November 29, 2023 • 37 mins
MIT CTL Research Scientist David Correll joins us to share findings from the State of Supply Chain Sustainability 2023. Pressure on firms to make their supply chains more sustainable has increased over the past four years and isn't going anywhere, though the distinct areas of sustainability on which that pressure focuses are constantly changing. Indeed, sustainability is complex and contains multitudes. The report also takes a look at firms' progress on achieving their Scope 3 emissions goals.
The full State of Supply Chain Sustainability report is available free at sscs.mit.edu.
Host & Executive Producer: Benjy Kantor Marketing Writer & Producer: Dan McCool Sound Editor: David Benjamin Sound Audio Engineer: Kurt Schneider
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
(bright upbeat music)
- Welcome to MIT "Supply Chain Frontiers,"
presented by the MIT Centerfor Transportation & Logistics.
I'm your host, Benjy Kantor.
Each episode of "Supply Chain Frontiers"
features center researchers and staff
or experts from industry
for in-depth conversationsabout supply chain management,
logistics, education, and beyond.
Today, we welcome David Correll,
(00:21):
lecturer and researchscientist at MIT CTL.
He's led the annual
State of Supply ChainSustainability report
for the past three years,
and this episode, we'lldive into the findings
of the most recent, the 2023 report.
The State of SupplyChain Sustainability 2023
is a co-presentation
of the MIT Center forTransportation & Logistics
and the Council for SupplyChain Management Professionals,
(00:42):
and was funded in part by generous support
from Avetta, C.H. Robinson,and Isometric Technologies.
The full report is available now for free
at sscs.mit.edu.
(bright upbeat music continues)
You may remember David
from his past appearances of this podcast
as both a guest and a host.
Dave, you've left me somepretty big shoes to fill.
(01:03):
Welcome back to "Supply Chain Frontiers."
- Thank you so much for having me,
and I'm excited to get this conversation
between you and me recorded.
- Yeah, so we'll dive right into it.
First, really just to give everyone,
laypeople and professionals both,
give us a broad overview of what you mean
by supply chain sustainability.
When did people startpaying attention to it?
(01:24):
- Sure, you know, and as I was thinking
about what to bring to this conversation,
I thought of what is probablythe most disappointing
but interesting way toanswer that question,
which is what motivates the study
is that no one has the same notion
of what the term means, you know?
So when you very naturallyask the question,
"Hey, what do we mean by this?"
(01:45):
as a researcher, my inclination is to say,
the fact that my answer is no good
is the reason we do the study we do.
So with that disappointment,I'll walk into it a little bit.
One thing that I've observedis that we take the results
of our research out into the world.
You know, sometimes we encounter people
who are already gung-ho aboutsupply chain sustainability
(02:07):
and wanna be part of theircompany's efforts to promote it.
Other times, we run intopeople who are more skeptical
of sustainability efforts in companies.
The thing that I thinkbrings everyone together
is everyone is equally maddened
by the fact that none of usmean the same thing by the term.
So that's a long way of saying
(02:29):
we're trying to narrow down the definition
with the work we're doing.
But I do think it's fair to say,
well, in general, what do you mean?
In general, we follow
the UN Sustainable Development Guidelines,
which include bothenvironmental and social impacts
of supply chain decisionsacross firm boundaries.
So if I'm a company that'sinputting materials,
the impact on theenvironment and communities
(02:51):
that surround my firm and my suppliers
are part of a supply chainsustainability journey.
- I'm glad you mentionedthat, 'cause actually,
and this may be to confuse things,
so I'm happy to confusethings a little bit,
I think that publicperception of sustainability
is one of environmental concerns,
like when a company saysthey're green, right,
and applying that to their supply chains.
But in terms of supplychain sustainability,
(03:13):
there's also that relation
to lowercase flexibility and strength
but capital R, Resiliencein terms of supply chain.
The people who were taking the survey
that led to this report,does their perception matter?
What is their perception
versus what definition you're using?
(03:34):
- Yeah, thank you, so theirperception definitely matters.
And the way I would thinkabout it is it allows us
to sort of not have toprescribe an answer.
So when we started this project,
there was actually some internal debate
on the research team;
does supply chain sustainabilityinclude social issues,
(03:54):
like issues of social justice?
Some people said, "No, no way.
That's not part of sustainability.Don't ask about it."
Other people on the researchteam said, "No, you know,
in my heart, that is part ofsustainability, ask about it."
There was no good way to stopthat fight except to say,
we'll ask the world,
and if the world says socialissues are not part of it,
(04:15):
then we'll stop asking.
But the exact oppositeturned out to be true.
Sort of our firstheadline-making conclusion
when we were able to first compare data
was that social issues are, in fact,
the fastest growing components
of supply chain sustainability.
So what the respondentssay definitely matters,
and that's what we're after.
We're not trying to beprescriptive or didactic
(04:40):
about how to do supplychain sustainability.
We're really trying to just understand
what is the state of play acrossgeographies and industries
as far as what's included insupply chain sustainability
and how firms try to achieve it.
- And so what might besome of the social aspects
of sustainability that folksare or are not familiar with?
(05:01):
- Excellent, yeah, so our survey asks
about 10 different dimensions
of supply chain sustainability,
five environmental, five social.
And the social ones are things
like supplier diversity,equity, inclusion,
fair pay and fair trade,employee health and safety,
things that are outside of justthe environmental components
of our firm's operations.
(05:23):
And one of the things that we've seen
is that when we look at how firms act
on environmental versus social issues,
sometimes hesitancy to actis because it's, I think,
hard for firms to knowwhich actions to take
to try to make a more sociallysustainable supply chain.
So in addition to thesurvey data that we collect,
(05:46):
we also do executive interviews.
And one of those thatreally struck with me
was a gentleman whooperates warehouse software.
He designs warehouse software.
And he said, "Look, Dave, I get it.
You know, social issuesare increasingly important
around the world.
We wanna be part of that.
But if you tell me tomake a greener warehouse,
I know what to do.
I know how to reduce energy costs.
(06:07):
If you tell me how to make
a more socially sustainable warehouse,
I simply don't know how to take action."
And so one of the thingsthat we've uncovered,
I think, through this report,
is that there are myriad social issues.
People feel pressure to act on them,
but firms don't always know
what their first step towards action is.
- Yeah, and the bulk of the...
In fact, likely 100% of the people
(06:28):
who are taking your surveythat led this report
are people from within these industries.
But where is the pressureon companies coming from?
Is it coming frominternally, from their staff,
from their employees,from their management?
Or is it coming from aseparate public piece,
who wasn't necessarily providing data
for you for this survey
(06:49):
but is part of this generalworld of public perception
and sustainability andgreening and things like that?
- So that really gets toanother one of, I think,
our most surprising results is, you know,
where does the pressurecome from for firms
to engage in supply chainsustainability in the first place?
And two things really jumpout to the research team
(07:10):
as we've analyzed the data.
And I should say that, you know,
we're in our fourth yearof data collection now.
Each year we get around2 to 3,000 respondents.
So, you know, for the most recent year,
we've got 2,300 respondents.
But across the four years,
that sums up to around 9,000 responses
answering surveys that aretranslated into English,
(07:30):
Spanish, simplifiedChinese, and Portuguese.
So we've got a pretty big picture.
And I bring that up to saythat over the four years,
none of the 10 sources of pressure
that we measure showed declines.
So at least over the last four years,
the pressure appears to reallybe real and ratcheting up.
And when we look atwhich sources of pressure
(07:53):
amongst the 10 that we measureare ratcheting up the most,
far and away, the answer tothe fastest-growing pressure
is investors, a 25%increase over the four years
compared to much smallerincreases from other sectors.
Investors is followed bycorporate buyers, or B2B buyers.
And that was really supported
(08:14):
by the executive interviewwork we did, too,
where firms suggested thatthe sources of capital,
their lenders are the peoplewho are really pushing them
to invest in supply chainsustainability efforts.
- So from those investors in B2B,
which of the areas of sustainability
is driving their pressure,
or what are the aspects ofthe supply chain and logistics
(08:36):
that they're focusing on for that purpose?
