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Market Trends
Pamela Styles
|
March 19, 2020
7 min read
Supply chain management is a key factor for many companies — growing in sophistication and scrutiny. I recently used AlphaSense to look at supply chain in context with ESG/Sustainability, in order to identify how companies and investors may be connecting the dots between these operations and investor communications positioning.
What immediately struck me minutes into my AlphaSense queries, is what I’ll call the interconnected 3 C’s of Sustainability and Supply Chain: Commerce, Compliance and Capital Investors.
The results of this exploration lead me to conclude that there is enough evidence to suggest that practically every company executive leadership team should be actively looking at sustainability and supply chain in context with broader company competitive positioning.
I used AlphaSense to guide my exploration, and my results are broken down below by competitive positioning and approach, to provide a snapshot of current trends and support of this conclusion.
Before sharing my AlphaSense query process, let’s look at a few examples of developments in the ESG / Sustainability field important to companies across the 3 C’s competitive positioning considerations.
For the purposes of this blog, I will divide commerce into two pieces: B2B (including government) and B2C, and focus on the former.
The trend in corporate purchasing expectations of suppliers to demonstrate ESG / Sustainability practices continues to expand.
Early leaders well known for ESG / Sustainability expectations and compliance by their suppliers include:
A few examples to show that the trend spans across sectors include: Munich Re ($ETR: MUV2), Mars (Private), ConocoPhillips ($COP), Lockheed Martin ($LMT), Johnson & Johnson ($JNJ), Cisco ($CSCO) and Westpac ($WBK).
On the government supplier side, federal mandates for government departments and agencies to include ESG / Sustainability evaluation of suppliers have worked their way into various pieces of legislation and by Executive Orders (EO), such as EO #13514, “Federal Leadership in Environmental, Energy and Economic Performance,” in October 2009, which was superseded in March 2015 by EO #13693, “New Sustainability Goals Across Federal Supply Chain.”
Capital Investors
There is growing evidence of attention to ESG/Sustainability in mainstream investing and discussions are finding their way into company earnings calls and related disclosure.
Since then, back-to-back announcements by two key suppliers in the investment world, Morningstar and MSCI, are bound to accelerate this trend and lead to increased investor expectations to include supply chain in these discussions.
A “supply chain” of sorts has been developing across the investment management and asset owner world for ESG/Sustainability investment considerations, from institutional through retail investor levels, which I will save for another blog.
I predict there will be a growing trend in the number of company executives who will be managing Supply Chain in context with ESG / Sustainability, as they realize it is to the company’s competitive advantage across the board (including with Investors) — time will tell!
I took a three-step query approach: AlphaSense – Google – AlphaSense
First, I made a simple query in AlphaSense — “Supply Chain and ESG” and “Supply Chain and Sustainability” for one year, garnering 27 results and over 1,000 results, respectively. Among the ESG search results was a particularly interesting find:
The annual list of Top 25 Supply Chain companies, published by Gartner, recently added a corporate social responsibility (CSR) scoring component to the Supply Chain Top 25 program (Gartner has been publishing a Top 25 list for 12 years). Gartner made a point of connecting supply chain with Investor Relations (IR) and how strategy leaders can use the insights to consider how to address CSR in the end-to-end value network and contribute to CSR goals.
Second, I conducted Google searches on “Supply Chain + ESG,” “Supply Chain + Sustainability,” “Supply Chain + ESG / Sustainability.” There were a lot of results, so I will highlight just one result from each search (in order above):
Third, I returned to AlphaSense to quickly check whether the Top 25 Supply Chain companies, as rated by Gartner from 2012 – 2016, include supply chain in context with ESG / Sustainability in communications aimed at the investment community. I excluded proxy statements from the outcome using the search filter, as references in this communications forum are often instigated by activist shareholder items.
This Alpha Sense search found that 40 percent of companies, many of which were on the Top 25 list multiple years, recently discussed supply chain in context with ESG / Sustainability. After that, I quickly confirmed whether these same companies have a company website section for Sustainability and if they produce Sustainability reports – the answer was yes for every one of the companies, except Amazon.com [$AMZN].“Unlike most big companies, Amazon has never published a sustainability report. Recent hires suggest that may be about to change — but will the retailer play ball?” Marc Gunther, The Guardian, Feb 2016.
Very likely, if we run this same check a year from now, the Alpha Sense search results will be much higher.
Pamela Styles is principal of Next Level Investor Relations LLC, an Investor Relations consultancy with dual IR and ESG/Sustainability specialties.
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