Sustainable Supply Chain to Reduce Risks

3.2.1 What Leading Companies Are Saying About Sustainability Value Creation Through Risk Avoidance?

Nestlé Example

Better management of risks that arise from sustainability issues begins with detecting key risks of operational disruptions from climate change, resource scarcity, or community issues (such as boycotts or delays in getting permits for manufacturing) (Carbon Disclosure Project 2013). Faced with potential supply constraints, Nestlé, for example, launched a plan in 2009 that coordinates activities to promote sustainable cocoa: producing 12 million stronger and more productive plants over the next ten years, teaching local farmers efficient and sustainable methods, purchasing beans from farms that use sustainable practices, and working with organizations to help tackle issues like child labor and poor access to health care and education. (Bonini and Schwartz 2014)

Michelin Example

Around 40% of a truck tire by weight is natural rubber and tire manufacturing uses 70% of the world's output of natural rubber, whose exceptional physical properties make it irreplaceable for truck, aircraft, agricultural and earthmover tires. (Michelin 2010)

Demand is constantly rising and therefore developing and maintaining rubber tree farms is a major priority for Michelin, which uses nearly 10 % of the world's natural rubber output.

Michelin recognized the risk represented by the raw materials, energy and nonrenewable resources required for its products and production, as these resources, like oil or natural rubber, are becoming scarcer and more expensive. “In 2010, raw material costs represented 27 % of Michelin's net sales. Optimizing their use is essential if these resources are to be conserved over the long term and if tires are to remain affordably priced.” (Michelin 2010).

Michelin is therefore working on engineering lighter tires that require less raw material and improve energy efficiency by optimizing the rolling resistance. Besides this strategy, the tire maker is also investigating alternative solutions to limit the pressure on primary resource supply through regrooving and retreading. Michelin is applying the life cycle assessment approach to ensure that such alternatives will not create value for Michelin while shifting environmental burdens elsewhere.

Sustainability to Increase Brand Perception

3.3.1 What Leading Companies Are Saying About Sustainability Value Creation Through Brand Perception and Positioning

Natura Example

Natura Cosmeticos has long been considered a leader in sustainability, known for materials and marketing innovations that aim to reflect its tagline of “well being/being well.” (Natura 2013). The Brazilian cosmetics maker has been recognized by organizations such as Corporate Knights, the U.N. Environmental Program, SustainAbility and the Boston Consulting Group. (Greenbiz 2014)

A corporate brand is not about product, but about how stakeholders view the organization and particularly its culture and value. Life cycle management helps managing expectation of stakeholders along the value chain. Which stakeholders need to be targeted in priority is a strategic decision of the company. For example, a positive brand perception helps increase customer loyalty or employee retention. Many prospective employees evaluate environmental policies as a measure of corporate value, but also sustainability programs within companies can have a significant impact on retention (The Guardian 2013).