Why has the original concept of Corporate Social Responsibility (CSR) evolved into the Environmental, Social and Governance (ESG) initiatives that so many organizations are pursuing today? And why have these ESG principles traveled so thoroughly from a company’s headquarters to the furthest outposts of its supply chain?

The answer lies partially in the evolving nature of the supply chain itself. A once cumbersome and opaque system for obtaining materials, creating goods and moving them has been transformed by technology into a more transparent and global process – one that can be easily monitored and understood by business and consumer end-users. As supply chains become more accessible and flexible, but also more complex and geographically extended, there is a growing awareness of how each individual component of the process works, and also a growing need to make sure each is working ethically.

And that brings us to the second part of the answer. The move to ensure ethical practices throughout the supply chain is also driven by changing consumer expectations, habits, and technological capabilities. Consider the following:

What consumers want

To some extent, the calculations for business owners and managers are straightforward. To succeed and grow, companies need to understand, satisfy and engage their customers. And one critical thing to know about buyers today is that they are actively seeking to do business with companies that prioritize social and environmental responsibility. An Accenture survey, for instance, found that more than half of consumers would pay more for sustainable products that can be reused or recycled. The data is particularly clear when it comes to Millennials, with a 2015 Cone Communications survey showing that 9 out of 10 would switch brands to one that was associated with a specific social cause. And a more recent 2019 survey revealed that 72% of the U.S. consumers want the companies they buy from to reflect their values.

That’s where comprehensive ESG reporting comes into the picture. If your company can communicate to consumers, and your stakeholders, exactly how you are prioritizing environmental protection, worker rights and safety, and social causes, you can better participate in the dialogue with consumers.

What consumers know

Not only are they able to research and understand how your business manufactures and obtains its goods and materials, consumers are more than willing to share their findings with others through social media. According to the Cone survey, more than two-thirds of Millennials use social media to engage on corporate social responsibility issues. Technology has given your customers the ability to broadcast their concerns about your organization’s approach to sustainability, for instance, or the manner in which your suppliers conduct their own business. It has also given consumers a platform to promote and recognize businesses that are doing good work, turning them into powerful ambassadors for brands whose social and environmental practices they support. 

What businesses have learned

One of the top issues for consumers and businesses today is environmental sustainability, as discussed in my blog article of Delivered. Sustainability is a central mission for DHL, where we have set a zero emissions by 2050 goal. A recent Forbes article drives this environmental message home, discussing new research about empowered consumers: “As expert researchers and device users, empowered shoppers scout information from company values to manufacturing and supply chain practices in search of sustainable options: 68% of highly empowered consumers plan to step up their efforts to identify brands that reduce environmental impact, 61% seek out energy-efficient labels when making purchases and 47% regularly buy organic products.”

But business leaders recognize that an ethical supply chain extends well beyond its adherence to principles of sustainability. It must also take into consideration the rights of workers – the very people who make the supply chain function – including issues such as labor conditions and workplace discrimination. And in the process of pursuing ESG practices, business leaders have learned something else: an open, transparent supply chain that works to reduce environmental impacts and ensure positive labor conditions operates more efficiently, delivers better products, and improves outcomes for everyone.

How is the ethical supply chain more effective? It allows for greater quality control, as improved oversight allows businesses to better monitor production practices. It reduces costs, as managers gain a greater ability to regulate how and when their goods are produced and delivered. It improves reliability throughout the supply chain, since enhanced compliance with environmental and labor laws and regulations means costly delays, and even more costly legal penalties, are avoided. And finally, it builds trust between companies and their customers. 

What your business can do

Achieving an ethical supply chain involves setting goals, embracing technology, and pursuing training and education for your employees. Establishing a green supply chain, for instance, means that your organization must commit to science-based targets, along with a process to ensure they are met. Science based targets are validated by an independent organization and support the goal of keeping global warming below 2 degrees Celsius. While your mission may be to reduce the carbon footprint of your supply chain to zero, getting there takes well-planned steps, and a commitment to finding the right sourcing, manufacturing and logistics partners.

