A few weeks ago I shared a piece explaining what we are working on at Responsibly. This week the latest IPCC report came out and the dire forecasts only underlines the importance of our mission of making every purchase in the world responsible.
We have to fix global supply chains, if we are to act on the findings of the report. Carbon Disclosure Project estimates that as much as 40% of the global GHG emissions are driven – or influenced – by companies through their purchases and the products they sell. This great opportunity for impact locked within our supply chains is nothing new to all the procurement professionals out there and it is hard not to get bogged down and lose hope reading the report.
But looking at the business landscape there is light shining on the horizon. We are seeing things turn around. This piece is an encouragement to all those, who have been pushing the sustainability agenda tirelessly since the first IPCC reports came out.
Dear procurement professionals,
It is easy to be discouraged by the current state of affairs, but there is hope. And not just in my overly optimistic entrepreneurial mind, I have data to back it up. The business world, investors and politicians are all moving on the agenda. There is hope for more sustainable supply chains. Here are my words of encouragement
A hockey stick of hope in the business world
Take the hockey stick curve above as an example, it shows how mentions of ESG in earnings calls have exploded within the last couple of years. The graph is based on an analysis the investment company PIMCO recently published based on transcripts of earnings calls from 10,000 global companies. They analyzed the earnings calls for mentions of ESG and saw a staggering development. In the period from 2005 up until 2018 ESG mentions hovered around 0% to 1%. The following year it rose to around 5%, but since then ESG mentions exploded to just below 20%.
ESG is sound investment practice
The investment world too is following suit. The Forum for Sustainable and Responsible Investment has been tracking sustainable investments made by professional US money managers since 1995. In 2020 the amount invested in ESG assets totaled $17.1 trillion. That is a 42% increase within just two years. Similarly, another survey shows that 72% of institutional investors consider ESG to be an integral part of sound investment practices.
German politicians are leading the way
It is not just in the business world that focus on sustainable practices is growing. Even governments and politicians have realised both the risk and potential in responsible sourcing. Take the federal government in Germany as an example. They are working on passing a supply chain act that’ll ensure supply chain sustainability. It will do so by requiring companies to abide by certain minimum standards of due diligence in order to stamp out destructive environmental practices and human rights breaches.
The final glimmer of hope is that consumers are willing to pay a premium for responsibly sourced products. According to a recent BCG study of the consumer packaged goods, metals and chemicals sectors, consumers of products from those industries are willing to pay 5% more for products that are sourced responsibly. This means that early movers are actually able to capture a cost advantage over those that take a wait-and-see approach.
These are the shivers of hope coming from politics, investing and business. While the IPCC report shows us that the burning platform has never been hotter, the willingness to act similarly has never been bigger. So dear procurement professionals, let me end with this
Keep pushing, there is hope, we need you now more than ever.
Thomas Buch Andersson, CEO and co-founder, Responsibly
Mentions of ‘ESG’ and sustainability are being made on thousands of corporate earnings calls, marketwatch.com
Germany taking lead in support of EU sustainable procurement, foodnavigator.com
Your Supply Chain Needs a Sustainability Strategy, Boston Consulting Group