- That's a great question,
and our data only gets us sofar before we have to infer,
(chuckles) but we know thatfrom our executive interviews,
you know, we ask like, okay,
well, how does that pressure show up?
What does that really look like
when your banker says be more sustainable?
We know that it shows up inthe form of questionnaires
to firms (08:56):
what are you doing about x, y, and z?
And oftentimes, those relate to emissions.
And so we did a wholedeep dive on emissions
in this year's report thatmaybe we'll get to talk about,
and, you know, what isthe motivation for that?
This is where, you know,
anyone who wants to to readour report is very welcome to.
We're happy to be able to shareit with the world for free.
(09:17):
But one interpretation of whyinvestors might be motivated
to push for moresustainable supply chains,
and why they're pushing inparticular around emissions,
is investors want the firmsthat they invest in to be ready
for the legislation that'scoming down the road.
And there's some expectationaround carbon prices,
new restrictions on carbon emissions
(09:39):
that investors want theirfirms to be ready for.
You know, another potentialmotivation for investors
is that sometimes the investorsare investing in the brands,
and a major environmental catastrophe
or a major social catastrophe,
for example, discovering childlabor in the supply chain,
can be really diminishingto the value of the brands
(09:59):
that the investors are investing in.
So those are some of themain motivations we hear,
at least from our anecdotal research.
- And after four years of thisreport coming through CTL,
this is perhaps asking formore inference on your part,
but are the companies payingattention to the report?
How much do they care, Iguess, is the question,
(10:20):
that they're receiving thispressure and that the investors
are thinking about these kinds of things?
- That's a really fair question.
So, you know, I do haveto infer, as you say,
so we don't have that barometerin our survey instrument,
although I wish we did, but the-
- The, "Do you care?Yes or no," check mark
is on next year's survey, right?
- Well, there's a few ways for us
(10:40):
to at least give some insightinto that important question.
And one is that, you know,
projects like this don'ttypically last for four years.
So that we have continuallyfound support for this project,
you know, we're completelyunderwritten by sponsors,
some of them repeat sponsors,you know, suggests to me
that that's a real interest in learning
(11:03):
about supply chain sustainability
and positioning themselves asthought leaders in that space.
Another question that we askthat I think is maybe helpful
to at least getting insightto that question is,
for each of the 10dimensions, we ask respondents
to rate their firm'sinvestments in those issues
(11:24):
and goals in those issues.
And then we plot thedifference between investments
and goals at an aggregatelevel over the four years.
So the first thing that wesee is everyone sees that,
everyone basicallyresponds that their firm
has a lot higher goalsthan their investments.
(11:45):
So they don't put as much money down
as they talk, colloquially speaking.
What's interesting thoughis that the gap is closing.
Over those four years,
we still see that on the whole,goals exceed investments,
but the gap has closedover the four years.
And, in fact, it's closed mostrapidly among social issues.
(12:06):
So those are two thingswe can grab from the data
that lead me to believe that, you know,
I don't have a percentageestimate, you know,
how much do people care,
or what percentage of people really care,
but those two things lead me to believe
that firms care more thana cynic might expect.
- So we're seeing the lipservice potentially decreasing-
(12:26):
- Yeah.- and some act
or action meeting upwith the amount of talk.
- An action meeting up withthe talk is part of it,
you know, but another part ofit is thinking about the story
about the warehouse software engineer
and, you know, his challenge to me,
"Hey, Dave, look, I get it, I care,
but I just don't knowhow to make a warehouse
more socially sustainable."
You know, I think over the four years
(12:48):
that we've been in this space,
that gap has been addressedentrepreneurially by people
who are now making software solutions
and supplier vetter solutions
and bringing things to the marketplace
to try to make firmsmore socially sustainable
that didn't exist before.
So I think maybe less lip service,
but also that gap isbeing filled by people
who wanna help firms on that journey.
(13:11):
- Yeah, it's funny, itreminds me of this story
that we were hearing from yourcolleague Josué Velázquez,
which, about the effortsthat some companies are doing
to actually make things greener
or more sustainable interms of supply chain
that actually have a deleterious effect.
So, like, the ways that they'repacking things into freight
(13:31):
actually ends up being more efficient
and sustainable for packing things,
but makes delivery andfuel consumption heavier.
And so they have these sortof, like, interesting offsets
for the efforts that they're trying to do.
So it's that that conundrum of like,
how do we make the warehouse-
- Oh yeah.- sustainable. (laughs)
Yeah, interesting.
(13:52):
- And the upside of that
from an educator'sperspective is that, like,
the most motivated students
are always drawn to the hardest problems.
And so when we see that, like,
it's just not easy to even know what to do
if a firm wants to make themost sustainable choice,
because there are so many trade-offs,
quantitative and qualitative,to balance in one's head.
(14:14):
The downside is that it's hard.
The upshot is that, you know, as someone
who works with supply chainstudents all the time,
hard problems draw great talent.
And I think we're seeingthat in our students,
who really want to engage us
on state-of-the-artsustainability projects.
- Yeah, and what's the...
Like, does your teamand your colleagues work
on the most effective ways to approach it?
(14:36):
Like, is it breaking these hugeprojects into doable tasks?
Or for, you know, yourwarehouse manager example,
like, how is it thatthey are eventually able
to take steps in thedirection they wanna go?
- Oh, I think like all science,
the progress is incrementaland maddeningly slow.
(laughs) So I think,
(14:56):
you know, that we all cutout different parts of it
that maybe we have the best potential
to contribute to meaningfully.
So, you know, you talked withJosué, and he's done all sorts
of really cool vehicle routing problems,
where, thinking about howto route the vehicles.
Another one that's of interest to me
is a challenge that needs to be solved
in this particular case is like,
(15:17):
so let's say I am a shipper,
and I am committed to paying more
for greener transportation,
if someone can prove tome how much greener it is,
and I can measure thatagainst the extra cost
of paying them to do it.
And, frankly, those shippersexist. Those brokers exist.
They come to our office and ask for help
(15:39):
because it's not out there.
Like, even how to quantify the benefit
is not yet figured out.
And why is it hard?
And hard, it's part because,
if you think about freight movements,
they're oftentimes sharedbetween different companies.
How are we going to apportionthe offset of carbon emissions
that came from one truck movingmultiple companies' freight?
(16:00):
It's a lot to figure out.
So hopefully researchers,
like those of us at MIT CTL working on it,
will move the ball a littlebit before we retire.
- So certainly, in thegrand scheme of things,
sustainability within supplychain is still in its infancy.
And supply chain as astudy in and of itself
is still sort of, in thegrand scheme of things,
(16:20):
in its infancy.
And, also, I think oneother potential roadblock
or challenge is thatconventional wisdom might say
that sustainability would take a backseat
during a major crisis,like the last few years,
during COVID-19, right?
But in your research, you'vefound that sustainability
has proved resilient in the face of this.
So why do you think that is?
Have you seen any exceptions to that rule,
(16:43):
or would you even call it a rule?
- Yeah, oh, thank youfor finding that one,
because I think that is ourmost surprising discovery,
and maybe what we bring to the world
that I hadn't seen previously documented.
So what we did is decidedthat for better or for worse,
over the last four years,
there's been no shortage of crises,
(17:04):
so we'll directly ask the question,
how has this crisis impactedyour firm's commitment
to supply chain sustainability?
We did two years of COVID.
First year, we got roughly 80% of people,
if they said, "Yes, thisimpacted my firm's commitment
to supply chain sustainability,"
said, "Well, it actually increased it,"
versus 20% saying decreased.
(17:26):
First time we saw that,
personally, I thought, youknow, something's wrong.
Did we code the question wrong?
I kind of thought in thatenvironment, people would say,
"Get off my back. I don'thave time for this right now."
We checked everything was right.
We asked the question again another year.
And we got the same result,
which is, just from a researchperspective, exciting.
Because you rarely get the opportunity
(17:48):
for replication in socialsciences, but we had it here.
And so we started asking inour executive interviews,
what's this about?
Why are firms that said COVID-19 changed
their firm's supply chainsustainability effort
saying that it increased it?
