Sustainability Series: Part 3
Value-Chain Analysis — For a sustainable post-covid economy
In part-1 of the series, we introduced the problem and acknowledged the challenges of climate change along with the need to walk towards sustainable development. In part-2 of the series, we focused on how organizations can increase their sustainability engagement. We also discussed a six-step process for introducing sustainability benchmarking while maintaining long-term value creation.
In part-3 of the series, let us look at how to evaluate sustainable performance across the value-chain of an organization.
A value chain refers to the activities that take place in a company to deliver a valuable product to the market. The overall goal of this value-chain analysis is to identify areas and activities that can benefit from an improvement in sustainable performance. The first step towards this is identifying the business drivers and whether they are value-drivers or cost-drivers. Once you identify them as value-drivers, you can focus on including more sustainable values and identifying areas of optimization based on sustainable objectives. Each of these business drivers and its corresponding sustainable objectives can be mapped against the relevant SDG goals. When you complete these aspects of the analysis you are ready to put together a plan, which allows you to maintain your competitive advantage and creates a long-term value.
The above process could potentially allow for collaborating in a cross-functional manner to work on targeted policies. Listing the primary and secondary activities in your value-chain allows identifying opportunities, focusing on the overall impact, and understanding boundaries. Furthermore, focusing on regenerative designs within the organization consequently creates circular economies and closes sustainability gaps.
Analyzing the value-chain for sustainability impact in a cradle-to-cradle fashion ends up unleashing new opportunities. For example, reimagining design with product end-of-life in mind; regenerative use of materials, products, and packaging may create new opportunities for circularities. Using advanced AI or predictive models to accurately predict demand, having less inventory in the supply chain, or introducing just-in-time to reduce waste — all indirectly contribute to the goal of carbon neutrality. We need to have cradle-to-cradle thinking to approach this re-affirming that sustainable value-chains are here to stay.
A new study from the non-partisan energy policy firm Energy Innovation places a precise dollar figure on the cost of procrastination. The group analyzed the cost to the US economy of waiting 10 more years before passing policies to reach net-zero emissions by 2050.¹
Those estimates are roughly in line with other studies in the scientific literature that show costs go up faster, the later climate initiatives begin. In the US, the Biden administration’s new climate plan will zero out greenhouse gas emissions from the power sector by 2035, on the way to net-zero emissions nationwide no later than 2050. At least 1,100 companies have voluntarily adopted emission targets, according to the Science Based Targets initiative, about a third of which plan to meet the 1.5°C target set by the Paris Agreement.²
Working across your value-chain enables you to assess the sustainability improvements that provide cost-efficiencies you will need for the long-term. Entering newer markets, or including more circular economies to the organization’s value-chain allows to reduce the cost of procrastination and avoid the penalties of future clean-up. In a post-crisis economy, one that is more sustainable, the customer relationship does not end at the point of sale, instead empowering them with information to make good decisions would earn a lifetime brand loyalist. The last part of the series will cover the journey of the informed customer.
…to be continued in Part 4…
[1],[2]: Coren,J Michael (February 3, 2021) Waiting 10 years to start eliminating emissions will cost the US more than $3.5 trillion”https://qz.com/1967754/waiting-to-eliminate-emissions-will-cost-the-us-trillions/
The opinions expressed in this publication/study are those of the authors. The content of this article has not been approved by the United Nations and does not reflect the views of the United Nations or its officials or Member States.