When it comes to obtaining materials and monitoring your supply chain for compliance, digital tools are essential. By digitalizing your supply chain, you also prevent the falsification of manual, paper-based supply chain documents, thereby reducing the amount of counterfeit parts entering the supply equation. 

Your employees represent the front line of your efforts to ensure that your social and environmental supply chain goals are realized. Ensuring that they understand your company’s overall commitment to ethical practices is key, and it’s also critical to give them the ability to participate in the mission and speak up when they see something wrong. Your employee training and professional development programs should include a comprehensive component on your company’s social and sustainability goals.

For business leaders today, especially those in the small and medium enterprise (SME) space, the most critical question is not whether supply chains will continue to move, but where those supply chains are headed in 2022.

Will we see continued disruption in manufacturing and delays in transportation down the road? And how can logistics ecosystems ultimately adapt to the dramatic changes sparked by global e-commerce?

The state of supply chains

After more than a year of pandemic-driven challenges, supply chains are clearly strained. The reasons are complex: early in the COVID-19 era, manufacturing shutdowns were followed by sudden shifts in consumer demand. Then in 2021, flush with savings and hopeful that the pandemic would improve, buyers flocked online, and to stores. Business procurement surged. At the same time, transportation bottlenecks increased, triggered by a mix of elements including a decrease in commercial airline flights (which carry freight as well) and dislocations of cargo ships and containers. Finally, workforce disruptions and labor shortages continue to impact the supply chain from manufacturing to truck transport.

The fact is, however, supply chains were significantly challenged well before the pandemic began. Years of B2B and B2C e-commerce growth, global political instability, trade disputes, natural disasters and infrastructure problems have all contributed to the growing stress.

What’s next for global logistics

With new COVID-19 variants expected and many people around the world still unvaccinated, uncertainty will remain a critical factor in the supply chain equation in 2022. Some pandemic-related challenges, like the current high cost of ocean freight, will likely be resolved, but the potential for disruption due to shutdowns, slowdowns, and labor shortages is high.

The good news is that DHL Express and the air cargo industry are well positioned for the peak holiday season and for the year ahead. We have invested in our people, facilities and fleets, purchasing 22 Boeing 777 freighters over the past three years and converting nine Boeing 767 passenger aircraft to freight configuration – all to boost capacity in our network. In the U.S., DHL Express has invested to expand our workforce and increase wages at our superhub in Cincinnati, and we recently unveiled the grand expansion of our Miami hub.

While DHL’s delivery network, including air cargo and last-mile delivery across 220 countries and territories, is robust, transportation networks in general will face strain in 2022, especially ocean freight. Ports are operating around the clock to off-load container ships, but this effort is only effective when there is efficiency across the entire value chain. That means operating warehouses 24/7, ensuring truckers are available, having the containers and chassis to complete the work, and seeing the backlog further down the supply chain begin to break free. Until each element is fully addressed, problems can persist.

The long-term view

Technology and advances in logistics are changing the way goods are moved, stored, and tracked. But the full effect of the Internet of Things (IoT), robotics, and Augmented Reality (AR), to name a few, cannot be realized without critical investments in people.

Supply chains are crucial to companies across business sectors, and in today’s hyper-competitive labor market, attracting and retaining the best talent up and down the supply chain has broad implications for local and regional economies around the world. At DHL Express, we continue to create an engaging and rewarding workplace, while equipping our teams with the tools and training they need to excel. We’re so passionate about making the best possible work experience that we were rated the number one best place to work in 2021by Great Place to Work and Fortune Magazine.

Over the next year and beyond, we expect a greater focus on workforce development throughout the e-commerce and logistic industries. From manufacturing to transportation and shipping, the companies that comprise the supply chain must prioritize and seek the best talent, even as they embrace technology and automation.

To see this level of devastation in my adopted country of Germany, and even more recently in the Henan Province of China, leaves no room for doubt that the effects of climate change are greater than ever before. In many cases, we are woefully unprepared to be able to deal with it.

The specific intensity of some of these events may be hard to predict, but that should not have any bearing on our ability to prepare. Many supply chain professionals are still caught off-guard by these weather phenomena and wonder what could’ve been done differently to mitigate the impact of the devastating events.