And we heard back frommultiple sources that, like,
"COVID broke my supply chain.
(18:09):
My management gave me newtime and budget to fix it.
And when I did it, I did it now
with sustainability top of mind
in a way that it wasn't way back when,
when these supply lineswere originally drawn."
So, you know, for better or for worse,
there's some benefit to the crisis,
or at least some opportunitythat came outta that crisis.
And I bring those up becausein this most recent year,
(18:31):
we asked about two different crises.
One was Russia's invasion of Ukraine,
and the other was projectionsof economic recession in 2023.
Focusing in on the Ukraineone first, you know,
less people said it impactedtheir firm's commitment
to supply chain sustainability,
and most of those were in Europe.
But when they said yes, we sawthe same general phenomenon.
The majority of the yes answers,
(18:53):
the majority of respondents who said,
"Yes, this crisis impactedmy firm's commitment
to supply chain sustainability,"said that it increased it.
When we started askingaround and reading more
and trying to understandwhat was going on,
to my mind, the phenomenon was the same.
Essentially, supply linescoming out of Russia were broken
(19:13):
either by firms that were trying
to de-Russify their supply chain
or were just trying to avoid sanctions.
That gave them,
the supply chain managersfor those companies,
opportunities to redraw those lines.
And when they redrew them,
they did things to advance sustainability
that they didn't have managerialpermission to do before.
And some of it was franklymotivated by a fear
over lack of access to Russianhydrocarbons in the winter.
(19:37):
It was much easier to say,
"I'm gonna put electricvehicles in our fleet,"
in the face of that crisis thanit was without that crisis.
So in that sense, we see a surprising
but consistently observed result
that when supply lines are broken,
sustainability seems to thrive.
And that's something I wouldbet on from the research.
(19:57):
Now, the flip side of thatis that when we asked,
"Did your firm's commitment
to supply chain sustainability change
as a result of projectionsof economic recession?"
if they said yes, the phenomenon reverses.
If they said yes, the majority said,
"Well, we actuallydecreased our commitment."
So to my mind, the inferenceis when supply lines are broken
(20:19):
by crisis, sustainability thrives.
But when downstreamsupply chains are starved
of sales opportunities, that'swhen sustainability withers.
Maybe another interpretationis that the commitment
to supply chain sustainability
is uniquely sensitive toprojections of consumer demand,
and it is not as sensitive to projections
(20:40):
of supplier disruption.
So it's almost like we'refinding the funny bone,
if you will, of supplychain sustainability.
If you mess with oreven give the impression
that there's weakness in consumer demand,
which is what I think the bottom line
of a recession protection is,
that's when the sustainabilityknob turns down.
(21:02):
And so that's a uniquelysensitive pain point
compared to if you say, you know,
I think we're gonna havesome real upstream upheaval,
we're gonna lose some suppliers,
that doesn't seem to haveas sensitive of a connection
to sustainability commitment.
- Well, and that was the question
that was kind of coming up in my mind,
which is the concept of sustainability
as a way to address risk, asa way to improve resilience
(21:28):
during a crisis or during conflict.
Sounds like there's some buy-inthere from the upper levels.
When the world gets beyond conflict,
when we've solved allthe rest of the problems,
will the C-suite respond in the same way
towards committing resources
to having sustainability be
(21:48):
part of their risk managementand resilience program?
That's just a theoreticalquestion at this point, I guess.
- Yeah, no, no, it's a fair question
because I think another part of the reason
that we observed thephenomenon that we did,
and one respondent said it so well,
he used military terminology,
he said, "The pandemic gave me air cover
to do the things I already wanted to do."
(22:10):
So it gave people who were interested
in improving their sustainability profile
opportunity to do it, sothat's part of the explanation.
But I think the other part is like,
the response or the counteraction
to a supply chain crisis anda sustainability initiative
have a lot of the same moves.
(22:31):
It's invest in visibility,
understand who your suppliers are,
understand how they're producing,
dig into that at a deeper level.
So part of it is, I think,
that it's essentially thesame response to crisis
or response to motivation,
whether it's shoring up after a crisis
or improving supply chain sustainability.
Either way, you're digging deeper
into your supplier's practices.
(22:53):
- So I guess shifting gears a little bit
with relation to the past surveys
and reports that have been done,
we've been finding previous reports
have found that sustainability efforts
may vary widely by geographic reason.
And at this point, I'll givea a thank you to our producer,
Dan McCool, who is diggingdeep into the reports
and finding some of thesecomparisons from year to year,
(23:17):
in this particular example,
where we find that thesustainability efforts are stronger
in more economicallyprosperous global north areas.
What's the story there?
Do those areas thatare having more success
with more efforts andresources addressing it,
do they have a responsibilityto other areas,
to global south countries,
(23:38):
to help them become more sustainable
within their logistics and supply chains?
- Oh yeah, that's one of the interesting
but perhaps concerning results
that's come up two years in a row now.
So the first time we lookedat geography, you know,
we're comparing responsesfrom all over the world,
and that becomes sortof a lot of comparisons.
(24:00):
You know, if I'm gonna sayEurope versus Latin America,
America versus the Middle East,Middle East versus Europe,
it becomes a lot ofcomparisons to present.
And so we thought, okay,what is a simple way
to divide the world that mightgive us meaningful insight
into how people around the world approach
supply chain sustainability?
We tried two, the firstone, east versus west.
(24:24):
So is it like a Cold War division?
Second one, global northversus global south,
is it an economic development division?
the one that rang true statistically
was global north versus global south.
That's where we saw the most differences
in how respondentsprioritize different issues
related to supply chain sustainability.
(24:44):
We built on that this year
with a deep dive on net zero goals.
And we looked at where around the world
are firms adopting net zero goals.
And it really was a surprising result,
or not surprising butkind of jarring result,
when we saw that adoption in the US
(25:05):
and in the European Union area,
right around 50%, closer to60 in the European Union.
Adoption, in other parts of the world
where we have a statisticallysignificant sample,
in Asia and LatinAmerica, in the Caribbean,
in the teens and the 20%.
So the adoption of net zerogoals really seems to be
in this global north.
(25:28):
And one of the charts in thereport that gives me pause
and usually gives audiencespause as I present this
is if we use adoption on the y-axis
and World Bank percapita GDP on the x-axis,
a couple things jump out,
and I encourage listeners,if you're interested in this,
to go take a look at the chart.
If we look at per capitaGDP in the United States
(25:49):
and in the European Union
and compare it to theworld per capita average,
we're just way off.
Like, our lived experienceis so much different
than the global experience.
And if we look at where,
the parts of the world wherewe have good responses,
Latin America, theCaribbean, and parts of Asia,
(26:09):
they're really in linewith global per capita GDP,
and there's far lower ratesof net zero adoption there.
So, you know, what does all that mean?
One thing, it gives me pause
in that net zero is intended to be a tool
to fight a global problem,
but it's a tool that's onlybeing deployed in limited areas.
(26:30):
So I think we mightnot have the right tool
if we're trying to solve a global problem.
- This is the fourthannual report through CTL.
At this point, what are the newest things
that you're finding?
Are there things that arecoming to you at this point
after four years that are surprising you?
What are the biggest learnings
that are being corroborated every year?
You've touched on that a little bit,
(26:51):
but it kind of goes intothis questioning of, like,
what happens beyond the fourth year?
Are there things youstill need to dig into
or that you can find out,with a fifth survey perhaps,
if that's something that you end up doing?
- Yeah, excellent, so yeah,
the first things that jump out to me
are the things thathave been corroborated,
which gives us, I think, confidence
(27:13):
that we've documented a newand important phenomenon
in the world, and that is the way
that supply chain sustainability responds
to what we call acutesupplier disruptions.
So we've seen that multiple times,
and we'll continue testing,
but that seems to be something new
that it's understood aroundthe world in different ways.
That seems to be something important
(27:34):
and that's corroborated,that I hope, you know,
we can bring to the world's understanding
of supply chain sustainability.
What we don't have but what we need
is that when we look at practices,
we see that most firms havesome sort of code of conduct.
And for people who aren't familiar,
what that really means, it just says,
(27:56):
"These are our rules. Follow them."
