- Date: 05 March 2013
- Author: Nick Conger
It’s hard to feel sorry for the world’s biggest companies. But consider this. They have to figure out how to meet skyrocketing growth in consumer demand that is unmatched in human history. Factor in a recovering yet fragile global economy, weather variability and an increasingly scarce natural resource base and they have a real dilemma. As they look ahead to 2050, they see two billion more potential customers earning more, living better and consuming twice as much on average as we do today. With just 24% of Earth’s surface left on which to farm, supply/demand ratios look grim.
Whether we like it or not, our lives are bound to these challenges. Global supply chains are complex and impact us more than we know. The price we pay for food and long-term access to our most basic products hangs in the balance.
This nervousness is tempered by optimism and real solutions, all of which were on full display at last week’s Sustainable Sourcing Workshop held at World Wildlife Fund headquarters in Washington. Learn to trace products from origin to the store shelf, measuring the impacts along the way, cried the procurement officers. Double down on existing farmland and rehabilitate degraded farms, noted the agriculture experts. Make consumers part of the solution, stressed the CSR staff.
And then there’s the financial elephant in the room. Representatives from the world’s biggest banks used the word “risk” in just about every sentence. Many of these financial institutions are lending based on newly established sustainability criteria, demonstrating both risk and opportunity. As one brand pointed out, banks don’t take risks, so you better demonstrate a smart risk mitigation strategy when making the case for investment. How do you measure and incorporate environmental externalities into pricing models? How are you addressing weather variability? Chief Financial Officers need to clearly demonstrate the link between sustainability and a company’s bottom line.
Actions speak louder than words. The forum produced ideas, so now we need to get to work. The impact of last year’s drought in the U.S. on the price of beef, pork, poultry and dairy products still hasn’t been felt, but it will be a powerful motivator. Reputational risk (think recent cases of horse meat and “pink slime”) should be considered. More laws are popping up to crack down on illegal products in supply chains like the amended Lacey Act for forest products.
Mitigating these risks will require, among other strategies, a closer look into supply chains. Tracing and measuring environmental impact requires trust, collaboration and verification. Consumer brands need to rethink their relationships with suppliers and shift from being simply transactional, spot market purchasers to longer-term partners. They can work with NGOs to gain visibility into their operations in the field. They can use long-term contracts to reduce transaction costs and guarantee access to finite resources.
In the final analysis, these challenges are shared by all of us. We all need food and basic consumer products. And we all need a healthy planet. The two-day session was as much about sharing lessons learned as it was about creating partnerships and alliances. Nobody can solve these challenges alone, but we will all share the burden of inaction.