Benefits of a sustainable supply chain

Corporate values

Reputation and brand are among a company's principal assets. One of the parameters that can have a negative influence on corporate reputation and share price is whether the company's supply chain is socially responsible and accountable. The book value of a company is significantly enhanced by investment in its people, environmental impacts and local communities.

Shareholder returns: Sustainable development pays

Dow Jones has valued more than 300 companies in relation to their sustainable development in the Dow Jones Sustainability Group Index (DJSI). The index provides evidence that sustainable development pays, with companies in the index outperforming the Dow Jones Group Index. The 2003 annual review of the components of the DJSI found that since September 2002, the DJSI World (in US$) has outperformed the mainstream market, rising 23.1%, compared with 21.2% for the MSCI and 22.7% for the DJ World Index.

Risk management

In the mid-1990s, Shell's plans to dispose of the Brent Spar oil rig, and its alleged negative impacts on local communities in Nigeria, brought social and environmental responsibility to the world stage. Shell's journey towards sustainable development commenced with these wake-up calls and started at the top of the organisation. Since then, Shell reviews its sustainable strategy as part of its planning process and has moved from its initial 'Trust me' programme to its current 'Show me' approach.

The growing demand for sustainable products particularly by European retailers and the response by manufacturers are due in part to recognition that one bad story can do lasting damage to a brand. Damage control is more costly than proactively managing an issue.

Appealing to markets: Financial benefits

Sanford Sustainable Seafood

Sanford's business is based on the growth and harvesting of wild fish and shellfish within the sustainable fish quota management system and is entirely dependent upon long-term fish supply. This focus is underpinned by the inclusion of Sustainable in the branding and name.

The Quota Management System (QMS) lies behind New Zealand's reputation as a world leader in sustainable fisheries management. Individual New Zealand companies such as Sanford own the quota and it is therefore treated with the same respect as any other valuable asset. The QMS ensures that New Zealand waters are not over-fished and that New Zealand seafood will be available for generations to come.

More than 90% of New Zealand's seafood - with an annual value of approximately US$669 million - is exported. The most valuable export species is New Zealand Hoki. In 2001, Hoki exports to the European Union were worth US$150 million and those to the USA were worth an additional US$90 million.

In 2001, New Zealand Hoki became the world's first large whitefish stock to achieve Marine Stewardship Council (MSC) certification. This eco-label is independent confirmation that the fishery is being managed according to the principles and criteria of the MSC.

Appealing to customers: Increased sales and brand security

Companies embracing sustainable development can benefit from being a first mover in a market. Eighty-two percent of UK consumers prefer to purchase goods from socially and environmentally responsible companies, according to a 2003 study, and 23% would do so even if this option is more expensive.

Increased efficiency reduces costs

Driving out inefficiency from processes is good business practice and reduces costs. In the service sector, introducing videoconferencing (phone conferencing) reduces energy consumption and emissions associated with travel; increases productivity and reduces costs.

See NZBCSD Business Guide to Energy Efficiency

Legislation now and future

Regulatory trends in certain industries and countries support the business case for action. These include electronics product take-back and recycling legislation in the European Union; United States biosecurity requirements and frameworks which support the Kyoto process. There are also a number of emerging intergovernmental supply chain certification schemes such as the ILO Declaration of Principles and Labour Standards.