Far fewer firms havesomething where they say,
"These are our rules,"
you know, speaking to their suppliers,
"Let us help you develop up to them,
if those aren't your rules."
Far fewer have somethingeven rarer to say,
"Here are our sustainability goals.
What are your sustainability goals?
(28:16):
Let's figure out a mechanismto work on them together
and share the benefits."
But I think that's really is what needed.
So I hope we get to go forward,
and if we do, I think presenting readers
go-bys or examples ofhow to work more deeply
with your supply chain toachieve your sustainability goals
is where we have to get to next.
(28:37):
- Just from some sort of,like, survey nitty-gritty,
can you talk about the process
of translating the surveyinto those multiple languages
and kind of what went into that
and how that helped with thedistribution of the survey
and getting to the final report?
- Oh, my pleasure, those aresome of my favorite stories
of our team's efforts on the project.
(28:57):
So, you know, this year wewent out in four languages,
English, Spanish, Portuguese,and simplified Chinese.
The way we do that iswe do multiple passes
through the translationswith native speakers
to make sure that we'regetting at the right thing.
So, you know, I'll work with the team
to write the survey in English.
We'll give it to some bilingual folks
(29:19):
who speak each of the languages.
They'll take a pass at translation.
Then I'll convene another group of people
who also are native speakers
to make sure that that works out.
And I bring up those mechanics
because, you know, some of themost fascinating discussions
for me, you know, whereI've had great opportunity
to learn as part of doing this research
(29:39):
is convening the native speakers
to talk about how they choose the words.
And one that really jumpsto mind is diversity.
So we had, I believe, in year three,
we had someone fromMexico, Columbia, and Peru
reviewing our existingSpanish translation.
So we had this group thinking
about how we would ask questionsabout supplier diversity.
(30:03):
And so one of the respondents said,
"Oh, you know, these are programs
that help hire peoplewith physical handicaps."
And then someone elsesaid, "No, no, no, no, no.
In my country, that meanshelping to support businesses
that come fromunderrepresented communities."
And then they described theunderrepresented communities
in their country.
And we got into this battleabout what does this mean.
(30:25):
To my mind, that really kind of highlights
what makes this studyimportant but also difficult
is that even in the notion of the words,
there's so much packedinto each respondent's head
about how they're answering the questions,
that we're all seeingthings a little differently.
And hopefully, with a report like this,
(30:47):
we can at least presentsome global baselines
that allow people to have amore productive conversation
to get to, you know, here's where I'm at,
and here's where you're at.
- And then once yousort of deciphered those
or peeled them apart
or put them back together again, I guess,
what is it like when...
What is it like on the ground
for individuals working at companies
(31:08):
or for companies themselves,
when they're making these,
when they're heading toward net zero,
or when they're making improvements
or addressing supply chainwithin sustainability?
What are the specific kind of things
that companies are now doing?
- Sure, so this is one of the resources
that we're really proud of in the report.
And I wanna highlight and thank everyone
(31:28):
who contributed to thisreport, including Kellen Betts,
who's also a researcher here on our team,
who made some of these results filterable
by geography and industry.
And I bring that up and that,
so one of the things we ask is,
what is your firm doing aboutsupply chain sustainability?
And then we've built
what we call the staircase of practices.
(31:50):
So the bottom rung iswhat everyone's doing.
And so that's like 80% of people
have built their firm'ssustainability code of conduct.
These are our rules.
And then you can climb up that staircase
to sort of the rarer and rarer air
of the lesser applied tools.
And that's really a testamentto Kellen's ingenuity
that readers have really enjoyed.
(32:11):
You can go in there and put,
"Well, I work in manufacturing in Europe,"
and can see where you arerelative to your peers
on that benchmark.
So anyone can see, you know,
what firms are doing in their sector,
as long as we have the data,
by using those filterabletools at sscs.mit.edu.
But the bottom line for everyone
(32:32):
is that everyone seems to have documented
something that theycan point to that says,
"These are oursustainability expectations."
Those are communicatedto their supplier base.
I think that's sort of table stakes.
The more aspirational stuff
is helping suppliers develop to meet those
(32:53):
and working with suppliersto share the benefits
of sustainability winsacross firm boundaries.
- And it looks likeachieving those kind of goals
or working towards those goals
certainly would requirea lot of collaboration
between tiers of the supply chain,
you know, the second, third,fourth, fifth tier of folks.
(33:14):
So, and where the second andthe fifth part of the chain
are disassociated from each other,
but they're so to tightly, you know,
coordinated with each other,
and it might not be thereyet for a lot of industries,
how do you see that evolving?
- That's a great pointin that I think people
outside of this world really over assume
(33:38):
how available data is,(chuckles) you know,
so I think, you know, if you'renot working in this world,
you would think that, youknow, major companies,
the Procters & Gambles of the world,
the major motor companies of the world
would have greatvisibility into everything
that their many suppliers are doing
and the ability to track thesustainability implications
(33:59):
as far back as they want.
But that is really far from the truth.
And I don't speak to thosecompanies specifically
just to say that, you know,even firms that we think of
as being quite powerfuland quite established
have trouble seeing thatdeep into their supply chain
and having high-qualitydata about, you know,
(34:21):
what are the emissions thatdeep in their supply chain?
So, you know, one of the things,and some of the companies
that worked with us on this year's report
are trying to fill that gapby becoming just specialists
in the recording and reportingof things like emissions data
or employee health and safety data
that can be tracked all theway back and up supply chains.
But that's a currententrepreneurial innovation,
(34:44):
not something that's existed for a while.
- Yeah, and this kind of goes back
to what we were sayingbefore of, like, this is,
they have broken this intothe doable piece, right?
And from there, so yeah,that was my next question,
which is, where do they start?
It sounds like that's one example
of like where you could start,
because they are ableto go back far enough
where they can make tweaks orchanges and make a difference.
(35:07):
Whereas, when you startgetting into your partners
and your partner's partners
and your partner's partner's partners
is where a lot of these,
it strikes me that a lot ofthese challenges are gonna last.
- Oh yeah, and the morepainful part of that, too,
or what adds difficulty is that,
I think you're right, that if, you know,
say a firm reads our reportor reads something else
(35:28):
and says, "Okay, I wanna do more here,"
certainly, you know, and like you said,
the first step is getyour own house in order.
You know, makes sense,
and particularly around thingslike energy conservation
and in some ways what we'dcall Scope 1 emissions,
it's clear which steps totake and how to get there.
But the real challenge is thatmost of a firm's emissions
(35:50):
are in what's called Scope 3 emissions,
which are the third partiesmoving your goods around
between you and your suppliers.
And that's the biggestpart of a firm's emissions
according to most studies.
So how to even collect thatdata is still being figured out.
Those products are still in the offing.
And I think that's kindawhere this industry goes next.
(36:13):
- We have been speakingwith David Correll,
research scientist and lecturer
at the MIT Center forTransportation & Logistics,
co-director of the MIT FreightLab,
and the principal researcher
on the annual State of SupplyChain Sustainability report.
Dave, thanks for joining us again.
I'm sure we'll haveyou back sometime soon.
- I hope so.
- Let's leave with sort of what's next.
So what do you do with this report now?
(36:36):
It is available digitally, sscs.mit.edu,
where it's available withthe digital interface
and then also downloadable as a PDF.
What do you do next with this piece?
Or what can other folks do with it?
- I do exactly this.
I take it out into the worldand socialize the ideas,
see where we got it right,
see where maybe our interpretationwas missing something,
and hopefully someone inthe audience of, you know,
(36:57):
this audience or the onesthat I have coming up
will point out what they think.
So right now I'm just in the mode
of sharing this with the world
and seeing what the world thinks of it,
and we'll report back whatthe world thinks of it
next time we chat.
- And with that, you have been listening
to MIT CTL's "SupplyChain Frontiers" podcast.
I'm Benjy Kantor.
Dave Correll, thank you for joining us.
I really appreciate it.
(37:18):
- Thank you.
- Thanks for listening to this episode
of MIT "Supply Chain Frontiers,"
presented by the MIT Centerfor Transportation & Logistics.
