By Robyn Buma, vp-Global Procurement, Avery Dennison Materials Group
Editor’s Note: This paper is based on a presentation at the AWA Global Release Liner Industry Conference & Exhibition, held in Amsterdam, The Netherlands, in February 2020. More info: www.awa-bv.com
Not long ago, corporations were forgiven for a bit of mystery in their supply chains.
With supply lines linking vendors large and small across countries with varying regulations and oversight, companies often had to take it on faith that not only were their suppliers meeting environmental and labor standards, but their suppliers’ suppliers were, too. Verifying those assumptions was daunting and sometimes impossible. So, for many years, when companies were asked where the materials for their products came from and how they were made, it was largely acceptable for them to admit that, beyond a certain point, they didn’t know.
Not any longer. The recent focus on plastic pollution – in addition to dwindling natural resources, climate change, concern for human rights and combined pressure from consumers, non-governmental organizations (NGOs), regulators and investors – has made transparent supply chains the new standard.
As vice president of procurement for a Fortune 500 company that serves the label and packaging industry, I’m navigating this changing landscape like everyone else. But, one thing is clear: The era of the opaque supply chain is over. And, for companies in our industry that haven’t already done so – suppliers and converters alike – the time to pivot to transparency is now.
The push and the pull
“Transparency” in a corporate context originally referred to candor about financial or product performance, or to truth in advertising. Now the term has broadened to include a company’s forthrightness about its impact on the environment, its adherence to labor standards and human rights, and more. Today, companies are expected to trace every last link in their supply chains, gain visibility into the practices of suppliers and proactively share that information – the good, the bad and the ugly – with stakeholders.
The pressure to be more transparent comes via both push and pull. NGOs have been pushing for years by publicly calling out companies for pollution or for unfair or unsafe labor practices. Just last November, the environmental NGO Greenpeace exposed Shell’s plans to abandon parts of four aging oil-drilling platforms in the North Sea, which would have risked leaking some 11,000 tonnes of oil into the ocean, while setting a toxic precedent for the decommissioning of oil rigs [1]. And, that’s just one recent example. Whether it’s deforestation, illegal labor practices or the production of unsustainable products and packaging, NGOs are keen to publicize corporate behavior they find objectionable, and the spotlights they cast are only getting hotter and brighter.
Regulators also are pushing for greater transparency, as with last March’s European Union vote to ban a wide range of single-use plastic products by 2021. Investors, too, are applying pressure. Seeing the risks inherent in unsustainable, poorly understood supply chains, more analysts are applying ESG measurements – metrics gauging a company’s environmental performance, social impact and governance – thereby increasing the need for companies to deliver solid data about their performance in those areas, along with data from their suppliers. Corporate leaders have gotten on board: Earnings calls in Q3 2019 contained twice as many mentions of supply-chain sustainability than the year before [2]. In a recent McKinsey global survey on the value of ESG programs, 83% of C-suite leaders and investment professionals said they expect ESG programs to contribute more shareholder value in five years than they do today [3].
Which isn’t to say transparency isn’t already delivering value. Earlier this year, Harvard Business Review published a report on using transparency to enhance reputation and manage business risk. In it, 90% of executives surveyed said increased transparency leads to better-informed decision-making, and more than half said ethical and commercial considerations were equally important when evaluating suppliers. Maybe most tellingly, the report showed that companies that already have invested in improving visibility are reaping benefits such as greater employee engagement, improved reputation and increased revenues [4]. That’s a “push” any company can get behind.
The pull toward transparency, meanwhile, is coming from consumers. Increasingly concerned about social equity and alarmed by climate change, plastic pollution and science showing precipitous drops in biodiversity and natural resources, consumers are, more than ever, voting for transparency with their wallets. New York University’s Stern Center for Sustainable Business found that 50% of CPG growth between 2013 and 2018 came from sustainability-marketed products [5]. A recent Boston Consumer Group study of almost 3,000 consumers in Brazil, China, France, the UK and the US found that 75% viewed sustainability as “very” or “extremely” important [6]. Shoppers increasingly want to know exactly where the things they buy come from and how they were made, and they want them to be made sustainably and responsibly.
Brands respond
None of these influences arrived overnight. They have been building for years, and companies have responded to them incrementally, in fits and starts, as they sought to balance sustainability and transparency with earnings expectations. What’s different now is that we have reached the tipping point where transparency is no longer a nice-to-have – it’s expected, and the consequences for a lack of transparency (from reputational hits to lower sales to government penalties) can have real bite.
The most influential makers of fast-moving consumer goods (FMCGs) are responding accordingly, with public commitments to not only be more transparent but to also be more responsible in how they do business. For packaging, these include specific commitments to responsible sourcing, lightweighting, increased amounts of recycled content and greater recyclability. Along the way, companies are demanding equal commitment from their suppliers, and the data that prove it.
For converters and suppliers: an opportunity
External demands for transparency aren’t going away, and consumer goods companies are finding that transparency is good business. So, where does that leave those of us in labeling and packaging?
At first, transparency can seem like a lot more work. Converters now are expected to offer sustainability-oriented products and services and to assess their operations and those of their suppliers to ensure they meet ever-more stringent standards of corporate responsibility. To help ensure that their customers’ packaging complies with regulations, they also must become experts in the blooming pace of policies governing packaging around the world.
Suppliers of raw materials, meanwhile, have been asked to step up and provide their own environmental and labor data, and to offer products that help companies meet their ESG commitments.
But, there’s opportunity here, too. The future of our industry belongs to those who can innovate to create sustainable products and solutions at scale, and who can gracefully take the steps to meet and report the required metrics for environmental and social responsibility.
And, amid all the conversation on transparency, we shouldn’t overlook the most important fact: Taking responsibility for our supply chains is the right thing to do. In the 21st Century, doing business with integrity precludes the “see no evil” approach deemed acceptable in years past. All of us have a personal stake in reversing climate change and plastic pollution, slowing resource consumption and ensuring a decent quality of life for people everywhere.
Our industry is at the point where talk about transparency and sustainability is meaningless if it’s not matched with substantive action. If we’re not eliminating risk from our supply chains, if we’re not looking at how to eliminate waste and contribute to a circular economy, if we’re not inventing sustainable solutions and if we are not implementing systems that measure our performance and those of our suppliers, then we are not pivoting to meet the moment. And, our customers – not to mention consumers, regulators and NGOs – will hold us accountable.
Conclusion
Achieving transparency and sustainability on the scale required will take equally large-scale collaboration among all of us, materials providers and converters alike. We’ve worked together to meet big challenges before. I’m confident we can do it again. If we’re successful, a whole new world of business opportunities awaits. And, just maybe, a better world, period.
References
1. 6. Greenpeace; Right to protect under legal threat from Shell,
Nov. 25, 2019
2. CB Insights; How supply chains are addressing sustainability,
Nov. 7, 2019
3. McKinsey & Company; The ESG premium: New perspectives on value and performance, Feb. 12, 2020
4. Harvard Business Review; Using transparency to enhance reputation and manage business risk, Feb. 4, 2020
5. NYU Stern Center for Sustainable Business and IRI Launch New Sustainable Market Share Index™; March 11, 2019
Robyn Buma is vp-Global Procurement at Avery Dennison (Mentor, OH). Buma joined Avery Dennison in 2000 and has served in a variety of roles across procurement and product management/product development functions – in both regional and global capacities. She can be reached at 440-289-3330, email: [email protected], www.averydennison.com.