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How Supply Chain Partners Can Help Drive The Triple Bottom Line

Benzinga · 05/15/2020 19:57


Large corporations are more committed than ever to ambitious sustainability initiatives that they believe can simultaneously help the brand, company profitability, the environment, and the communities in which they operate.

Multiple converging forces are putting a new emphasis on corporate accountability and sustainability. These include increasingly sophisticated consumers and more engaged employees, new investment themes like ESG (environmental, social, and governance), legitimate concern about the business impact of climate change, and even political fallout from the corporate bailouts of 2009 and 2020. 

Compared to even just ten years ago, many more consumers want to buy ethical meat, carbon neutral or biodegradable products, and do business with companies who pay living wages. Meanwhile, corporations are being rewarded for investing in long-term growth, partnering with local communities affected by their operations, controlling waste, and using energy more efficiently.

There are a couple of ways to think about these new realities: one is captured by the term ‘stakeholder capitalism' in contrast to ‘shareholder capitalism.' In stakeholder capitalism, corporations are operated for the benefit of all stakeholders, including customers, employees, suppliers, communities, and shareholders. In ‘shareholder capitalism', corporations are presumed to operate for the benefit of their owners only. Those terms form a binary opposition that rarely corresponds to reality, but executives have found them useful when articulating what businesses are for.

"Each of our stakeholders is essential," said an open letter from the Business Roundtable signed by hundreds of prominent CEOs in August 2019. "We commit to deliver value to all of them, for the future success of our companies, our communities and our country."

The CEOs who signed the letter represented major shippers like Amazon(NASDAQ: AMZN), Bayer, Boeing(NYSE: BA), BP, Best Buy, Bristol-Myers-Squibb, Caterpillar, ConocoPhillips, Corning, Cummins, Coca-Cola, CVS, Eastman Chemical, Ford, Honeywell, Huntington Ingalls, General Motors(NYSE: GM), Home Depot, International Paper, Land O'Lakes, John Deere, Kimberly-Clark, Lockheed Martin(NYSE: LMT), Johnson & Johnson, Johnson Controls, Macy's, Marriott, National Gypsum, Stanley Black & Decker, Walmart, Whirlpool, and 3M, as well as a host of technology and financial services companies.

The ‘triple bottom line' is another conceptual framework, specifically for accounting. The triple bottom line expands the traditional narrow accounting of profit and loss to three broad categories: economic, social, and environmental. The basic assumption is that the social and environmental performance of a company can and should be measured as carefully as its financial performance, and that corporate officers should be assigned responsibility for meeting targets in those categories.

While it can be a relatively simple task for companies to make it a priority to employ people in an underserved community, or offer more generous health benefits, or increase recycling among its office staff, some kinds of operations are more difficult to measure and improve. 

Supply chains have tended to lag behind other corporate divisions in sustainability because their operations require collaboration with many partners and visibility into those moving parts can be limited. Still, electronics manufacturers have come under pressure because they sourced minerals from mines employing children; beverage companies have been criticized for bottling in communities where potable water is scarce; paper companies embraced sustainable timber harvesting after decades of clear-cutting. 

Today, there's a chance to improve supply chain sustainability because increased consumer interest in upstream sourcing and manufacturing is coinciding with new technologies that actually give companies tools to design sustainable and socially responsible supply chains.

In fact, companies are keen to work with logistics partners who can help them execute on sustainability and triple bottom line targets, especially because they see supply chain as a largely untapped opportunity.

Convoy, the Seattle-based digital freight network, has leveraged its technology—which includes real-time visibility into truckload shipment locations and automated batching of shipments into routes for carriers—to help drive its customers' triple bottom line performance. 

By using data to understand freight markets on a real-time basis, Convoy helps companies time their shipments to minimize unnecessary costs while maintaining high service levels. Convoy's Automated Reloads program links shipments together for a carrier to reduce empty miles and carbon emissions while boosting asset utilization and lowering a shipper's cost per mile to move its freight. Convoy has found that carriers using Automated Reloads have reduced carbon emissions from empty miles by 45%. Convoy's progress in reducing carbon emission was even recognized by Fast Company as a World Changing Idea.

In addition to carbon emissions, Convoy helps its food and beverage customers reduce landfill waste by automatically redirecting OSD (overage, shortage, and damaged) shipments to Feeding America food banks, where they are inspected and distributed across a national network of pantries serving local communities.

Finally, many companies want to partner with diverse suppliers—companies that are 51% or more owned and operated by veterans, women, ethnic minorities, etc. Because it has uncommon insight into its own carrier base, Convoy provides reporting to its customers to let them know exactly how much freight and transportation spend went to diverse certified suppliers.

In our view, just as supply chain operations have gradually come to be seen as competitive differentiators instead of simply cost centers, supply chains will increasingly be viewed as one of the most important areas for environmental sustainability and social responsibility. Convoy has been able to deliver meaningful results for its customers, but sustainability in the supply chain is still in early innings: there is so much innovation ahead of us.

This article is published jointly with our partners at Convoy. To view more Future of Freight content, click here.