Once again, the State of SupplyChain Sustainability 2023
is available for free sscs.mit.edu.
And to check out other episodes
of MIT "Supply Chain Frontiers,"
(37:38):
visit us at ctl.mit.edu/podcasts.
And for more on thecenter's research, outreach,
and education initiatives,visit ctl.mit.edu.
Until next time.
(bright upbeat music)
(bright upbeat music)
- Welcome to MIT "Supply Chain Frontiers,"
presented by the MIT Centerfor Transportation & Logistics.
I'm your host, Benjy Kantor.
Each episode of "Supply Chain Frontiers"
features center researchers and staff
or experts from industry
for in-depth conversationsabout supply chain management,
logistics, education, and beyond.
Today, we welcome David Correll,
(00:21):
lecturer and researchscientist at MIT CTL.
He's led the annual
State of Supply ChainSustainability report
for the past three years,
and this episode, we'lldive into the findings
of the most recent, the 2023 report.
The State of SupplyChain Sustainability 2023
is a co-presentation
of the MIT Center forTransportation & Logistics
and the Council for SupplyChain Management Professionals,
(00:42):
and was funded in part by generous support
from Avetta, C.H. Robinson,and Isometric Technologies.
The full report is available now for free
at sscs.mit.edu.
(bright upbeat music continues)
You may remember David
from his past appearances of this podcast
as both a guest and a host.
Dave, you've left me somepretty big shoes to fill.
(01:03):
Welcome back to "Supply Chain Frontiers."
- Thank you so much for having me,
and I'm excited to get this conversation
between you and me recorded.
- Yeah, so we'll dive right into it.
First, really just to give everyone,
laypeople and professionals both,
give us a broad overview of what you mean
by supply chain sustainability.
When did people startpaying attention to it?
(01:24):
- Sure, you know, and as I was thinking
about what to bring to this conversation,
I thought of what is probablythe most disappointing
but interesting way toanswer that question,
which is what motivates the study
is that no one has the same notion
of what the term means, you know?
So when you very naturallyask the question,
"Hey, what do we mean by this?"
(01:45):
as a researcher, my inclination is to say,
the fact that my answer is no good
is the reason we do the study we do.
So with that disappointment,I'll walk into it a little bit.
One thing that I've observedis that we take the results
of our research out into the world.
You know, sometimes we encounter people
who are already gung-ho aboutsupply chain sustainability
(02:07):
and wanna be part of theircompany's efforts to promote it.
Other times, we run intopeople who are more skeptical
of sustainability efforts in companies.
The thing that I thinkbrings everyone together
is everyone is equally maddened
by the fact that none of usmean the same thing by the term.
So that's a long way of saying
(02:29):
we're trying to narrow down the definition
with the work we're doing.
But I do think it's fair to say,
well, in general, what do you mean?
In general, we follow
the UN Sustainable Development Guidelines,
which include bothenvironmental and social impacts
of supply chain decisionsacross firm boundaries.
So if I'm a company that'sinputting materials,
the impact on theenvironment and communities
(02:51):
that surround my firm and my suppliers
are part of a supply chainsustainability journey.
- I'm glad you mentionedthat, 'cause actually,
and this may be to confuse things,
so I'm happy to confusethings a little bit,
I think that publicperception of sustainability
is one of environmental concerns,
like when a company saysthey're green, right,
and applying that to their supply chains.
But in terms of supplychain sustainability,
(03:13):
there's also that relation
to lowercase flexibility and strength
but capital R, Resiliencein terms of supply chain.
The people who were taking the survey
that led to this report,does their perception matter?
What is their perception
versus what definition you're using?
(03:34):
- Yeah, thank you, so theirperception definitely matters.
And the way I would thinkabout it is it allows us
to sort of not have toprescribe an answer.
So when we started this project,
there was actually some internal debate
on the research team;
does supply chain sustainabilityinclude social issues,
(03:54):
like issues of social justice?
Some people said, "No, no way.
That's not part of sustainability.Don't ask about it."
Other people on the researchteam said, "No, you know,
in my heart, that is part ofsustainability, ask about it."
There was no good way to stopthat fight except to say,
we'll ask the world,
and if the world says socialissues are not part of it,
(04:15):
then we'll stop asking.
But the exact oppositeturned out to be true.
Sort of our firstheadline-making conclusion
when we were able to first compare data
was that social issues are, in fact,
the fastest growing components
of supply chain sustainability.
So what the respondentssay definitely matters,
and that's what we're after.
We're not trying to beprescriptive or didactic
(04:40):
about how to do supplychain sustainability.
We're really trying to just understand
what is the state of play acrossgeographies and industries
as far as what's included insupply chain sustainability
and how firms try to achieve it.
- And so what might besome of the social aspects
of sustainability that folksare or are not familiar with?
(05:01):
- Excellent, yeah, so our survey asks
about 10 different dimensions
of supply chain sustainability,
five environmental, five social.
And the social ones are things
like supplier diversity,equity, inclusion,
fair pay and fair trade,employee health and safety,
things that are outside of justthe environmental components
of our firm's operations.
(05:23):
And one of the things that we've seen
is that when we look at how firms act
on environmental versus social issues,
sometimes hesitancy to actis because it's, I think,
hard for firms to knowwhich actions to take
to try to make a more sociallysustainable supply chain.
So in addition to thesurvey data that we collect,
(05:46):
we also do executive interviews.
And one of those thatreally struck with me
was a gentleman whooperates warehouse software.
He designs warehouse software.
And he said, "Look, Dave, I get it.
You know, social issuesare increasingly important
around the world.
We wanna be part of that.
But if you tell me tomake a greener warehouse,
I know what to do.
I know how to reduce energy costs.
(06:07):
If you tell me how to make
a more socially sustainable warehouse,
I simply don't know how to take action."
And so one of the thingsthat we've uncovered,
I think, through this report,
is that there are myriad social issues.
People feel pressure to act on them,
but firms don't always know
what their first step towards action is.
- Yeah, and the bulk of the...
In fact, likely 100% of the people
(06:28):
who are taking your surveythat led this report
are people from within these industries.
But where is the pressureon companies coming from?
Is it coming frominternally, from their staff,
from their employees,from their management?
Or is it coming from aseparate public piece,
who wasn't necessarily providing data
for you for this survey
(06:49):
but is part of this generalworld of public perception
and sustainability andgreening and things like that?
- So that really gets toanother one of, I think,
our most surprising results is, you know,
where does the pressurecome from for firms
to engage in supply chainsustainability in the first place?
And two things really jumpout to the research team
(07:10):
as we've analyzed the data.
And I should say that, you know,
we're in our fourth yearof data collection now.
Each year we get around2 to 3,000 respondents.
So, you know, for the most recent year,
we've got 2,300 respondents.
But across the four years,
that sums up to around 9,000 responses
answering surveys that aretranslated into English,
(07:30):
Spanish, simplifiedChinese, and Portuguese.
So we've got a pretty big picture.
And I bring that up to saythat over the four years,
none of the 10 sources of pressure
that we measure showed declines.
So at least over the last four years,
the pressure appears to reallybe real and ratcheting up.
And when we look atwhich sources of pressure
(07:53):
amongst the 10 that we measureare ratcheting up the most,
far and away, the answer tothe fastest-growing pressure
is investors, a 25%increase over the four years
compared to much smallerincreases from other sectors.
Investors is followed bycorporate buyers, or B2B buyers.
And that was really supported
(08:14):
by the executive interviewwork we did, too,
where firms suggested thatthe sources of capital,
their lenders are the peoplewho are really pushing them
to invest in supply chainsustainability efforts.
- So from those investors in B2B,
which of the areas of sustainability
is driving their pressure,
or what are the aspects ofthe supply chain and logistics
(08:36):
that they're focusing on for that purpose?
- That's a great question,
and our data only gets us sofar before we have to infer,
(chuckles) but we know thatfrom our executive interviews,
you know, we ask like, okay,
well, how does that pressure show up?
What does that really look like
when your banker says be more sustainable?
We know that it shows up inthe form of questionnaires
to firms (08:56):
what are you doing about x, y, and z?
