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Sustainability ‘Isn’t an Either/Or Scenario’—And it Can Boost the Bottom Line

Building long-term sustainable value. That’s the main goal of the “purpose economy,” a way of doing businesses that transcends quarterly earnings and growth.

But while it may sound costly, helping the planet can also benefit the bottom line, according to a new report by EcoVadis, a New York-based firm that provides procurement teams with sustainability risk-mapping tools.

“Visionary CEOs and executives recognize that sustainability isn’t an either/or scenario,” it wrote in its report. “Committing to purpose—and aligning with the United Nations Sustainable Development Goals (SDGs)—is good for business and society, with a trickle-down impact across strategic stakeholders.”

When a company embeds sustainability in its strategy and practice, it creates a competitive advantage in the form of improved customer loyalty, employee and supplier relations, innovation, operational efficiency, stakeholder engagement and media coverage, EcoVadis said. All of this helps drive greater profitability, higher corporate valuation and lower cost of capital while delivering both short- and long-term value for stakeholders and civil society.

“Visionary” enterprises, it added, will turn to procurement in the supply chain as a lever for innovation, differentiation and growth—not to mention risk management.

“The globalization of today’s supply chains can often span less mature and unregulated markets,” EcoVadis warned. “If left unmanaged, this can expose organizations to slavery, forced labor, dangerous working conditions, information security lapses, counterfeiting, quality issues, environmental waste, corruption and more.”

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As such, the chief procurement officer (CPO) plays a vital role in supply-chain engagement.

“The CPO holds the cards,” it wrote. “By implementing more responsible procurement practices, CPOs can improve supply chain performance, limit exposure and move the dial on the ‘purpose’ of the SDGs, which include key objectives like ending poverty and hunger, protecting clean water and energy supply, providing quality education, addressing climate issues and more.”

And sustainable procurement creates a proven return on investment, according to a 2019 study by EcoVadis and the New York University Center for Business Sustainability. Of the 400 companies analyzed, 88 percent reported increased risk mitigation as a benefit of this strategy, 53 percent improved productivity and 35 percent higher cost savings.

Momentum is this area has been building for years, EcoVadis noted.

In January 2018, BlackRock CEO Larry Fink spoke about the “criticality” of social purpose. The following August, more than 180 CEOs from leading companies such as Amazon, Bayer and Coca-Cola set broader standards for corporate leadership that prioritize sustainability, stewardship and people alongside profits.

Just last month, the World Economic Forum’s Davos Manifesto encouraged businesses to engage stakeholders in promoting respect for human rights throughout their supply chains. And today, more than 10,000 firms across 161 countries participate in the UN Global Compact to adopt sustainable and socially responsible policies.

Of the 729 companies polled by PWC in 2018, 72 percent mentioned the SDGs in their annual corporate or sustainability report and 50 percent have identified priority SDGs to tackle issues such as climate change, poverty, clean water and gender equality.