Are the Keys to Supply Chain Transformation Closer Than They Appear?

For sustainability initiatives in food retail, do the largest hurdles lie in the supply chain, or within the walls of corporate headquarters? As sustainability becomes a bigger priority for food producers and retailers, more and more companies are forming sustainability teams to push toward a new food economy through supply chain transformation. After a summer working on case studies with Environmental Defense Fund’s corporate partners, I discovered that the keys to success for sustainability initiatives were not necessarily costly technologies, but rather rethinking internal strategy and organizational design.

A Fascination with Supply Chains
As a former researcher and policy analyst for an environmental nonprofit focused on sustainable food systems, I had worked across supply chains with food retailers, farmers, chemical manufacturers and consumers. I loved the complexity of searching up and down the supply chain for opportunities to improve environmental performance and drive value back to farming communities. In previous roles, I had advocated for increased transparency and heard farmers’ testimonials about struggling financially and feeling helpless in their desire to move toward a more regenerative food system.

In my first year of the Erb dual-degree program, my interest in supply chains intensified. Adding to the intricacies of supply chain operations from an agricultural and environmental perspective was the business perspective. How can companies increase efficiency, maintain high yields and ensure land viability for generations to come while meeting their bottom line? More and more consumers are pushing for transparency and sustainability from food retailers, and simultaneously, the food industry and agricultural-chemical industry are rapidly consolidating to stay competitive. Deep within supply chains, there seemed to be answers that industry experts were racing to find. Entering my summer internship with the Environmental Defense Fund’s Supply Chain Team, I imagined researching fertilizer optimization technology and carbon reduction for Environmental Defense Fund’s corporate retail partners. But rather, my task was seemingly simple: explore why supply chain sustainability initiatives at corporate partners are not yielding expected results.

Sustainability teams within companies are beginning to be a norm, but when asked why sustainability initiatives are not showing expected results, these teams often say that the issues are upstream, where technology is underdeveloped, the cost of implementation is too high, the transparency issues are limiting, and quantifying impact is impossible. Further up supply chains, practitioners claimed the biggest issues were not in their control, and they were unsure of what retailers truly wanted, after hearing conflicting goals. The biggest issues seemed to be not what tools to use in agricultural transformation or measurement, but rather something far more fundamental: communication.

Harmonizing Communication Channels
A case study comparison of two supply chain projects, launched in collaboration with Environmental Defense Fund over the same time period with the same food retailer, was illuminating. In both cases, teams’ projects were launched internally, with bottom-up support from the sustainability team and top-down support from the C-suite. Hurdles for both included negative public perception, pushback from suppliers, faulty quantification methods and transparency issues. However, one project thrived, while the other showed diminishing results. Why?

After extensive stakeholder research with people involved in both projects, it appeared that communication throughout the company and proper incentive structures were the leading causes of success or failure. Most sustainability teams are still separate from the core competencies of the food retail business. Even with public C-suite support, if initiatives are not reflected in the overarching firm strategy and given space within accounting for the bottom line, support from the top can only travel so far.

Most people working on major retailers’ supply chains are looking for answers deep in the supplier base, but few are looking back at how their internal strategy reflects their commitment to the results they seek. Many companies have kept a hierarchical structure of decision-making that moves information vertically through the firm. However, my research showed that most sustainability initiatives are moving horizontally through the firm, often pushing up against the decision-making hierarchy.

So why do some projects thrive, while others fail? Ardent team alignment, champions at all levels of decision-making, and proper incentive structures that are built with company culture in mind were the keys to success. Projects overcame hurdles in the supply chain when goals across the firm were aligned, teams communicated regularly  and, most important, buyers felt supported in taking on difficult, more risky projects. Suppliers expressed a willingness to adapt and change methods in the field, but only if the change felt rewarded by the food retail company and universally supported. When suppliers received mixed messages, they typically chose not to change.

In a hierarchy, tenure is rewarded with freedom. Unfortunately, most innovation does not come from tenured staff who have identified tried-and-true methods of success. Companies truly dedicated to seeing sustainability flourish need to allow space for innovation and ideation from new talent. Similarly, incentive structures should reflect the firm’s commitment to sustainability—through performance reviews, bonuses and promotion opportunities.

Organizational Design for Sustainability
Through the project, we identified measures that companies can take to increase the likelihood of their sustainability projects’ success. However, these measures are only temporary adhesives to a larger problem that most corporate retailers face. True transformation will require a level of internal alignment that cannot be accomplished through segregated team structures. Companies that are committed to working on issues upstream and reaching their goals of increased efficiency, high yields and ensured land viability need to reorganize and integrate sustainability into every part of the company. No longer can small, disconnected teams carry the weight of sustainability for multi-billion-dollar businesses. Rather than diving deep into the tangle of supply chain issues and getting lost in the complexity, companies need to build the necessary internal structures—through integrating sustainability.