It's not easy being green...but it could mean a bump in tech spend for enterprise vendors, according to new IBM data

The good news for the planet? Nearly two-thirds of consumer goods companies reckon to be “purposefully aligning” sustainability and operational goals. The good news for the tech sector? That could mean that technology budgets will increase by over a third over the next three years! 

Those are two of the top line conclusions emerging from a new global study from IBM and The Consumer Goods Forum (CGF) of 1,800 consumer goods executives across 23 countries. 

The resulting data, published in a report entitled 'Redesigning brand values: Purpose and profit converge in core operations', suggests that consumer goods firms are making the necessary strategic operational adjustments needed to meet sustainability demands - or at least making the claim that this is what’s happening in practice. 

The underlying premise exposed by the research is that sustainability is no longer a standalone corporate priority, but one that executives are actively integrating into core operations, with 61% of respondents saying their organizations are doing this. It’s not, it seems, entirely altruistic - over three-quarters (77%) believe that sustainability investments will accelerate business growth - but it is resulting in deliverables, such as more sustainable packaging, energy-efficient manufacturing and ethical sourcing policies. 

So, it’s a win-win scenario? The study report argues: 

As they redesign their supply chain and manufacturing operations following the massive pandemic-driven disruptions, sustainability is no longer a standalone priority. Instead, executives are seizing this moment to integrate it into core operations. This shift is putting organizations on the fast track to the radical reinvention needed to achieve the quadruple bottom line: protecting people, planet, profit, and purpose.

Again, all of this is not entirely being driven by altruism: 

Closer to home, consumer products companies are also being held accountable by their investors and an emerging group of purpose-driven consumers—savvy shoppers who are increasingly aware of the environmental and social impact of their purchases. From design to disposal, these activists are pushing the industry to factor in sustainability.

But is it true?

That last sentence encapsulates a sentiment that is to be heard regularly these days, although it remains one that is open to question in terms of what actually happens in the real world. Are investors in the grip of a macro-economic crisis really more focused on ensuring the right sustainability boxes are not just ticked, but put into practice? Or are they more likely to put off saving the planet until they’ve saved the profit margins? 

Cynical view? Maybe. But let’s look at how respondents to the IBM study back up their answers. That 61% who it is claimed are aligning operational and sustainability objectives, for instance. That’s a good sounding number, but when broken down, only 17% of respondents believe they have complete alignment, while 44% are ‘mostly aligned’, with ‘mostly’ left to do some heavy lifting there. Meanwhile 36% say they’re ‘somewhat aligned’, again with ‘somewhat’ not providing a particularly solid metric upon which to judge veracity.

Then there’s the question of motivation. Now, any move to improve sustainability policies and practices is clearly to be welcomed, whatever the driver that’s behind it. But it is interesting to note that actually advancing environmental sustainability is only ranked number five on the priority list of corporate execs polled here, cited by only half of respondents (51%). And while sustainabilty-centered legislation and regulatory regimes are on the rise, at present only a quarter of respondents (26%) cite complying with these as a driver. 

In practice, the top three priorities are decidedly commercial in nature - raising product quality (75%), improving productivity (71%) and increasing growth (63%). To benefit from these priorities demands change, notes the report: 

Pursuing these opportunities requires that sustainability become part of a company’s fiber, woven throughout the organization. 

There is low-hanging fruit here. Some 84% of respondents argue that their organizations have, to a moderate or large extent, embedded sustainability goals into their manufacturing processes, while 80% say the same about supply chain management, logistics and distribution.

More than 60% of respondents say they believe that sustainability initiatives will change the model in supply chain, with nearly half (48%) stating that their organization is currently redesigning their supply networks to avoid future disruptions and mitigate risks - oh, and to become more sustainable. The report notes:

To strengthen resilience and build a more sustainable supply chain, organizations are diversifying more broadly across suppliers, transportation, and logistics providers. But managing this expanding, more complex network requires greater visibility and collaboration to have the traceability and transparency required for tracking sustainability targets and minimizing disruptions.

And here there may be some bumpy roads to travel as the study data finds that engaging ecosystem partners remains a challenge, coming bottom of the league table of enterprise operations integrated with sustainability initiatives. That said, more than 50% of respondents either have established, or are establishing, environmental impact evaluation programs with partners and suppliers, while 54% say they are evaluating environmental impact with their ecosystems, with a further 43% saying they expect to do so at some point over the next three years. 

But...

But - and it’s a big but - while that all sounds positive in intent, in practice things aren’t going to be easy, as the report warns: 

Tracking material flows and carbon intensity across the industry is easier said than done. While almost half of leaders say they are creating joint sustainability metrics and dashboards with their ecosystem partners, a deeper issue complicates these efforts: knowing exactly what and how to measure. Lack of alignment among multiple, evolving sustainability standards and measurement frameworks causes confusion and even distrust within the industry. 

It’s that old tech industry cliche coming round again - ‘I love a standard; there are so many to choose from!’. This leads to a problem/opportunity for organizations, as the study report observes: 

Companies have flexibility to selectively report on ESG [Environmental, Social and Governance] measures, some choosing the ones that make them look good (known as greenwashing) while others are more genuine in their reporting. 

Even those organizations that are genuine in intent struggle to keep track of progress with their stated sustainability agendas, with 58% of respondents saying they just can’t do it and a hefty 68% going further and saying it’s not possible to report on targets in real-time. The more seasoned readers of such industry-sponsored studies will already be bracing for the inevitable sales pitch at this point, and yes, there is some IBM plugging running through the report, but that doesn’t detract from the validity of the underlying problem that’s being highlighted. 

Without getting into IBM-specific tech, there are some clear priorities identified by respondents when it comes to spending a presumed 34% increase in their tech budgets over the next three years, led by automation (71%), then analytics (69%) Internet of Things (62%) and, of course, Artificial Intelligence (55%). These are likely to be deployed in various combinations, with analytics tech as the common thread, suggests the study data: 

As they revamp their supply chain operations, 67% of respondents cite the use of predictive and prescriptive analytics and AI-powered demand sensing (69%) to improve inventory management and eliminate excess stock. They are also applying AI-enabled workflows (70%) and are beginning to adopt the emerging technology of digital twins (26%) to drive efficiencies.

My take

This is a worthy report, albeit not one whose findings are necessarily going to shock many. As noted above, the impact of the macro-economic crisis on the gap between public intent and public practice when it comes to sustainability initiatives is still unclear. All the right noises are being made, but how much of that ‘greenwashing’ is going on remains to be seen. 

But the report does end with a to-do list, something which is always to be welcomed. The top line recommendations on this occasion are: 

• Supply chain and operations leaders should team with C-suite peers to build a new strategy that operationalizes sustainability.
• Sustainability leaders should work across the organization to integrate sustainability strategies across the enterprise and ecosystem partners.
• Technology executives should collaborate with manufacturing, supply chain, and sustainability leaders to create smarter operations across the value chain.

The report breaks out specific action points under those rather generic aspirations. It’s worth checking these out and seeing how they might apply to your organization - assuming that is, that you’re not just talking the talk here…

Addendum

As this article was about to go live, a second sustainability study, this time from Google Cloud and polling 1,476 “top level executives” across 16 countries, finds that ESG efforts have fallen from being the stated number one organizational priority in 2022 to number three in 2023. Google’s poll respondents cited the macro-economic environment as well as “pressure from external parties to cut corners in their sustainability initiatives”. Meanwhile a damning 59% of executives polled admitted to ‘greenwashing’

Ouch!