And oftentimes, those relate to emissions.
And so we did a wholedeep dive on emissions
in this year's report thatmaybe we'll get to talk about,
and, you know, what isthe motivation for that?
This is where, you know,
anyone who wants to to readour report is very welcome to.
We're happy to be able to shareit with the world for free.
(09:17):
But one interpretation of whyinvestors might be motivated
to push for moresustainable supply chains,
and why they're pushing inparticular around emissions,
is investors want the firmsthat they invest in to be ready
for the legislation that'scoming down the road.
And there's some expectationaround carbon prices,
new restrictions on carbon emissions
(09:39):
that investors want theirfirms to be ready for.
You know, another potentialmotivation for investors
is that sometimes the investorsare investing in the brands,
and a major environmental catastrophe
or a major social catastrophe,
for example, discovering childlabor in the supply chain,
can be really diminishingto the value of the brands
(09:59):
that the investors are investing in.
So those are some of themain motivations we hear,
at least from our anecdotal research.
- And after four years of thisreport coming through CTL,
this is perhaps asking formore inference on your part,
but are the companies payingattention to the report?
How much do they care, Iguess, is the question,
(10:20):
that they're receiving thispressure and that the investors
are thinking about these kinds of things?
- That's a really fair question.
So, you know, I do haveto infer, as you say,
so we don't have that barometerin our survey instrument,
although I wish we did, but the-
- The, "Do you care?Yes or no," check mark
is on next year's survey, right?
- Well, there's a few ways for us
(10:40):
to at least give some insightinto that important question.
And one is that, you know,
projects like this don'ttypically last for four years.
So that we have continuallyfound support for this project,
you know, we're completelyunderwritten by sponsors,
some of them repeat sponsors,you know, suggests to me
that that's a real interest in learning
(11:03):
about supply chain sustainability
and positioning themselves asthought leaders in that space.
Another question that we askthat I think is maybe helpful
to at least getting insightto that question is,
for each of the 10dimensions, we ask respondents
to rate their firm'sinvestments in those issues
(11:24):
and goals in those issues.
And then we plot thedifference between investments
and goals at an aggregatelevel over the four years.
So the first thing that wesee is everyone sees that,
everyone basicallyresponds that their firm
has a lot higher goalsthan their investments.
(11:45):
So they don't put as much money down
as they talk, colloquially speaking.
What's interesting thoughis that the gap is closing.
Over those four years,
we still see that on the whole,goals exceed investments,
but the gap has closedover the four years.
And, in fact, it's closed mostrapidly among social issues.
(12:06):
So those are two thingswe can grab from the data
that lead me to believe that, you know,
I don't have a percentageestimate, you know,
how much do people care,
or what percentage of people really care,
but those two things lead me to believe
that firms care more thana cynic might expect.
- So we're seeing the lipservice potentially decreasing-
(12:26):
- Yeah.- and some act
or action meeting upwith the amount of talk.
- An action meeting up withthe talk is part of it,
you know, but another part ofit is thinking about the story
about the warehouse software engineer
and, you know, his challenge to me,
"Hey, Dave, look, I get it, I care,
but I just don't knowhow to make a warehouse
more socially sustainable."
You know, I think over the four years
(12:48):
that we've been in this space,
that gap has been addressedentrepreneurially by people
who are now making software solutions
and supplier vetter solutions
and bringing things to the marketplace
to try to make firmsmore socially sustainable
that didn't exist before.
So I think maybe less lip service,
but also that gap isbeing filled by people
who wanna help firms on that journey.
(13:11):
- Yeah, it's funny, itreminds me of this story
that we were hearing from yourcolleague Josué Velázquez,
which, about the effortsthat some companies are doing
to actually make things greener
or more sustainable interms of supply chain
that actually have a deleterious effect.
So, like, the ways that they'repacking things into freight
(13:31):
actually ends up being more efficient
and sustainable for packing things,
but makes delivery andfuel consumption heavier.
And so they have these sortof, like, interesting offsets
for the efforts that they're trying to do.
So it's that that conundrum of like,
how do we make the warehouse-
- Oh yeah.- sustainable. (laughs)
Yeah, interesting.
(13:52):
- And the upside of that
from an educator'sperspective is that, like,
the most motivated students
are always drawn to the hardest problems.
And so when we see that, like,
it's just not easy to even know what to do
if a firm wants to make themost sustainable choice,
because there are so many trade-offs,
quantitative and qualitative,to balance in one's head.
(14:14):
The downside is that it's hard.
The upshot is that, you know, as someone
who works with supply chainstudents all the time,
hard problems draw great talent.
And I think we're seeingthat in our students,
who really want to engage us
on state-of-the-artsustainability projects.
- Yeah, and what's the...
Like, does your teamand your colleagues work
on the most effective ways to approach it?
(14:36):
Like, is it breaking these hugeprojects into doable tasks?
Or for, you know, yourwarehouse manager example,
like, how is it thatthey are eventually able
to take steps in thedirection they wanna go?
- Oh, I think like all science,
the progress is incrementaland maddeningly slow.
(laughs) So I think,
(14:56):
you know, that we all cutout different parts of it
that maybe we have the best potential
to contribute to meaningfully.
So, you know, you talked withJosué, and he's done all sorts
of really cool vehicle routing problems,
where, thinking about howto route the vehicles.
Another one that's of interest to me
is a challenge that needs to be solved
in this particular case is like,
(15:17):
so let's say I am a shipper,
and I am committed to paying more
for greener transportation,
if someone can prove tome how much greener it is,
and I can measure thatagainst the extra cost
of paying them to do it.
And, frankly, those shippersexist. Those brokers exist.
They come to our office and ask for help
(15:39):
because it's not out there.
Like, even how to quantify the benefit
is not yet figured out.
And why is it hard?
And hard, it's part because,
if you think about freight movements,
they're oftentimes sharedbetween different companies.
How are we going to apportionthe offset of carbon emissions
that came from one truck movingmultiple companies' freight?
(16:00):
It's a lot to figure out.
So hopefully researchers,
like those of us at MIT CTL working on it,
will move the ball a littlebit before we retire.
- So certainly, in thegrand scheme of things,
sustainability within supplychain is still in its infancy.
And supply chain as astudy in and of itself
is still sort of, in thegrand scheme of things,
(16:20):
in its infancy.
And, also, I think oneother potential roadblock
or challenge is thatconventional wisdom might say
that sustainability would take a backseat
during a major crisis,like the last few years,
during COVID-19, right?
But in your research, you'vefound that sustainability
has proved resilient in the face of this.
So why do you think that is?
Have you seen any exceptions to that rule,
(16:43):
or would you even call it a rule?
- Yeah, oh, thank youfor finding that one,
because I think that is ourmost surprising discovery,
and maybe what we bring to the world
that I hadn't seen previously documented.
So what we did is decidedthat for better or for worse,
over the last four years,
there's been no shortage of crises,
(17:04):
so we'll directly ask the question,
how has this crisis impactedyour firm's commitment
to supply chain sustainability?
We did two years of COVID.
First year, we got roughly 80% of people,
if they said, "Yes, thisimpacted my firm's commitment
to supply chain sustainability,"
said, "Well, it actually increased it,"
versus 20% saying decreased.
(17:26):
First time we saw that,
personally, I thought, youknow, something's wrong.
Did we code the question wrong?
I kind of thought in thatenvironment, people would say,
"Get off my back. I don'thave time for this right now."
We checked everything was right.
We asked the question again another year.
And we got the same result,
which is, just from a researchperspective, exciting.
Because you rarely get the opportunity
(17:48):
for replication in socialsciences, but we had it here.
And so we started asking inour executive interviews,
what's this about?
Why are firms that said COVID-19 changed
their firm's supply chainsustainability effort
saying that it increased it?
And we heard back frommultiple sources that, like,
"COVID broke my supply chain.
(18:09):
My management gave me newtime and budget to fix it.
And when I did it, I did it now
with sustainability top of mind
in a way that it wasn't way back when,
when these supply lineswere originally drawn."
So, you know, for better or for worse,
there's some benefit to the crisis,
or at least some opportunitythat came outta that crisis.
