We are living in a time of great uncertainty and change. As citizens, more of us are demanding sustainable transformation from businesses and governments. Regulations like CSRD are also making this a priority in corporate agendas. But to achieve this transformation, we need to make difficult choices. We spoke with Jack van der Veen, who is a distinguished Professor of Supply Chain Management, to understand how leadership teams can drive the change.
Can you start by telling us a bit more about yourself?
I work as a Professor of Supply Chain Management at Nyenrode Business Universiteit. I have been part of the faculty there for over 30 years. I studied econometrics and operations research and I’ve always been interested in improving things using mathematical modelling. Over time though, I noticed that mathematics alone cannot address the complexity of today’s supply chains. The issues we see are increasingly about management – and especially about the human aspect of management.
This led me to a new path that focuses on supply chain collaboration: how can different parts of the supply chain and different departments within an organisation join forces to provide better products and services? How can they create win-win scenarios? If different departments work better, in unison, organisations can lower costs and create more sustainable supply chains. The same is said to be true for partners in a value chain. The theory tells us that collaboration is better for people, profit and the planet. But this is not how things typically work in practice.
Organisations find it difficult to work together; they don’t have shared goals or shared data. It’s the same for different departments within a company. How can we transition to being more collaborative? This is an intriguing question that touches every aspect of a business, and it’s closely linked to culture, strategy, and leadership. I’ve been wrestling with this puzzle for more than a decade.
The importance of stewardship in corporate sustainability
Nyenrode Business University is the top university for accountants and controllers in the Netherlands. The institution is also known for its commitment to sustainability and for its faculty’s role in advancing the conversation around sustainable business in the country. We had the pleasure of speaking with André Nijhof, a professor and thought leader in the field. We were curious to hear his thoughts on the state of non-financial reporting in the Netherlands and some of the promising frameworks that are helping companies make progress in this area.
You’re in a good position to solve it though, since you teach mostly executives these days.
Yes, that’s true. I teach people who are in a position to make the change. This makes my role very interesting. I see that many of them are struggling with the “how.” We don’t know all the answers. Each organisation is different. So, we are on a journey of discovery. Participants in the program have joined because they want to explore how better cooperation can lead to better results and better functioning organisations.
Can you give us an example of the typical challenges you see when it comes to supply chain collaboration?
There’s an internal and external component in all processes within an organisation, including the supply chain. Somebody is handling purchasing and coordinating with suppliers. A group is manufacturing goods for customers. Another sells them, and another distributes them. Each of these departments has its own objectives and budget. Sometimes, they have joint objectives. When they do, they come together to discuss them through processes like sales and operations planning (S&OP).
The purpose of S&OP is for sales and operations to create a joint plan and facilitate much-needed alignment. In reality though, sales comes up with a forecast and operations is tasked with delivering on that forecast. They might not have the capacity or materials to deliver, so this leads to a constant struggle. One department tells the other what to do. You start to see power struggles and internal politics that are detrimental to the organisation. All of this holds them back from finding a better solution.
This is a common example of internal collaboration challenges. Externally, things are not that much better. Although we have seen some improvement throughout the years.
Thanks for sharing that insight. We spoke with your colleague Andre Nijhoff about Stewardship in corporate sustainability. Effective supply chain management and collaboration are crucial for companies to become stewards for sustainability. What are the important trends you see in this area?
I work very closely with Andre Nijhoff these days. Sustainability itself has become a big trend in supply chains over the last decade. Ten years ago, sustainability was not even on the agenda for board directors. Today, it’s one of the top 3 issues. When we talk to supply chain professionals they are concerned about digitization, talent and sustainability. I see this as a very interesting and important trend.
The primary processes in any organisation are supply chain-driven; about 80-90% of what companies do is related in one way or another to their supply chain. So, if an organisation wants to become sustainable, it has to collaborate better internally and with its supply chain partners. It’s an interrelated ecosystem, not a standalone thing. Collaboration and sustainability cannot be seen in isolation from each other.
For example, for companies to become circular, they need to know more about their suppliers and their customers’ supply chain. Immediately, you realise you have to collaborate in an end-to-end way. Whether it’s preventing slavery, implementing fair trade, and so on.
Do you know of any companies that are doing well in this area?
Interface is a commonly cited example of a company that has adopted circular economy principles. Heineken is another company that cares deeply about sustainability and working hard in this area. Tony’s Chocolonely is well-known for being transparent about their supply chain and doing a lot to prevent slavery.
You also have great examples of short, closed supply chains like what Lidl (a supermarket chain) is doing with Kipster (a producer of poultry products). Kipster uses only a particular type of feedstock and provides well-being for its chickens, following certain standards for sustainability. The supply chain is locally managed.
