SVM is a comprehensive, capital based approach to sustainability mapping costs/ benefits of a company’s activities accruing to the corporate, the individual and society throughout the value chain. SVM develops full-scope strategic insights and, through linkage to financial performance, easily integrates into strategic planning, risk management and investment analysis.
Sustainability is a broad, ill defined and complex concept. At its most simple it talks to the long-term survival of a business and therefore should be at the heart of an organization’s strategy. However the traditional strategic lens is currently too narrow and ‘sustainability’, whilst on the CEO agenda, remains more of a side conversation. Furthermore the sustainability conversation is often subjective, the metrics and initiatives too often difficult to coordinate and in general it is challenging to understand the relative importance vis a vis the ‘core’ business. Despite broad recognition of the macro drivers and fundamentals that underpin sustainability there is still general confusion within business as to whether sustainability represents an issue or opportunity. This has largely been driven by the lack of a common language, a tenuous link to corporate performance and the consequent difficulty of integrating into core business activities and decision-making processes.
SVM measures the performance impact (by reference to the P&L, balance sheet and enterprise value) of sustainable and un-sustainable practices. The performance impact includes both external costs / benefits (such as the health costs associated with air borne pollutants or the economic benefits of supply chain diversity initiatives) and indirect internal costs (such as the fill costs of employee disengagement or commodity inflation from over reliance on certain technologies).
By incorporating an external lens and overlaying future business scenarios SVM enhances medium to long term planning. By framing the analysis and subsequent debate in financial terms and broadening the strategic lens SVM mitigates risk in the short, medium and long term and provides a stimulus for innovation that can force a rethink of an organization’s supply chain or product use which would otherwise be ignored.
SVM aligns the goals of business value creation and sustainability and leads to a sustainable business footing through the promotion of innovation – in strategy, in process and in technology.
Supporting delivery of the above framework is SVM’s platform and methodology based on proprietary multi-regional economic models and leading-edge sustainability KPI valuation and impact tools. This enables meaningful, accurate and high-resolution analysis of the direct, indirect and external costs at all levels in the supply chain as well as valuing the more intangible cost-benefits within sustainability.
SVM can be used to develop enhanced set of P&Ls, balance sheets, cash-flows and insights charts such as the heat map or risk matrix set out below:
From this platform, SVM can be used to develop inclusive and balanced goals and metrics, enhance risk assessments and mitigation planning, evaluations of current & potential initiative and be further developed into performance management tools.
SVM can add value to businesses with well develop and less developed sustainability programmes. Organization’s that are far from sustainable and that require significant transformation can use SVM to optimize performance during that transition.
A relatively simple way to illustrate the strength of this approach is to map out the full scope of your organization’s impact and likely cost / benefit by listing your organization’s major inputs and outputs. You can do this by developing or using an existing process map or taking your P&L and balance sheet and developing a driver tree for each line. Then determine the buckets of costs and benefits associated with each of those inputs and outputs. Repeat this exercise at the corporate, individual and society level.
For example - your people: 500 full time employees at a corporate cost of US$25m; individual benefit of US$17.5m (net of tax) plus the benefit of any training / development and net of the cost of injuries and any health issues; society benefits may include the consumption and tax multiplier associated with the individual’s wages and employment taxes, societies cost may include treatment costs of any health issues. Or another example - your water abstraction / consumption: the annual corporate cost of water abstracted or consumed is US$1m; society cost is the opportunity cost of someone lese going without a portion of that water equal to the incremental cost of desalination.
Once this is done then classify those costs / benefits into those costs / benefits most likely to be subject to regulation or consumer pressure and over what time period. Determine your organization’s level of influence over finding the solution to the issue or realizing the benefits. Once classified this list can then become a prioritized agenda of issues / opportunities, a risk map and an enhanced set of assumptions driving your mid to long term strategic planning. It may also inform your stakeholder engagement dialogues given you now have some visibility into who may be suffering or benefiting from your action or inaction.
A more comprehensive approach is achieved using multi-regional input output modeling to ascertain the full value chain impact. Additionally, to capture the full scope of the indirect and external costs / benefits across all dimensions of an organization influence (environmental, people, internal and external social capital and the built capital) would require a database of primary and secondary research.
Dr. Daniel Dias
A sustainable supply chain is important in a long-term survival of a business. A better processes and strategies can have a big impact in a business. In order to have a better and sustainable supply chain you need to have a supply chain analysis, because here you can measure and monitor the metrics. After the analysis you can now know what scenarios is possible and if it is sustainable enough for your business.
Emelia Ingram, Supply Chain Marketing
BR International Supply Chain Consulting
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