Mar 07 2024

The Impact of Supply Chain Decarbonisation on Consumer Preferences and Loyalty: How Sustainable Practices Can Drive Brand Value and Market Share



The Impact of Supply Chain Decarbonisation on Consumer Preferences and Loyalty: How Sustainable Practices Can Drive Brand Value and Market Share

In today's rapidly evolving business landscape, sustainability is no longer a nice-to-have, but a strategic imperative for companies that want to stay relevant and competitive. From investors and regulators to employees and consumers, stakeholders are increasingly demanding that companies take action to reduce their environmental footprint and contribute to the transition to a low-carbon economy.

And while many companies have made significant strides in reducing emissions and waste in their own operations, the reality is that the majority of a company's environmental impact often lies outside its direct control, in the complex web of suppliers, logistics providers, and other partners that make up its supply chain.

In fact, according to CDP, supply chain emissions are on average 5.5 times higher than a company's direct operational emissions. This means that any company that is serious about sustainability must look beyond its own four walls and engage its entire value chain in the effort to reduce greenhouse gas emissions and mitigate climate change.

But decarbonizing the supply chain is not just about doing the right thing for the planet - it's also about doing the right thing for the bottom line. And one of the most compelling reasons for companies to invest in sustainable supply chain practices is the impact it can have on consumer preferences and loyalty.

Consider this: according to a 2020 study by IBM and the National Retail Federation, nearly 60% of consumers surveyed were willing to change their shopping habits to reduce environmental impact, and nearly 80% of respondents indicated that sustainability is important to them. And a 2019 study by Hotwire found that 47% of internet users worldwide had switched to a different product or service because a company violated their personal values, with environmental impact being one of the top reasons cited.

These findings suggest that consumers are increasingly basing their purchasing decisions not just on price and quality, but also on a company's sustainability credentials. And for many consumers, a company's environmental impact is not just about its own operations, but also about the sustainability of its entire supply chain.

So how can companies effectively leverage supply chain decarbonization to drive consumer preference and loyalty? Here are a few key strategies:

Make sustainability a core part of your brand story and value proposition
To truly win the hearts and minds of environmentally conscious consumers, companies need to make sustainability a core part of their brand identity and value proposition. This means going beyond just a few eco-friendly products or initiatives, and embedding sustainability into the very DNA of the company.
One company that has done this particularly well is Patagonia, the outdoor clothing and gear retailer. Patagonia has long been a leader in sustainable business practices, from using recycled materials in its products to donating 1% of its sales to environmental causes. But more than just a set of initiatives, sustainability is a fundamental part of Patagonia's brand story and values, which are centered around the idea of "using business to inspire and implement solutions to the environmental crisis."

By making sustainability a core part of its brand identity, Patagonia has attracted a loyal following of environmentally conscious consumers who are willing to pay a premium for products that align with their values. And by consistently communicating its sustainability commitments and progress to consumers, Patagonia has built trust and credibility that has helped it weather challenges and controversies over the years.

Be transparent and accountable about your supply chain sustainability performance
Another key to winning consumer trust and loyalty through supply chain decarbonization is transparency and accountability. In today's age of social media and instant access to information, consumers are increasingly demanding that companies be open and honest about their environmental and social impacts, and are quick to call out greenwashing or hypocrisy.
To build credibility with consumers, companies need to be transparent about their supply chain sustainability performance, including their carbon footprint, supplier practices, and progress towards decarbonization goals. This means going beyond just high-level commitments and buzzwords, and providing detailed, quantifiable, and verifiable information about their sustainability efforts.

One tool that can help companies do this is sustainability reporting frameworks and standards, such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD). These frameworks provide guidance and metrics for companies to measure and disclose their environmental, social, and governance (ESG) performance in a consistent and comparable way.

By reporting on their supply chain sustainability performance using these frameworks, companies can demonstrate their commitment to transparency and accountability, and provide consumers with the information they need to make informed purchasing decisions. And by setting ambitious, science-based targets for supply chain decarbonization and regularly reporting on progress, companies can build trust and credibility with consumers over time.

