Since our inception as both a supply chain management industry analyst research firm and a Supply Chain Matters global-wide blog presence, we have produced and made available our annual predictions for industry and global supply chains.

The purpose of these predictions is to advise our clients and global-wide supply chain management teams as to what to anticipate in the coming year as well as areas to focus on in strategy and tactical direction, business process improvements and technology investments. These predictions and their implications become the basis of our continued research and consulting agenda in the coming year.  Feedback we have received indicates that this report often serves as a reference for many of our clients and readers.

This year’s predictions feature a new format in what we are designating the year 2021 as a Year of Renewal. Our individual predictions are formatted in the context of our prediction of New Thinking, New Definitions and New Directions for each area.

Prior published bogs detailing our individual 2021 predictions have included:

2021 Prediction One-The Need for Enhanced End-to-End Supply Chain Visibility.

2021 Prediction Two- Discernable Acceleration of Supply Chain Digital Transformation Initiatives but in the Context of Business-Driven Objectives

2021 Prediction Four: Omni-Channel Focused Processes and Customer Fulfillment Capabilities Now Essential to Business Growth

2021 Prediction Six: Fostering Connected Manufacturing and Supply Chain Operational Synchronization

2021 Prediction Eight: More Active Investment, IPO, or M&A Activity in Supply Chain Tech Landscape

2021 Prediction Nine: Significantly Increasing Global-Wide Transportation Costs and Eroded Service levels Will Foster New Thinking in Supply Network Sourcing, Customer Fulfillment Strategies

In this posting we highlight our prediction related to supply chain sustainability efforts during the coming months.

2021 Predictions

2021 Prediction Ten: More Active Focus and Support of Business Sustainability and Corporate Social Responsibilities in the Aftermath of the COVID-19 Pandemic.

 

Prediction Summary

We are predicting that the COVID-19 pandemic’s learnings and realizations in 2020 will lead to a more active focus on business sustainability and corporate social responsibility efforts over the coming year(s), as global and regional economies begin to improve.

There is an increased belief that the pandemic and the consequent economic and social impacts, have undone many human rights or diversity gains that companies have made in recent years. The significant disruptions that occurred among domestic and global supply networks provided added senior management recognition to the importance of supplier relationships as being an extension of business sustainability. Thus, organizations will face heightened attention surrounding sustainability and CSR oversight and initiatives.

The Ecovadis 2020 Business Sustainability Risk and Performance Index that is based on cumulative 2015-2019 performance data drawn from more than 40,000 companies globally indicated that while business sustainability index performance was improving through 2019, scores in sustainable procurement remained in their lowest levels. While North American based companies had led in active reporting of carbon emissions, European based companies were leading in implementing actions in reducing emissions. Greater China reportedly remained as the lowest scoring region.

The Index further revealed that among a sampling of 35,000 supplier ratings, more than a quarter had no health crisis measures in-place. Such variances led to a conclusion that employee health and safety, diversity and discrimination, child labor and human trafficking remain high on business’s sustainability management agenda. Further noted were significant performance differences among specific industries with highly regulated sectors tending to be more advanced while services sectors, including transportation lag. A further interesting finding was that small and medium businesses tend to outperform large enterprises in sustainability and corporate social responsibilities.

In the early days of the global outbreak, when vast populations and subsequent transportation had to be locked down for their own safety and that of healthcare institutions, global citizens began to visualize what a cleaner, more carbon free environment can feel like. By the same token, the pandemic was a brutal reminder of the fragility of our planet and to the notions of what overall risks can equate to in human and environmental dimensions.

Some futurists thought leaders and business commentators equate active and visible corporate sustainability commitments to appealing to customers and consumers who are increasingly concerned about the rising threats of climate change, and who might favor brands that demonstrate active commitment. To some extent, that may or may not be true. There is mixed data pertaining to direct correlation. On the other hand, the extent of this pandemic’s vast impact on customer demand and supply networks, including the various business continuity vulnerabilities, drives home a reality that sustainability is about the future of the business and of respective global and domestic supply networks.

Global food companies such as Nestle, Unilever, Kellogg and others continue to proactively support human rights across supply network value chains, combating forced child labor, protecting farmers and growers’ rights through joint efforts.

