look closely at the actual implementation of sustainable sourcing policies, you see that most companies rely on sustainability standards. For example, IKEA defines ‘more sustainable sources’ of wood, paper and cardboard as FSC certified or recycled wood. Eighty five per cent of supply chain commitments aimed at reducing deforestation include reference to certification. Thirty eight per cent of the world’s coffee, 12 per cent of the world’s cotton and 14 per cent of seafood is certified by sustainability standards.
When asked directly, representatives from businesses said they perceive the value of standards as frameworks to guide and operationalise sustainability and tools to achieve business sustainability objectives. They also value the role of standards in risk management, allowing access to new and niche markets, and expanding consumer demand. (Research conducted by ISEAL Alliance and Globescan, 2015)
A new report by AidEnvironment offers a comprehensive review and synthesis of existing literature and evidence of the benefits businesses derive from using credible sustainability standards. The report identifies that most documented early benefits of using sustainability standards are marketing related benefits, followed by benefits on internal management, procurement, stakeholder engagement and sector-wide cooperation and alignment.
As the use of sustainability standards becomes more established, more business benefits materialise which improve the financial return on investment. Sources refer most frequently to the benefits of improved reputation (cited in 60% of the studies) which translates into improved credibility, increased brand value, a license to operate, and higher trust by customers and consumers in a company. Other benefits identified in the AidEnvironment review are improved profitability (53%), cost reduction (30%), growth in production (30%), improved supply security (23%), enabling policy context (15%) and a level playing field (10%).
The study examines contextual and other factors that affect the benefits businesses derive from standards. For example, credibility of the standard is a key success factor to various business benefits, especially reputation. Credible standards are defined by ISEAL as clear, accurate, relevant, transparent and robust.
Not surprisingly, the report shows that some important benefits are difficult to quantify and that some studies had inconclusive outcomes. The use of standards or other tools and approaches to meet corporate sustainability commitments has costs as well as benefits; more thorough analyses of the costs and benefits of different approaches in various contexts would be valuable.
If the companies are truly focused on delivering sustainability outcomes, surely the overriding motive for meeting their commitments should be to ensure a positive economic, social and environmental impact. Interestingly this can also be seen as a business benefit – especially for companies that have made public sustainability commitments. Sustainability impact emerges as a business benefit in 38 per cent of sources in the AidEnvironment study. Companies value the sustainability impacts of using standards as important in themselves, but also choose to use standards because they generate other business benefits, such as contributing to improved short and long-term supply security and enhanced reputation.
At the beginning of 2017, companies assessing their progress towards 2020 targets should be spurred on by the prospect of reputational benefits, business benefits and achieving positive sustainability impacts. If used as part of an integrated sustainable sourcing strategy, standards have the potential not only to bring business benefits but also to contribute towards supply chain and sector transformation.