Sustainability and efficiency are not mutually exclusive: Lessons from leading supply chains

The Misconception

Many companies see sustainability as a burden, something to be done only to the extent required by law. If those companies operate in industries that have very little sustainability regulations, they would probably put in even lesser sustainability efforts. According to Mckinsey, more than 90% of natural capital impact of the consumer sector lies in supply chains.

Some businesses see sustainability as a cost burden, and to their credit it can be challenging to change the way a business operates whilst remaining profitable. This especially holds true for large publicly traded firms where corporations are under constant pressure to meet the financial expectations of shareholders. Some business view sustainability and efficiency as mutually exclusive

Why the Old-trade off Does Not Hold Anymore

This old assumption is increasingly being proven wrong. For instance, Unilever’s sustainable brands recorded a 69% faster growth than the rest of its portfolio. There are increasing similarities between lean and green practices, Dües, Tan, and Lim (2013) in their research identified that lean practices not only serve as a catalyst for going green, but are also synergistic with it. This is because lean and green both have overlapping focuses across attributes like waste and waste reduction techniques, lead time and so on. Martinez and Jirsák (2024) in a survey among manufacturing firms discovered that the lean index was higher at firms reporting the inclusion of green aspects.

Operating sustainably means running a business in a way that minimizes environmental harm while optimizing resource use. This involves minimizing waste. True sustainability does not always require a complete overhaul of operations – except in very few cases. Oftentimes, it means to be conscious of the environmental implications of your operations and to actively seek out ways to minimize them.

Industry Examples of Sustainability

Unilever

Unilever is a global company that markets and produces hygiene, nutrition and personal care consumer goods. Their zero waste to landfill initiative began in 2008. By January 2015, Unilever had announced that they had achieved zero waste to landfill across all their sites. Before this initiative 140,000 tons of non-hazardous waste went to landfills. They achieved this through collaboration and innovation. For example, in China, instead of using plastic to wrap pallets, they used reusable fabrics. They did this by implementing the four “R” approach which entails reducing, reusing, recovering or recycling – viewing waste as a resource with alternative uses. The zero-waste program was developed in house with little cost.

Achieving this incredible milestone came with some benefits. Through the zero waste to landfill initiative Unilever was able to cut down costs by about $227 million.

Pepsico

Agricultural activities such as tiling soil and raising livestock contribute about 22% of global greenhouse gas emissions annually. PepsiCo set out to reach net zero emissions by 2040. Their strategy for meeting this target was based on sourcing crops in ways that restore the earth and strengthen farming communities, building a circular and inclusive value chain and inspiring people to make choices that are both good for them and the earth. One of their goals is to spread the adoption of sustainable agriculture.

This and many other sustainability efforts like their reliance on renewable sources for over 90% of its global electricity have saved PepsiCo over $300 million since 2010. PepsiCo has proven that sustainable practices can create economic value.

Finding opportunities in sustainable efforts

Operating in a sustainable manner presents businesses with a lot of opportunities.

Benefits in cost savings: As mentioned earlier, sustainable operations usually come with cost benefits, because it requires companies to seek better and less wasteful ways to conduct their business, usually making it operate more efficiently.

New product and service offerings: There is a growing demand for sustainable products. A 2024 PwC report revealed that 46% of consumers are going in for more sustainable products in a bid to lessen their impact on the environment. On average, consumers are willing to pay 9.7% more for sustainable offerings. Sustainability gives companies the opportunity to come up with novel products and services that meet consumers’ sustainability needs.

Improved public image: Companies that embrace sustainability in their operations gain trust from the public; including consumers and investors. Especially for individuals who feel a strong sense of purpose in this regard. Companies that position themselves as operating in a sustainable manner win their loyalty. Not only does it help in winning the loyalty of consumers it helps in winning the loyalty of employees as well.

Conclusion

Sustainability and efficiency are not opposing forces; they are complementary drivers of business growth. Companies seeking to become more sustainable in their operations should first of all adopt the philosophy of sustainability and then subsequently turn that philosophy into actionable strategies to meet their sustainability goals.

Sustainability and efficiency are not mutually exclusive!