Investment managers more focused on sustainable supply chains

26 October 2021 Consulting.us 3 min. read

In the report "Investing in a Sustainable Supply Chain," experts from Proxima spoke to investors across the US and UK to get their first-hand perspective on sustainability within supply chains. Kent Mahoney, head of Proxima’s US operation, walks through five key findings of the report.

1. Sustainability impacts investment decisions

Ninety-seven percent of investment managers told us they consider the sustainability standards of a business’s supply chain when making investment decisions, telling us that having a sustainable supply chain is no longer a ‘nice to have’.

Investors will be looking for real, measurable results and businesses will need to be ready to show them.

Do you currently consider the sustainability standards

2. Investment managers see risk in businesses that don’t change

Over eight in 10 (84%) investment managers stated that issues with supply chain sustainability and (a lack of) ESG standards are a financial threat to their investments. Further, 85% believe that businesses who do not have supply chain sustainability standards will see share prices fall as a result over the next decade.

There is a firm belief that inaction on the environmental, social, and governance agenda (ESG) has material consequences for businesses.

How aware or unaware are the businesses you work with

3. There is increasing rigor, but still a gap in assessing sustainability progress 

Investment managers are focused on sustainability in supply chains, with nine in 10 (89%) discussing ESG standards in the supply chain with the companies they invest in, with two-fifths (37%) having these conversations frequently. When investment managers are looking at supply chain standards, they most commonly look for suppliers audits (39%), data reporting procedures (37%), and analysis of financial reports (37%).

The responses suggest that there is action, but a lack of common adopted assessment methods and standards amongst the investment community. Evidence points towards the emergence of an ESG style reporting and measurement approach being favoured amongst investors and large corporates, making sustainability, and progress on sustainability, visible and measurable.

To what level of extent

4. Sustainable supply chains matter to investors over the long term

Investors believe this topic has longevity, with 88% of investment managers saying that supply chain sustainability standards will be a key criterion for investment decisions over the next ten years. Eight in 10 (80%) also believe that businesses without supply chain sustainability and wider ESG standards will struggle to access capital in the next ten years, indicating that business who do not act now risk inhibiting their future growth.

5. A trade-off between long-term purpose and short-term profits is accepted

Conversations about procurement and supply chain strategy must go beyond cost and consider ESG impact on top and bottom line, short and long term. Seven in 10 (70%) of investment managers believe that businesses should accelerate purpose initiatives at the expense of short-term profitability.