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Understanding Sustainable Value Chain Strategies for Growth

September 29, 2023 by KPMG

Over the past few decades, the clamor for improved corporate sustainability practices has yielded laudable efforts by numerous businesses globally. Many of these organizations have responded to the call by advancing social and environmental responsibility initiatives of varying scale and reach, with equally varying levels of impact. But as the devastating effects of climate change and social inequality manifest ever more clearly, companies are urged to reevaluate the design of their sustainability efforts, and to weave sustainability even more tightly into every aspect of their operations—especially their value chains.

At Enterprise Asia’s International CSR & Sustainability Summit this year, I delivered a keynote speech on sustainability and how it can be integrated more strategically into value chains. It was an honor to be at the forefront of some of the most important global discussions about corporate sustainability today, it gave me the unique opportunity to dialogue with Asian companies that are leading the charge in bringing greater sustainability into their value chains. 

Redefining the value chain via sustainability

Sustainability should be the guiding hand that influences how value chains are created and maintained, both for optimal business growth and maximum social and environmental impact. Rather than tacking sustainability onto the value chain as if it were just an accessory, sustainability principles should instead be the engine that drives value chains, so that every stage in a product’s life cycle accounts for the welfare of the environment and communities at large.

How can companies make this happen? They need to subject their value chains to thoughtful scrutiny and identify the sustainability risks and opportunities that attend each step of the process. By doing so, they can home in on sustainability hotspots: stages in the value chain that have a potentially negative impact on sustainable development, and which adversely affect the environment or perpetuate social inequities.

This requires overhauling the way business organizations approach sustainability. Too often, sustainability initiatives are scattered, one-off affairs that suffer from nearsighted planning. In some cases, companies may pursue ESG efforts for the mere sake of compliance. This has to change. Across industries, there should be a recognition that the occasional CSR initiative and compliance oriented ESG practices will not be enough to create lasting, meaningful impact.

Instead, companies should start looking inward through the lens of sustainability and peer into every component of their value chain to see which of their practices may be contributing to social injustices or further environmental degradation. From there, they can take corrective measures that not only contribute positively to sustainable development but can likewise have a fruitful impact on their growth prospects. 

Making sustainable value chains work

I’m often asked if it is possible to make value chains environmentally and socially sustainable, and I’m happy to confirm that business use cases for sustainable value chains are gaining ground across the world.

Take for example a European chocolatier that has become a leading market player: its entire value chain—and the very heart of its business—is premised on slavery-free labor, where farmers and laborers they partner with are assured of fair and sustainable livelihoods. Another Europe-based tech company and social enterprise has developed modular smartphones that create a much smaller environmental footprint, and which are likewise produced under fair, ethical labor, low carbon and circular conditions. In fact, the carbon accounting on the greenhouse gases emission inventory of scope 1, scope 2 and scope 3 is based on value chain perspective.

But companies should think beyond whether sustainable value chains are possible, and start considering that sustainability is what makes value chains successful. Without the appropriate integration of sustainability into the value chain, a company risks making harmful profit—profit that is made at the expense of the well-being of communities and the survival of the planet. Quick and decisive action towards this must come from the boardroom, where C-Suite executives fully embrace the necessity of sustainability in the growth of their business.

No one can do it alone on sustainability. No one can afford to delay creating a sustainable value chain. With clear and long-term direction from corporate leaders, an organization can transform its entire value chain according to the terms of sustainability, so that resulting profits benefit every stakeholder in the life cycle of a product or service. Within such a sustainable system, everyone wins and no one is left behind. That’s what impactful business success looks like: it creates an abundantly positive impact not just on the organization, but on the greater world as well.

Author Niven Huang (pictured, top of page) is head of ESG for KPMG Asia Pacific. Read more KPMG blogs here.

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