Ikea, Douwe Egberts and Conimex are other brands that have strong commitments in this area.
All of these are great examples of companies that are trying to make the transformation towards sustainability. But are they going fast enough? From a regulatory perspective, pressure is rising. You have the Lieferkettengesetz in Germany and CSRD approaching fast. These regulations put a burden on the information flow between supply chain partners. What is your perspective on that?
Supply chains are characterised by 3 flows: the flow of products and services, financial flow, and information flow. This last one is probably the most important. If you have a better flow of information, you can improve your finances and the products and services you deliver.
Sharing data with partners across your supply chain is key. And there are technologies like blockchain which give you an advantage. But it’s no easy task. Companies in the Netherlands, for instance, can have up to 30,0000 suppliers. How do you manage information flow in such a vast supply chain? There has to be will and commitment, as well as a shift in strategic direction.
When it comes to regulation, I see a lot of companies complaining about the “red tape,” especially medium-sized ones. But I think it’s a very justified ask from people and governments. They’ve had several years to think about this. Now it’s time to be transparent and disclose how they run their supply chain. Information sharing benefits us all, including the final customer.
iSHARE is a great example of data sharing in the logistics space. It’s helped to drive efficiency and sustainability gains, as companies can collaborate better to reduce emissions in the sector.
Yes, data sharing is good but that’s not always how it is perceived. Often, companies are just overwhelmed by all the laws and regulations. We have to change the mindset here. They need to start seeing this as an opportunity, rather than fighting it and lobbying against it.
What difference can supply chain managers make? Can you describe some examples of best practices in managing sustainability in the supply chain?
Supply chain managers can make a huge impact. Most, if not all, of the choices they make have a sustainability impact. For instance, should we deliver by boat, plane or truck? Where do we place our new distribution centres? What type of warehousing do we need? For all of these questions, there is a cost and a sustainability implication - among other trade-offs.
The best practice you can have is to have a clear strategy towards sustainability. In supply chain, we are used to thinking in terms of cost, quality, reliability, speed, flexibility, customization and sustainability. In an ideal world, we would like to have them all. But the reality is, we have a choice to make. Electric trucks are more expensive than diesel ones but they are better for the environment. Which one will you choose?
The first step is to have sustainability as a strategic priority. Then, you need to figure out how much it will cost you. Be honest about it too. Don’t greenwash. Be clear about what you want to achieve and dare to make choices.
There are many topics to cover in a supply chain from a sustainability perspective: greenhouse gases, resource usage like water, rare metals, labour conditions, human rights, biodiversity etc. How does a supply chain manager prioritise these topics?
There is no one size fits all. There are 17 Sustainable Development Goals. All of them are fantastic but nobody can achieve them all. Identify where you want to contribute and adapt your organisation to achieve your goals. If we can all contribute, we will all improve. Do a few things well, rather than everything poorly.
Where is the drive to become more sustainable coming from?
Based on my conversations with supply chain managers, the drive is hardly ever coming from the end consumer. Yes, consumers want to have more sustainable products. But the real push is coming from other businesses. B2B customers are becoming more demanding. In their own push to become more sustainable, they are triggering others to want to do the same.
The other big driver is talent. People want to work for organisations that have a good purpose. Sustainability is an intrinsic motivation.
Which value chains are more advanced at managing sustainability? And which value chains are lagging?
It’s difficult to compare different sectors with each other. I think food or fast-moving consumer goods (FMCG) are pretty advanced in this. That’s because good health is very much related to good food. Sustainability has very tangible consequences here.
Will sustainability become a hygiene factor without which you cannot operate, or will it be a differentiator and a competitive edge?
Both. On the one hand, there will be minimum requirements and the bar will be raised higher in the years to come. You will have to fulfil them or risk losing your licence to operate.
On the other hand, you can compete on sustainability. Some organisations choose to compete on speed, like parcel delivery players. Others can do so on sustainability. Patagonia is an example. People are willing to pay more for a jacket if it is produced sustainably. Heineken is another example.
We have to be mindful of greenwashing, of course. If Amazon would suddenly start claiming they were sustainable, we shouldn’t take their word for it.
Any final remarks or advice you’d like to give?
For too long, supply chains have basically been about transforming valuable raw materials into waste. This cannot be the goal of your supply chain anymore. Supply chains need to become circular. It’s time to shift.
I started on the wrong foot, thinking that the end goal of collaboration should be lowering costs. But I switched gears. You can too. Stop looking only at the economic factors, and consider the human factors. Sustainability is a way of life and a different approach. Collaboration can help you achieve it.