On February 3rd, our webinar ‘Sustainability through Supplier Collaboration’ brought together executives from Unilever, BP, and Heineken to explore how companies move from dreaming to delivering when it comes to sustainability goals. With 2025 deadlines looming for ambitious public pledges, sustainability should be top of the business agenda for any enterprise company in 2021. Chaired by Jim Massey, a leading sustainability expert and former VP of Global Sustainability at AstraZeneca, our panel also featured Lazar Armianov of sustainable procurement experts EcoVadis. Alongside our very own CEO Mark Perera, all speakers gave great insights into how leading enterprise companies understand their environmental and social footprints.
Jim kicked us off by noting that within the climate community, the 2020s are being dubbed ‘the decade of our lives’. Worryingly, however, with every 5 weeks that passes we lose 1% of that decade. Aspirations of operating sustainably far in the future are no longer enough. It’s time for decisive action.
Like many others, the companies who joined our webinar have lofty targets to meet over relatively short time frames. This is especially true when it comes to ‘net zero’ emissions pledges – perhaps the most pressing climate concern the planet is facing.
By 2030, Unilever has committed to halving the greenhouse gas emissions of their products across the lifecycle, while Heineken has set an 80% target reduction. BP is facing an even bigger challenge as a petrol company, leaning away from fossil fuels and committing to net zero carbon from their operations by 2050.
A sentiment shared amongst the panellists was that many organisations don’t yet know in full how they’re going to achieve these targets. However, given the urgency of the issue, they’ve launched their efforts regardless, anticipating the discovery of further solutions during the process. As Jim put it, what’s important is:
‘having the willingness to adapt and keep trying to get there. I think that’s the era in which we’re operating. We’ve got to be fearless in our attempts.’
Alongside the need to protect our planet, hitting these targets is key for the survival of businesses. Strong sustainability performance pays dividends in opportunities for growth, increased returns on capital, and in managing threats to the business, with McKinsey finding that the value at stake from sustainability risks can be as high as 70% of EBITDA.
Given that 50% of the S&P 500 will likely be replaced within the decade, companies must look beyond business as usual towards the strategies that will shore up their own survival.
Alexandra Tarmo, Global Director Procurement Partnerships at Unilever, and Arjen van der Woude, Heineken’s Director Strategic Sourcing Supply Chain, were in agreement that consumer relevance will be key to this longevity, with Lazar adding that the ability to attract talent will also be central to business success. As both of these groups come armed with a strong ESG mindset, setting and meeting sustainability targets will be key for business continuity.
This focus on doing right by consumer and employee values corresponds to a wider movement towards stakeholder capitalism, an idea which was raised repeatedly during the event. This movement advocates for moving away from a sole focus on maximising shareholder value towards a company strategy which creates value for all its stakeholders – from customers and employees, to suppliers, communities, and the environment. As Larry Fink put it in his 2021 Letter to CEOs:
‘Each company’s prospects for growth are inextricable from its ability to operate sustainably and serve its full set of stakeholders’.
Along with making themselves accountable to a broader set of stakeholders, the panellists agreed that companies should also be drawing from these stakeholders to meet sustainability goals.
When asked about the biggest procurement priority for this year, all agreed on the need to leverage your wider ecosystem. Mark Smith, VP Digital Talent & Supply at BP, combined this theme with the idea of stakeholder capitalism in his key procurement trend for 2021:
‘partnering for value to the triple bottom line’.
Seeing as 80% of company emissions and up to 90% of their impact on biodiversity and natural resources originates in the supply chain, it’s unsurprising that companies are looking past internal operations when pursuing ambitious sustainability targets. Given also that 50-70% of company innovations originate externally, it makes sense to look beyond the bounds of your company to source new solutions.
Mark Smith gave an example of this kind of partnership. As they work towards net zero for their tech and IT estate, BP are moving away from high-power data infrastructure in favour of forging deep partnerships with cloud providers. The cloud providers also have net zero commitments of their own which they can support using renewable energy sourced from BP. This partnership presents a win-win situation where both companies can hit their targets in tandem.
This emphasis on openness and collaboration from procurement experts signals a change taking place in the role of the function. Jim mentioned that prior to his work at AstraZeneca, he thought of procurement as ‘protecting the company from all those suppliers’. Thanks to the work happening in companies like Unilever, BP, and Heineken, he now understands it differently:
‘Procurement is still protecting the company assets, but also you’re bringing in and finding the innovation to help the organisation continue to grow’.
As it moves away from a single-minded focus on cost-cutting, procurement can facilitate relationships which in turn drive key business strategies like sustainability and growth. Arjen thinks the function is well placed for this new role as a business partner, noting that procurement professionals are known for managing both internal and external stakeholders well. He suggests this talent be turned towards promoting internal collaboration and sourcing external ideas and opportunities, allowing procurement to make a real impact on key business objectives.
Mark Smith echoed these thoughts exactly, neatly summing up the themes our panellists had discussed. He notes that procurement has a great foundation to build on, given that the function has historically been curious and hyper-diligent when it comes to costs. Now, he proposes we broaden our focus:
‘We’ve got to apply that same muscle to the sustainability agenda. How much energy went into creating this? What’s the water usage? How can I get that down? If we bring that level of curiosity and collaborative problem-solving to our supply chains, we’ll have a big impact on the longevity and success of our businesses.’