Sustainable development? Yes, but not at too great a cost: FM Logistic looks into the TSL sector’s approach to ESG

Faced with growing social and regulatory pressures, more and more companies declare their commitment to sustainable development. And yet, the FM Logistic report “The Performance and Sustainability Paradox in Supply Chains” concludes that the reality is that many companies approach such initiatives with great caution. Key concerns include the adverse impact on profitability, with as many as six out of ten respondents indicating that initial costs are too high.

Strategies that flexibly combine environmental and social goals with operational efficiency, taking into account both stakeholder expectations and business reality, are gaining in importance. You can see this clearly in supply chain management, where costly investments often come at odds with short-term profitability.

Over half of business owners (56%) point to savings and efficiency improvements, rather than ESG commitments, as the main driver for sustainable development initiatives. These findings highlight that although sustainability is gaining importance, financial benefits remain the key driver for many companies.

Between performance and sustainable development, you can see a certain paradox. While environmental and social initiatives offer significant long-term benefits, in reality, the driving force behind their implementation is often the prospect of short-term cost savings. Consequently, many companies still view sustainability more as a short-term optimisation tool than a long-term strategy for addressing regulatory and ethical commitments.

According to the FM Logistic report, this focus on short-term results limits companies’ ability to plan strategically and discourages investments with returns only visible in several years. That’s why sustainable development, which by definition is all about thinking ahead, often gets pushed to the back burner. Such a strategy may lead to lost opportunities, particularly given growing consumer expectations and environmental regulations.

Businesses often shy away from the initial costs of going green. In fact, a whopping 60% of those surveyed say it’s spending that is the main roadblock. On the other hand, supply chain experts seem to be moving towards the opposite view. They recognise real benefits gained from integrating sustainable practices into their business objectives. As many as 94% among them believe that the two can go hand in hand: environmental initiatives do not compromise performance, but rather support innovation, boost competitive advantage, and facilitate long-term relationships with customers and partners.

Joining forces is the key to getting results – that’s what 86% of companies surveyed by FM Logistic think. This highlights the growing recognition that collaborative efforts across the supply chain are essential for driving sustainable practices. How well this works depends on effective management, clear goals, and good communication tailored to different business areas.

With today’s complex supply chains and lots of people involved, setting common goals and aligning priorities is a must for effective collaboration. Clear ownership, governance, and processes are essential for ensuring collaboration runs smoothly and efficiently. Effective communication and alignment across different functions within the supply chain are crucial for overcoming barriers and ensuring that everyone is working towards the same objectives.

The FM Logistic report also notes a lack of adequate expert and technological know-how in many businesses. This limits their use of available tools to improve the visibility, efficiency and sustainability of the supply chains. As a result, there is a gap between bold statements and real outcomes. Closing this gap may require an external impetus, such as consulting, technology partnerships, or expertise, to translate strategic goals into specific operational actions. To this end, businesses consider seeking external support to accelerate their transformation, with digitalisation and change management identified as key areas requiring support.

In spring 2024, FM Logistic working with BearingPoint, the consulting firm, looked at whether businesses were ready to build more efficient and sustainable supply chains and if they could work together on this. The study, carried out by Phronesis Partners, the global research company, included a series of in-depth interviews with experts and a survey of 258 executives from various sectors in 18 countries in Europe, the Middle East, Asia and the Americas. Based on data gathered and with market conditions analysed, FM Logistic has published its latest report, “The Performance and Sustainability Paradox in Supply Chains,” which is now available to download at https://www.fmlogistic.pl/.