Redefining Value: Synchronising Business Strategy with ESG/ Sustainability
Why is it better to identify significant impacts in the value chain and not just the supply chain?
Identifying significant impacts in the value chain as opposed to solely focusing on the supply chain is crucial for businesses seeking sustainable growth AND competitive advantage.
The value chain approach allows for a more comprehensive understanding of customer preferences and value creation, aiding in strategic decision-making and competitive advantage. Focusing solely on the supply chain may overlook crucial factors that contribute to overall stakeholder satisfaction and market positioning.
Supply chain
The supply chain is essential for ensuring the smooth flow of goods and services from their origin to the end consumer. It involves the management of various processes, including procurement, production, distribution, and logistics. However, while the supply chain is vital for the physical movement of products, it often overlooks the strategic aspects of value creation and customer satisfaction.
Value chain: delve into the intricacies of what stakeholders truly value and how the organisation can meet those needs more effectively
On the other hand, the value chain encompasses a broader perspective, focusing on the series of activities that add value to a product or service from the perspective of the stakeholders (not just the a specific stakeholder, e.g. the customer). It includes both primary activities like inbound logistics, operations, outbound logistics, marketing, and sales, as well as support activities such as procurement, technology development, human resource management, and firm infrastructure. Analysing the value chain enables businesses to delve into the intricacies of what stakeholders truly value and how the organisation can meet those needs more effectively. By understanding the impact of each stage of the value chain on the final product or service, businesses can fine-tune their operations, address stakeholder needs, enhance customer experiences, and differentiate themselves from competitors.
Identification of significant impacts throughout the value chain (Materiality)
Moreover, the value chain approach facilitates a more holistic understanding of the market dynamics and customer preferences. By identifying the activities that contribute the most to the perceived value of the product or service, businesses can allocate resources more efficiently and prioritise investments in areas that directly impact stakeholder satisfaction. For instance, when it comes to customers, a critically important stakeholder, by recognizing that customer service plays a significant role in the overall customer experience, companies can invest in training and technology to improve this aspect of their value chain, thereby enhancing customer retention and brand reputation. Focusing on the value chain also allows businesses to adopt a more customer-centric approach to their operations. By aligning activities to meet specific customer needs and preferences, companies can tailor their products or services to deliver a more personalised and targeted experience. This customer-centric approach enhances brand loyalty and creates a competitive edge, as customers are more likely to remain loyal to companies that consistently meet their needs and expectations.
Identify potential areas for innovation and process optimisation
Additionally, considering the impact across the entire value chain helps businesses identify potential areas for innovation and process optimisation. By recognizing the interconnectedness of activities and their impact on the final product, companies can streamline operations, reduce costs, and improve overall efficiency. This holistic view encourages a culture of continuous improvement and innovation, leading to the development of new products or services that better meet evolving stakeholder demands and market trends.
Creating value for the business, the world and stakeholders
Identifying significant impacts within the value chain is instrumental in enabling organisations to create value not only for their business but also for the world and stakeholders. By comprehensively analysing each stage of the value chain, businesses can strategically align their operations with sustainable practices, reducing their environmental footprint and contributing positively to the world. This may involve implementing eco-friendly production processes, sourcing ethically and responsibly, and minimising waste. Such initiatives not only enhance the brand’s reputation and appeal to socially conscious stakeholder, they foster a healthier and more sustainable environment and value chain resilience. Furthermore, by prioritising value-adding activities that directly impact stakeholder satisfaction and overall societal well-being, organisations can cultivate stronger relationships with stakeholders, including employees, suppliers, and local communities. Through responsible and ethical practices, businesses can promote social welfare, drive economic development, and establish themselves as socially responsible entities, thereby creating a positive impact that extends beyond financial success.
While the supply chain is critical for the physical flow of goods and services, understanding the value chain enables businesses to create a more stakeholder-centric, efficient, and innovative approach to their operations. By identifying significant impacts within the value chain, businesses can build a sustainable competitive advantage and adapt more effectively to changing market dynamics and customer preferences.
The GRI Standards certified course delivered by FBRH ‘Learn how to prepare a 1st Class GRI Sustainability Report’ prioritises the identification of significant impacts across the value chain. This approach equips participants to seamlessly integrate business strategy and value creation with sustainability to create/ deliver value for the business, the world and stakeholders.
Identification of significant impacts throughout the value chain (Materiality)
By identifying significant impacts across the value chain, an organisation can effectively synchronise its business strategy and value creation with sustainable development objectives. This alignment not only facilitates the delivery of tangible value to the business, but also the opportunity to deliver value to the world and stakeholders.The example below demonstrates that if a certain activity has a significant adverse effect, the organisation can explore alternatives that both deliver value and reduce this impact.
Japanese automakers streamlined their operations by adopting a just-in-time delivery approach for vehicle tires, eliminating the need for storage facilities, maintenance, and additional resources. This efficient strategy allowed them to allocate the saved resources toward enhancing the end-user experience through valuable vehicle features like automatic transmission, GPS systems, and premium sound setups. Conversely, other global manufacturers persisted with storing tires on-site, incurring costs for maintenance, security, and personnel. These expenditures, though not directly perceptible to customers, constituted a non-value-adding activity. By redirecting resources to customer-centric enhancements, Japanese automakers prioritised the integration of sought-after features, thereby establishing a competitive edge and fostering customer satisfaction.
78% of the world’s 250 largest companies report in accordance with the GRI Standards
SustainCase was primarily created to demonstrate, through case studies, the importance of dealing with a company’s most important impacts in a structured way, with use of the GRI Standards. To show how today’s best-run companies are achieving economic, social and environmental success – and how you can too.
Research by well-recognised institutions is clearly proving that responsible companies can look to the future with optimism.
7 GRI sustainability disclosures get you started
Any size business can start taking sustainability action
GRI, IEMA, CPD Certified Sustainability courses (2-5 days): Live Online or Classroom (venue: London School of Economics)
- Exclusive FBRH template to begin reporting from day one
- Identify your most important impacts on the Environment, Economy and People
- Formulate in group exercises your plan for action. Begin taking solid, focused, all-round sustainability action ASAP.
- Benchmarking methodology to set you on a path of continuous improvement