And I bring those up becausein this most recent year,
(18:31):
we asked about two different crises.
One was Russia's invasion of Ukraine,
and the other was projectionsof economic recession in 2023.
Focusing in on the Ukraineone first, you know,
less people said it impactedtheir firm's commitment
to supply chain sustainability,
and most of those were in Europe.
But when they said yes, we sawthe same general phenomenon.
The majority of the yes answers,
(18:53):
the majority of respondents who said,
"Yes, this crisis impactedmy firm's commitment
to supply chain sustainability,"said that it increased it.
When we started askingaround and reading more
and trying to understandwhat was going on,
to my mind, the phenomenon was the same.
Essentially, supply linescoming out of Russia were broken
(19:13):
either by firms that were trying
to de-Russify their supply chain
or were just trying to avoid sanctions.
That gave them,
the supply chain managersfor those companies,
opportunities to redraw those lines.
And when they redrew them,
they did things to advance sustainability
that they didn't have managerialpermission to do before.
And some of it was franklymotivated by a fear
over lack of access to Russianhydrocarbons in the winter.
(19:37):
It was much easier to say,
"I'm gonna put electricvehicles in our fleet,"
in the face of that crisis thanit was without that crisis.
So in that sense, we see a surprising
but consistently observed result
that when supply lines are broken,
sustainability seems to thrive.
And that's something I wouldbet on from the research.
(19:57):
Now, the flip side of thatis that when we asked,
"Did your firm's commitment
to supply chain sustainability change
as a result of projectionsof economic recession?"
if they said yes, the phenomenon reverses.
If they said yes, the majority said,
"Well, we actuallydecreased our commitment."
So to my mind, the inferenceis when supply lines are broken
(20:19):
by crisis, sustainability thrives.
But when downstreamsupply chains are starved
of sales opportunities, that'swhen sustainability withers.
Maybe another interpretationis that the commitment
to supply chain sustainability
is uniquely sensitive toprojections of consumer demand,
and it is not as sensitive to projections
(20:40):
of supplier disruption.
So it's almost like we'refinding the funny bone,
if you will, of supplychain sustainability.
If you mess with oreven give the impression
that there's weakness in consumer demand,
which is what I think the bottom line
of a recession protection is,
that's when the sustainabilityknob turns down.
(21:02):
And so that's a uniquelysensitive pain point
compared to if you say, you know,
I think we're gonna havesome real upstream upheaval,
we're gonna lose some suppliers,
that doesn't seem to haveas sensitive of a connection
to sustainability commitment.
- Well, and that was the question
that was kind of coming up in my mind,
which is the concept of sustainability
as a way to address risk, asa way to improve resilience
(21:28):
during a crisis or during conflict.
Sounds like there's some buy-inthere from the upper levels.
When the world gets beyond conflict,
when we've solved allthe rest of the problems,
will the C-suite respond in the same way
towards committing resources
to having sustainability be
(21:48):
part of their risk managementand resilience program?
That's just a theoreticalquestion at this point, I guess.
- Yeah, no, no, it's a fair question
because I think another part of the reason
that we observed thephenomenon that we did,
and one respondent said it so well,
he used military terminology,
he said, "The pandemic gave me air cover
to do the things I already wanted to do."
(22:10):
So it gave people who were interested
in improving their sustainability profile
opportunity to do it, sothat's part of the explanation.
But I think the other part is like,
the response or the counteraction
to a supply chain crisis anda sustainability initiative
have a lot of the same moves.
(22:31):
It's invest in visibility,
understand who your suppliers are,
understand how they're producing,
dig into that at a deeper level.
So part of it is, I think,
that it's essentially thesame response to crisis
or response to motivation,
whether it's shoring up after a crisis
or improving supply chain sustainability.
Either way, you're digging deeper
into your supplier's practices.
(22:53):
- So I guess shifting gears a little bit
with relation to the past surveys
and reports that have been done,
we've been finding previous reports
have found that sustainability efforts
may vary widely by geographic reason.
And at this point, I'll givea a thank you to our producer,
Dan McCool, who is diggingdeep into the reports
and finding some of thesecomparisons from year to year,
(23:17):
in this particular example,
where we find that thesustainability efforts are stronger
in more economicallyprosperous global north areas.
What's the story there?
Do those areas thatare having more success
with more efforts andresources addressing it,
do they have a responsibilityto other areas,
to global south countries,
(23:38):
to help them become more sustainable
within their logistics and supply chains?
- Oh yeah, that's one of the interesting
but perhaps concerning results
that's come up two years in a row now.
So the first time we lookedat geography, you know,
we're comparing responsesfrom all over the world,
and that becomes sortof a lot of comparisons.
(24:00):
You know, if I'm gonna sayEurope versus Latin America,
America versus the Middle East,Middle East versus Europe,
it becomes a lot ofcomparisons to present.
And so we thought, okay,what is a simple way
to divide the world that mightgive us meaningful insight
into how people around the world approach
supply chain sustainability?
We tried two, the firstone, east versus west.
(24:24):
So is it like a Cold War division?
Second one, global northversus global south,
is it an economic development division?
the one that rang true statistically
was global north versus global south.
That's where we saw the most differences
in how respondentsprioritize different issues
related to supply chain sustainability.
(24:44):
We built on that this year
with a deep dive on net zero goals.
And we looked at where around the world
are firms adopting net zero goals.
And it really was a surprising result,
or not surprising butkind of jarring result,
when we saw that adoption in the US
(25:05):
and in the European Union area,
right around 50%, closer to60 in the European Union.
Adoption, in other parts of the world
where we have a statisticallysignificant sample,
in Asia and LatinAmerica, in the Caribbean,
in the teens and the 20%.
So the adoption of net zerogoals really seems to be
in this global north.
(25:28):
And one of the charts in thereport that gives me pause
and usually gives audiencespause as I present this
is if we use adoption on the y-axis
and World Bank percapita GDP on the x-axis,
a couple things jump out,
and I encourage listeners,if you're interested in this,
to go take a look at the chart.
If we look at per capitaGDP in the United States
(25:49):
and in the European Union
and compare it to theworld per capita average,
we're just way off.
Like, our lived experienceis so much different
than the global experience.
And if we look at where,
the parts of the world wherewe have good responses,
Latin America, theCaribbean, and parts of Asia,
(26:09):
they're really in linewith global per capita GDP,
and there's far lower ratesof net zero adoption there.
So, you know, what does all that mean?
One thing, it gives me pause
in that net zero is intended to be a tool
to fight a global problem,
but it's a tool that's onlybeing deployed in limited areas.
(26:30):
So I think we mightnot have the right tool
if we're trying to solve a global problem.
- This is the fourthannual report through CTL.
At this point, what are the newest things
that you're finding?
Are there things that arecoming to you at this point
after four years that are surprising you?
What are the biggest learnings
that are being corroborated every year?
You've touched on that a little bit,
(26:51):
but it kind of goes intothis questioning of, like,
what happens beyond the fourth year?
Are there things youstill need to dig into
or that you can find out,with a fifth survey perhaps,
if that's something that you end up doing?
- Yeah, excellent, so yeah,
the first things that jump out to me
are the things thathave been corroborated,
which gives us, I think, confidence
(27:13):
that we've documented a newand important phenomenon
in the world, and that is the way
that supply chain sustainability responds
to what we call acutesupplier disruptions.
So we've seen that multiple times,
and we'll continue testing,
but that seems to be something new
that it's understood aroundthe world in different ways.
That seems to be something important
(27:34):
and that's corroborated,that I hope, you know,
we can bring to the world's understanding
of supply chain sustainability.
What we don't have but what we need
is that when we look at practices,
we see that most firms havesome sort of code of conduct.
And for people who aren't familiar,
what that really means, it just says,
(27:56):
"These are our rules. Follow them."
Far fewer firms havesomething where they say,
"These are our rules,"
you know, speaking to their suppliers,
"Let us help you develop up to them,
if those aren't your rules."
Far fewer have somethingeven rarer to say,
"Here are our sustainability goals.
What are your sustainability goals?
(28:16):
Let's figure out a mechanismto work on them together
and share the benefits."