Collaborate with suppliers and stakeholders to drive systemic change
Of course, decarbonizing the supply chain is not something that companies can do alone - it requires collaboration and partnership with suppliers, industry peers, policymakers, and other stakeholders to drive systemic change and create a level playing field for sustainable practices.
To effectively engage consumers on supply chain sustainability, companies need to be able to tell a story of collaboration and collective action, rather than just individual initiatives. This means working with suppliers to help them measure and reduce their own carbon footprints, and collaborating with industry groups and policymakers to advocate for supportive policies and regulations.

One example of this kind of collaborative effort is the Sustainable Apparel Coalition (SAC), a multi-stakeholder initiative that brings together brands, retailers, manufacturers, and other partners to develop common standards and tools for measuring and improving sustainability performance in the apparel and footwear industry. Through the SAC's Higg Index suite of tools, companies can assess the environmental and social impacts of their products and supply chains, and work together to drive improvements and innovations.

By participating in collaborative initiatives like the SAC, companies can not only accelerate their own supply chain decarbonization efforts, but also help to create a more sustainable and resilient industry as a whole. And by communicating these collaborative efforts to consumers, companies can demonstrate their commitment to driving systemic change and building a more sustainable future.

Innovate and differentiate through sustainable products and business models
Finally, one of the most powerful ways that companies can use supply chain decarbonization to drive consumer preference and loyalty is through sustainable product and business model innovation. By developing products and services that are inherently more sustainable and low-carbon, and by experimenting with new business models that prioritize sustainability and circularity, companies can differentiate themselves in the market and tap into growing consumer demand for environmentally friendly options.
For example, the footwear company Allbirds has built its entire brand around sustainable materials and manufacturing practices, using natural and recycled materials like merino wool, eucalyptus tree fiber, and sugarcane-based EVA foam to create comfortable, high-performance shoes with a low carbon footprint. By investing in sustainable supply chain innovations and communicating them to consumers through its marketing and branding, Allbirds has attracted a loyal following of environmentally conscious consumers and positioned itself as a leader in the sustainable fashion space.

Another example is the outdoor equipment company REI, which has experimented with a range of sustainable business models, from resale and rental programs to product take-back and recycling initiatives. By offering consumers more sustainable and circular options for enjoying the outdoors, REI has not only reduced its environmental impact but also created new revenue streams and customer touchpoints that deepen brand loyalty and advocacy.

The road ahead
As the business case for supply chain decarbonization becomes increasingly clear, more and more companies are recognizing the potential to drive consumer preference and loyalty through sustainable practices. But the road to a truly sustainable supply chain is long and complex, requiring sustained effort, collaboration, and innovation over time.

To effectively engage consumers on supply chain sustainability, companies need to approach it not just as a risk management exercise or a compliance requirement, but as a core part of their brand identity and value proposition. They need to be transparent and accountable about their sustainability performance, and work collaboratively with suppliers and stakeholders to drive systemic change. And they need to constantly innovate and differentiate through sustainable products and business models that meet the evolving needs and preferences of environmentally conscious consumers.

Of course, the journey to supply chain decarbonization is not without its challenges and trade-offs. Sustainable practices can often come with higher costs and complexity, at least in the short term, and there is always the risk of greenwashing or backlash if companies are perceived to be insincere or ineffective in their sustainability efforts.

But for companies that are willing to make the investment and do the hard work of truly embedding sustainability into their supply chains and their brands, the rewards can be significant. Not only can they reduce their environmental footprint and contribute to the urgent goal of mitigating climate change, but they can also build deeper, more loyal relationships with consumers who are increasingly looking to align their purchases with their values.

As a sustainability and marketing professional, I have seen firsthand the power of supply chain decarbonization to drive brand value and market share. From global giants like Unilever and Patagonia to disruptive startups like Allbirds and Imperfect Foods, the companies that are leading the way on sustainable supply chains are also some of the most successful and admired brands in the world.

But the opportunity is not limited to just a few niche players or industry leaders. As the low-carbon economy takes shape and consumer preferences continue to shift, every company in every sector will need to grapple with the challenge and opportunity of supply chain decarbonization. Those that do so effectively, and that authentically engage consumers in the process, will be the ones that thrive in the decades to come.

The road ahead may be uncertain, but the destination is clear - a more sustainable, resilient, and value-creating supply chain that delivers for people, planet, and profit. By working together and putting consumers at the center of the sustainability journey, we can accelerate progress and build a better future for all.

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