New Metrics and Trade Off Curves, Gartner Says

So called “stakeholder capitalism is certainly becoming more the norm in the US, Europe and even beyond – the concept that businesses have a lot more responsibility to various interests – workers, communities, the environment and more – far beyond just making an honest profit.

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As part of that movement is the idea of being “purpose-driven” – whether that be as a corporation, a supply chain, even a brand. A number of years back now, food giant Unilever launched the concept of “brands with a purpose” – that there was a broader purpose for its Miracle Whip product than making a sandwich taste better.

Earlier this year, the analysts at Gartner wrote in a research note that “Being purpose-driven is not just about doing no harm to stakeholders, but also positively amplifying benefits. For many organizations, the most significant end-to-end environmental impacts come from supply chains.”

It said leaders in this area were taking actions to focus on environmental operational efficiency through waste reduction, responsible sourcing, water efficiency and operational greenhouse gas emissions reduction.

That same Gartner research note commented that there is a tie to supply chain digitization here, writing that “To measure environmental efficiency, supply chain leaders require data from their digital ecosystem, including customer experience, carbon footprint, and the health and wealth of local supply communities.”

In a just released research note Gartner says many companies are moving “from operating profit-centric to purpose-driven.”

Noteworthy is that this paradigm creates a whole new set of trade-offs that supply chain managers must navigate – and much different than classic trade-offs such as between inventory levels and customer service or transportation costs.

“Supply chain leaders must consider their positive and negative impact across stakeholder groups and balance the trade-offs,” Gartner writes – but doesn’t point out there is really no playbook for how you do this, as there is for traditional supply chain tradeoffs.

In the recent research note, Gartner offers suggestions for how executives can work to create “purpose-drive” supply chains. Those include:

Show Executive Commitment

Rhetoric on purpose without concrete actions risks loss of authenticity and employee trust Gartner says, adding that “That’s why CSCOs should make purpose a vital part of the overall supply chain strategy, as well as decision-making processes and metrics."

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Get Engaged in Portfolio Management

All decisions made about products, their purpose and subsequent market positioning impacts the supply chain organization – which must then deliver on given promises. Gartner cites as an example that if a product is marketed as being made partly from recycled material, the supply chain organization must make sure that this is the case and can provide traceability and evidence to prove it.

“CSCOs and their teams should play a more active role in product development and portfolio management. For example, the supply chain organization is uniquely equipped to review the product pipeline for unintended consequences or advise on raw materials selection,” the note said.

Align Partner Ecosystem to Purpose

Gartner says that an organization cannot be fully purpose-driven unless its critical partners align to the same purpose. Collaborating with suppliers can lead to innovation, the creation of new products and shared value, Gartner says – though noting not many companies are doing this effectively.

Foster Employee Engagement

Employees will not buy into the purpose of the supply chain if they don’t feel included and heard, Gartner notes, adding that CSCOs must communicate the supply chain’s purpose to employees, empowering them through decision-making processes and the opportunity to ask questions.

“Building a purpose-driven culture means providing employees with autonomy, decision-making principles, and opportunities to ask questions and contribute,” Gartner writes. It says this can be through innovation days, town hall meetings, open door policies and one-on-ones.

Be Accountable

Purpose without accountability risks undermining the approach, Gartner warns, with stakeholders then viewing it as a marketing or cultural ploy rather than a mechanism for change. “This means that supply chain metrics focused on profitability and shareholder value, such as revenue and cash flow, have to be counterbalanced by metrics that display the interests of other shareholder groups, such as supplier engagement and diversity, equity and inclusion (DEI) metrics," Gartner says.

In conclusion, Garter says that “Enterprises aren’t charities. Still, CSCOs and executive leaders need to decide if they want their purpose to enable long-term profits or if the enterprise is purely profit-centric.

What is your reaction to these thoughts on the purpose-driven supply chain? Let us know your thoughts at the Feedback section below.