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Gartner Eyes Value of Purpose-Driven Supply Chains

August 18, 2021

As enterprises move from operating profit-centric to purpose-driven, chief supply chain officers (CSCOs) must focus on five actions to create a purpose-driven supply chain, according to Gartner.

“Purpose-driven enterprises deliver benefits for stakeholders while also generating long-term profits,” said Sarah Watt, senior director analyst with the Gartner Supply Chain practice. “With this approach, supply chain leaders must consider their positive and negative impact across stakeholder groups and balance the trade-offs.”

A global Gartner survey of 573 practitioners in supply chains and other functions conducted in January and February 2021 found that 85% of supply chain leaders believed that the primary priority of enterprise purpose is to connect the customer through product offerings while providing a positive societal and environmental impact – this is followed by an investor return at 61%.

The five actions that CSCOs should focus on to create a purpose-driven supply chain organization include:

Show Executive Commitment

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

Get Engaged in Portfolio Management

All decisions made about products, their purpose and subsequent market positioning impacts the supply chain organization – which must deliver on given promises. For example, 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,” Watt said.

Align Partner Ecosystem to Purpose

An organization cannot be fully purpose-driven unless its critical partners align to the same purpose. Supply chains can amplify the enterprise purpose by embracing collaborative partnerships across the ecosystem. This can lead to innovation, the creation of new products and shared value. However, survey results show that less than half of supply chain leaders perceive ecosystem partnerships as a key factor for enabling purpose.

Foster Employee Engagement

Employees will not buy into the purpose of the supply chain if they don’t feel included and heard. CSCOs must communicate the supply chain’s purpose to employees, empowering them through decision-making processes and the opportunity to ask questions. In addition, purpose must also be communicated externally to attract future talent.

“Building a purpose-driven culture means providing employees with autonomy, decision-making principles, and opportunities to ask questions and contribute. This can be through innovation days, town hall meetings, open door policies and one-on-ones. Internships and interviews must also be designed in a way that communicates the supply chain purpose to external and future candidates,” Watt said.

Be Accountable

Purpose without accountability risks undermining the approach, with stakeholders 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.

“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, with purpose relegated to being an employee engagement tool. If they choose the former, they must implement the metrics to prove that they can walk the talk,” Watt concluded.

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