With a blizzard on one end of his trip and the effects of a two-year (and counting) drought awaiting him on the other, author and green business strategist Andrew Winston got a firsthand look at the extreme weather battering the US this January while traveling from his East Coast home to the drought-ravaged West Coast to deliver a keynote address at the Oracle Value Chain Summit in San Jose. The extreme weather only underscored his message to supply chain managers: To succeed in an increasingly unpredictable world, executives must create resilient and responsible supply chains.
Of course, extreme weather is just one of the factors supply chain executives now must contend with when it comes to enterprise resource planning: They must also deal with fluctuating commodity prices, increasing environmental regulation, and customer demands for transparency about how their products are made and how they will be responsibly disposed of.
Winston knows the stakes are high. In his most recent book, The Big Pivot, he points out that to prevent climate change catastrophe, we must reduce carbon emissions by a whopping 80 percent in the next 35 years. But he tells OracleVoice he remains hopeful about the future of business and the planet.“I am optimistic when I see how much renewable energy is actually being bought. Half the new energy being put on the grid globally is renewable now,” he says. “I’m optimistic about how real the conversation globally is becoming, with the voices that are coming to the table, like former US Treasury secretaries and the Pope. We’re starting to get to talking about this all like adults, and not having to pretend there’s not an issue.”
We asked Winston what executives need to change right now about their thinking, and the steps they need to take to protect their businesses—and the Earth.
What new challenges are supply chain executives facing?
The supply chain carries enormous risk of disruption for companies, and that’s happened increasingly in sectors that are reliant on particular parts of the world. For example, think about what happened in Thailand. After the flooding in 2011, a bunch of companies discovered they depended on one area for hard drives and car production. This is not the most resilient strategy when areas can now get knocked off the grid or demolished quickly. This stuff is happening more and more. Company leaders need to be thinking about the volatility in their supply chain and managing for it—and mitigating for these risks as well. But we can’t adapt to everything. We actually have to try to avoid climate change from getting worse.
What is The Big Pivot?
We are taught that business is somehow all-powerful, and that the environment is this niche conversation within the economy. It’s actually the other way around. We’re at the mercy of having a stable climate, clean air, clean water, and enough resources to build an economy. And if we threaten that, we threaten our own prosperity.
The Big Pivot is actually about switching what business leaders think is the core purpose of business, which has become to maximize short-term earnings. Executives should tackle these big, shared challenges that threaten our own existence, instead of facing them when we feel like it, or when there’s a hurdle, or when there’s enough pressure from outsiders. And they can use tools they already have—capitalism, markets, and competition—to do it most profitably.
So how do supply chain executives pivot?
Efficiency is not a bad place to start. Efficiency can get you pretty far. Executives have massive opportunities to cut back their energy and water use, and reduce their waste production without necessarily redefining the terms of capitalism. And they need the data and systems to find those opportunities, manage them, and measure their impact.
But here’s the larger picture: If you look at the products in the world, the majority of the footprint generally sits in the supply chain. When most companies look at their own impact, especially a big consumer products company, their own factories and operations might be four or five percent of energy use, of carbon, of water. But upstream, there’s a long supply chain that goes all the way back to raw materials.
Supply chain professionals have a remarkable opportunity to measure, to understand, and then to manage upstream. They are sitting on the gold mine of more sustainable practices. For example, think about executives at a global soft drink maker who want to manage the amount of water they use per liter of product very carefully. A liter of water goes into a product, and they don’t want to have to use much more than that to produce it. But upstream, for every liter of soda they make, there’s 150 liters of water producing sweeteners. So they can try to reduce their ratio in the manufacturing, or they can make sugar production 10% more efficient.
What do CEOs need to do to help prepare their companies to last in the future?
CEOs are supposed to be leaders. They should be able to look out 5, 10, 15 years and think, “How do I make my company resilient? Let’s ask different questions.”
We need to try things, and we need to move from pilots to scale as fast as we can. And we need to collaborate in new radical ways. How do you engage your employees more? How can you bring them into this conversation and get ideas from them? How do you bring in your own competitors? How do you partner with NGOs? How do you talk to the government differently, so you’re not just responding to new regulation?
Step one is to figure out your map. Map out your whole value chain, and understand its impacts. And companies like Oracle are providing tools to help companies do that.
The biggest thing executives need to do is set goals based on the thresholds and science that tell us how fast we need to go. If we’re not doing that, I don’t know what the hell we’re doing. It’s an exercise in futility.
Speaking of goals, you’ve set up the website PivotGoals.com. What do you want executives to do there?
There are a lot more companies that have made very deep cuts in the amount of energy and water they are using—and in the carbon they are producing. Part of the reason I set up Pivot Goals is for benchmarking, so executives can see how many aggressive goals are actually being set. Eighty percent of the biggest companies in the world are in the database.
Executives have created these agendas, though they may not be core to their business. They may not think it’s important to their shareholders, but they’ve got a set of targets that are real. Pivot Goals is not a database of outcomes. We don’t know if everybody’s reached them. But it’s a start. You don’t get anywhere without setting really aggressive goals. It’s the first major step.
Author Andrew Winston