New Thinking

The opportunity for new thinking is to view product demand and global supply networks in the dimension of overall business sustainability and corporate responsibility. There is now a building emphasis among companies towards embracing environmental sustainability in the lens of a circular model, a concept to avoid production of any waste while emphasizing the packaging and use of products in advanced forms of recycling or re-use. Such strategies differ from commitments in energy consumption or strictly carbon reduction and emphasize more focus on renewable energy and reductions of reliance on fossil fuels. This is a rather important differentiation for supply chain focused initiatives. Lift trucks, material handling and transport equipment which are so pervasive across multi-industry manufacturing, logistics and transport networks are more far-reaching objectives.

A further area of re-thinking is the notion of sourcing for lowest cost or cost per unit, towards broader business continuity or risk implications. Too often this has been the dark side of supply network sourcing, that lowest cost is the sole determinant.  COVID-19 drove home the need for complete visibility among all suppliers related to their capabilities and performance, as well as cost.

The corporate social responsibility dimensions of factory workers in Myanmar or Bangladesh apparel mills, China based consumer electronics providers believed use of contracted slave labor, or U.S. based slaughterhouse and meat producers lack adequate health safeguards for virus spread, are all current evidence as to what lowest cost can imply. As noted in our prior prediction related to resiliency, sourcing balanced for risk factors needs to increasingly include corporate sustainability and especially social responsibility risk considerations. There is no coincidence to increased headlines that include high profile branded companies such as Apple, Amazon, Nike, Uber and others concerning added investigations and/or allegations of human rights abuses among contracted suppliers or gig workers.

An important emphasis in re-thinking for the coming year is in coming to consensus on the increased use and fair compensation of independent contractors or gig workers. This has been a particularly sore point among trucking, seasonal worker and last mile shared ride and customer fulfillment services networks. Companies such as Uber, Lift, Amazon, DoorDash and many others have come under increased scrutiny for labor practices that avoid the payment of direct wages and benefits. New moves and/or judicial actions in Europe and the U.S. introducing legislation or enforcing actions that would force categorizing such workers as direct employees’ risks upending respective business models that address needs for added flexibility to handle surge periods of service needs.

That will require the industry to come up with new definitions and practices that provide gig workers with some basis of predictable compensation and baseline benefits, but at the same time provide flexibility and choice of working hours on the part of workers themselves.

New Definitions

Definitions involve a far broader emphasis on sustainability and CSR in the setting of overall goals that are more aggressive as opposed to “comfortable” to prevailing senior management. That includes broader and more succinct definition and accountability for overall performance, as well as management bonus areas tied to annual CSR objectives that complement revenue and profitability goals.

In the area of fairer compensation for independent and gig workers, efforts in Europe are being championed by companies toward a framework in Italy where couriers are compensated a set hourly wage making deliveries, added consideration for equipment and insurance needs, while introducing collective bargaining rights for independent contractors. In the United States, President Joe Biden has indicated intent to push for collective bargaining rights for gig transport workers.

It will behoove the broader industry to proactively provide new definitions, modified compensation that can address minimum wage levels, and collective bargaining models for gig workers to address periods of high work demand. Companies that do not revise existing definitions run the risk of new labor legislation and regulation.

New Direction

New Direction is in clearer responsibilities, accountability and commitment for meeting sustainability and CSR objectives as opposed to just the establishing of supplier audit or code of conduct mechanisms to constantly test or monitor for CSR non-compliance. This is an area where active industry-wide consortia and supplier investment and support mechanisms have played an instrumental role.

We believe that a renewed recognition and future new direction will be in added emphasis among corporate boardroom, C-Suite as well as strategic sourcing and procurement leaders that active and measurable sustainability and CSR efforts are now an integral part of overall business continuity. The implication is added leadership and accountability in these areas.

 

With this blog we conclude our selective highlighting of our detailed predictions for the coming months. Throughout the coming weeks and months will feature additional update blogs, podcasts and webinar events that will update developments and added insights coming from each of these areas.

Obtaining a Copy

Our Ferrari Consulting and Research Group Advisory Report– 2021 Predictions for Industry and Global Supply Chains is available for complimentary downloading with our Research Center. Readers can obtain a complete copy by providing some basic registration information.

 

Bob Ferrari

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