June 8, 2022


By Michael Guerin

“Two-thirds of the average company’s environment, social, and governance footprint lies with suppliers. Procurement leaders who take bold action can make a decisive difference in sustainability”

Buying into a more sustainable value chain, McKinsey & Company Sep 2021


In the four years to 2025, ecommerce is forecast to grow about 50%, with exponential effects across the entire supply chain. Given that 80 to 90 percent of greenhouse-gas emissions for most products are “Scope 3”, ie indirect emissions that occur across a company’s value chain, this begs the question – who needs to be engaged to secure the progress that we need on supply chain ESG? 

In our estimation, if we’re to dramatically reduce carbon emissions at the same time that the Covid-induced switch to one-to-one commerce accelerates, we should direct our focus to the growing ecommerce brands, who are procuring hundreds of billions of dollars goods annually. While the marketplaces like Amazon, Alibaba, Mercado Libre, Zalando play an important role, they can only influence areas under their direct oversight, such as product returns, data centers and shipping. 

Brands, by contrast, are sourcing from suppliers who are responsible for two thirds of their environment, social, and governance footprints. Brands also have the relationships to influence customer behavior, and can realize value in ways that marketplace cost-cutters can’t. And finally, decent work and access to opportunities for all those who populate the supply chain is a fundamental responsibility of the brand, not sales channels. 

The challenge for an emerging brand is that ESG is not a straightforward undertaking. First, they need capabilities to evaluate the benefits that they can realize from a commitment to ESG principles. Secondly, they need leverage – usually more than they have – to demand meaningful changes from their complex, often cross border supply chains. This is our business, and we see that few have the bandwidth to tackle the challenges associated with low carbon supply chain transition, and few supply chain partners understand the end-to-end customer lifecycle. 


We agree that the incentives themselves can be unclear for a brand leader making a decision about where to invest resources. For example, in one study, although 65% of consumers wanted to buy brands that promote sustainability, only about 26% did so. Consumers often say that they’ll pay more for products with an explicit social impact proposition, but there’s still a gap between aspiration and action. That’s a practical challenge for a decision maker who is rewarded based on bottom-line impact. 

What we believe is that referencing a limited set of metrics like this can mask important trends. According to NYU’s 2021 Sustainable Share Market Index, about 30% of CPG growth over preceding five years came from sustainability-marketed products. Additionally, products marketed as sustainable grew 2.7 times faster than those that were not. Consumers are already investing with their wallets in brands that align with their growing environmental consciousness. 

We’ve also seen emerging brands pursue partnerships with Fortune 500 companies as a means to get exposure, but stumble without aligned policies and codes of conduct. And in the wake of the Great Resignation, is it safe to ignore the well documented correlation between ESG investment and employee satisfaction? 

Taken together with the higher margins commanded by many sustainability-marketed products, this raises the underlying question: what will become of companies that don’t make the transition? 


As supply chain experts we understand how to realize sustainability outcomes, but think the time is right for aligned investors to work with us to make this happen – provided that investors can see the right signals and follow-through. In 2019, McKinsey identified multiple value drivers that emerge from a strong ESG proposition, and other researchers have correlated sustainability commitments to improved financial resilience. Backed with verified supply chain data and mitigations, we think these are investible metrics. 

Moreover, supporting brand leaders in their journey to more sustainable supply chains may also be a means to drive change in consumer behavior. According to a researchers writing in 2019 for the Harvard Business Review, “Harnessing the power of social influence is one of the most effective ways to elicit pro-environmental behaviors in consumption as well.” The best ecommerce brands are masters of these tools and should be encouraged to make ESG part of their brand story. As the late US Secretary of Commerce Ron Brown once said, “I don’t just want to level the playing field. I want to tilt in in our favor.” 


There’s more underway than just consumers voting with their wallets. Increasingly, US and EU legislation such as ‘Right to Repair’ will make design for longevity, repairability, modularity, responsible disassembly, and disposal the law in many jurisdictions. That means that products need to be traceable, standardized, durable and reusable. The product lifecycle will change substantially, and with it the logistics infrastructures that solve these challenges. 

Many corporate leaders have taken on this challenge, and since the early 2000s ESG has moved back through the product development cycle from factory interventions, to engineering modifications, to sustainable design practices. We believe this is much like the quality revolution ushered in by Japanese manufacturers in the 1970s. Progress, however, has been uneven, as smaller brands don’t have the incentives or resources to match this effort. 

What this is means is that the opportunity in front of us, whether we see ourselves as supply chain leaders, as corporate citizens with a longstanding interest in ESG, as investors, or as individuals with a stake in the future, is to bring more companies with us on this journey. Because while failing to embrace new requirements might have meant missed opportunity for a few brands in the 1970s, it’s a loss for all of us if we fail to progress ESG today. 

Alan Cuddihy is the VP of Sustainability at PCH International. He works with customers to embed the shared ideals of the circular economy. Alan was selected as United Nations Global Compact 2021 SDG Pioneer for Circular Economy

Michael Guerin is the VP of Fintech Solutions at PCH International. His global technology and banking background enable him to bring product innovation and to drive change in legacy industries.