But I think that's really is what needed.
So I hope we get to go forward,
and if we do, I think presenting readers
go-bys or examples ofhow to work more deeply
with your supply chain toachieve your sustainability goals
is where we have to get to next.
(28:37):
- Just from some sort of,like, survey nitty-gritty,
can you talk about the process
of translating the surveyinto those multiple languages
and kind of what went into that
and how that helped with thedistribution of the survey
and getting to the final report?
- Oh, my pleasure, those aresome of my favorite stories
of our team's efforts on the project.
(28:57):
So, you know, this year wewent out in four languages,
English, Spanish, Portuguese,and simplified Chinese.
The way we do that iswe do multiple passes
through the translationswith native speakers
to make sure that we'regetting at the right thing.
So, you know, I'll work with the team
to write the survey in English.
We'll give it to some bilingual folks
(29:19):
who speak each of the languages.
They'll take a pass at translation.
Then I'll convene another group of people
who also are native speakers
to make sure that that works out.
And I bring up those mechanics
because, you know, some of themost fascinating discussions
for me, you know, whereI've had great opportunity
to learn as part of doing this research
(29:39):
is convening the native speakers
to talk about how they choose the words.
And one that really jumpsto mind is diversity.
So we had, I believe, in year three,
we had someone fromMexico, Columbia, and Peru
reviewing our existingSpanish translation.
So we had this group thinking
about how we would ask questionsabout supplier diversity.
(30:03):
And so one of the respondents said,
"Oh, you know, these are programs
that help hire peoplewith physical handicaps."
And then someone elsesaid, "No, no, no, no, no.
In my country, that meanshelping to support businesses
that come fromunderrepresented communities."
And then they described theunderrepresented communities
in their country.
And we got into this battleabout what does this mean.
(30:25):
To my mind, that really kind of highlights
what makes this studyimportant but also difficult
is that even in the notion of the words,
there's so much packedinto each respondent's head
about how they're answering the questions,
that we're all seeingthings a little differently.
And hopefully, with a report like this,
(30:47):
we can at least presentsome global baselines
that allow people to have amore productive conversation
to get to, you know, here's where I'm at,
and here's where you're at.
- And then once yousort of deciphered those
or peeled them apart
or put them back together again, I guess,
what is it like when...
What is it like on the ground
for individuals working at companies
(31:08):
or for companies themselves,
when they're making these,
when they're heading toward net zero,
or when they're making improvements
or addressing supply chainwithin sustainability?
What are the specific kind of things
that companies are now doing?
- Sure, so this is one of the resources
that we're really proud of in the report.
And I wanna highlight and thank everyone
(31:28):
who contributed to thisreport, including Kellen Betts,
who's also a researcher here on our team,
who made some of these results filterable
by geography and industry.
And I bring that up and that,
so one of the things we ask is,
what is your firm doing aboutsupply chain sustainability?
And then we've built
what we call the staircase of practices.
(31:50):
So the bottom rung iswhat everyone's doing.
And so that's like 80% of people
have built their firm'ssustainability code of conduct.
These are our rules.
And then you can climb up that staircase
to sort of the rarer and rarer air
of the lesser applied tools.
And that's really a testamentto Kellen's ingenuity
that readers have really enjoyed.
(32:11):
You can go in there and put,
"Well, I work in manufacturing in Europe,"
and can see where you arerelative to your peers
on that benchmark.
So anyone can see, you know,
what firms are doing in their sector,
as long as we have the data,
by using those filterabletools at sscs.mit.edu.
But the bottom line for everyone
(32:32):
is that everyone seems to have documented
something that theycan point to that says,
"These are oursustainability expectations."
Those are communicatedto their supplier base.
I think that's sort of table stakes.
The more aspirational stuff
is helping suppliers develop to meet those
(32:53):
and working with suppliersto share the benefits
of sustainability winsacross firm boundaries.
- And it looks likeachieving those kind of goals
or working towards those goals
certainly would requirea lot of collaboration
between tiers of the supply chain,
you know, the second, third,fourth, fifth tier of folks.
(33:14):
So, and where the second andthe fifth part of the chain
are disassociated from each other,
but they're so to tightly, you know,
coordinated with each other,
and it might not be thereyet for a lot of industries,
how do you see that evolving?
- That's a great pointin that I think people
outside of this world really over assume
(33:38):
how available data is,(chuckles) you know,
so I think, you know, if you'renot working in this world,
you would think that, youknow, major companies,
the Procters & Gambles of the world,
the major motor companies of the world
would have greatvisibility into everything
that their many suppliers are doing
and the ability to track thesustainability implications
(33:59):
as far back as they want.
But that is really far from the truth.
And I don't speak to thosecompanies specifically
just to say that, you know,even firms that we think of
as being quite powerfuland quite established
have trouble seeing thatdeep into their supply chain
and having high-qualitydata about, you know,
(34:21):
what are the emissions thatdeep in their supply chain?
So, you know, one of the things,and some of the companies
that worked with us on this year's report
are trying to fill that gapby becoming just specialists
in the recording and reportingof things like emissions data
or employee health and safety data
that can be tracked all theway back and up supply chains.
But that's a currententrepreneurial innovation,
(34:44):
not something that's existed for a while.
- Yeah, and this kind of goes back
to what we were sayingbefore of, like, this is,
they have broken this intothe doable piece, right?
And from there, so yeah,that was my next question,
which is, where do they start?
It sounds like that's one example
of like where you could start,
because they are ableto go back far enough
where they can make tweaks orchanges and make a difference.
(35:07):
Whereas, when you startgetting into your partners
and your partner's partners
and your partner's partner's partners
is where a lot of these,
it strikes me that a lot ofthese challenges are gonna last.
- Oh yeah, and the morepainful part of that, too,
or what adds difficulty is that,
I think you're right, that if, you know,
say a firm reads our reportor reads something else
(35:28):
and says, "Okay, I wanna do more here,"
certainly, you know, and like you said,
the first step is getyour own house in order.
You know, makes sense,
and particularly around thingslike energy conservation
and in some ways what we'dcall Scope 1 emissions,
it's clear which steps totake and how to get there.
But the real challenge is thatmost of a firm's emissions
(35:50):
are in what's called Scope 3 emissions,
which are the third partiesmoving your goods around
between you and your suppliers.
And that's the biggestpart of a firm's emissions
according to most studies.
So how to even collect thatdata is still being figured out.
Those products are still in the offing.
And I think that's kindawhere this industry goes next.
(36:13):
- We have been speakingwith David Correll,
research scientist and lecturer
at the MIT Center forTransportation & Logistics,
co-director of the MIT FreightLab,
and the principal researcher
on the annual State of SupplyChain Sustainability report.
Dave, thanks for joining us again.
I'm sure we'll haveyou back sometime soon.
- I hope so.
- Let's leave with sort of what's next.
So what do you do with this report now?
(36:36):
It is available digitally, sscs.mit.edu,
where it's available withthe digital interface
and then also downloadable as a PDF.
What do you do next with this piece?
Or what can other folks do with it?
- I do exactly this.
I take it out into the worldand socialize the ideas,
see where we got it right,
see where maybe our interpretationwas missing something,
and hopefully someone inthe audience of, you know,
(36:57):
this audience or the onesthat I have coming up
will point out what they think.
So right now I'm just in the mode
of sharing this with the world
and seeing what the world thinks of it,
and we'll report back whatthe world thinks of it
next time we chat.
- And with that, you have been listening
to MIT CTL's "SupplyChain Frontiers" podcast.
I'm Benjy Kantor.
Dave Correll, thank you for joining us.
I really appreciate it.
(37:18):
- Thank you.
- Thanks for listening to this episode
of MIT "Supply Chain Frontiers,"
presented by the MIT Centerfor Transportation & Logistics.
Once again, the State of SupplyChain Sustainability 2023
is available for free sscs.mit.edu.
And to check out other episodes
of MIT "Supply Chain Frontiers,"
(37:38):
visit us at ctl.mit.edu/podcasts.
And for more on thecenter's research, outreach,
and education initiatives,visit ctl.mit.edu.
Until next time.
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