There is a pattern emerging wherein B2C companies are more aggressively integrating elements of sustainability than are B2B companies...This is a real missed opportunity for B2B companies.
As a supplier, your competitive landscape is expanding to include elements of sustainability. What you do and how you do it is of direct interest to the B2C companies you are selling to which in turn is of direct interest to consumer and investor markets.
You can treat sustainability as a basic compliance issue and remain a liability within a supply chain or you can treat sustainability as a competitive advantage and become an asset within a supply chain.
We read a lot of sustainability reports--and by this I mean reports titled as Sustainability Reports but also reports published under titles such as CSR Reports, ESG Reports, Impact Reports, and Stakeholder Reports. The point is that, by whatever title you like to refer to them, we go through a lot of voluntary corporate disclosures.
Having gone through so many reports, certain patterns start to become apparent, and one in particular stands out as highlighting a substantial missed opportunity for many issuing companies.
We see the expected patterns of disclosures within industry sectors, geographies, thematic areas of focus, and so on, but most interestingly, we are seeing an unfortunate pattern emerge based on business models. In general, this pattern is demonstrated by companies that sell to other companies (or B2B models) and companies that sell to individual consumers (or B2C models).
We will get into the details of what we are seeing very soon, but in short, it is a significant missed opportunity for most B2B companies.
The B2C Model
In general terms--and I am well aware that this does not apply to every B2C company, but it does apply to enough of them to be able to identify a pattern--B2C companies are rapidly embracing sustainability. This embrace is driven by three broad pillars:
Consumers want more sustainable products.
Investors want less exposure to negative impacts.
Employees want to work for ‘good’ companies.
This results in many B2C companies approaching sustainability with a broad and deep perspective. They are trying to act on everything they believe their various stakeholders want them to act on and they are trying to act in ways that are meaningful. Sure, sometimes efforts miss the mark and sometimes certain campaigns approach the territory of greenwashing, but more often than not, these efforts are being driven by authentic intention.
To read the sustainability reports year-over-year, it is easy to find B2C companies progressively taking on ever increasing scopes and scales of responsibilities and efforts. For them, sustainability is becoming business strategy--and the objective is to expand on the strategy.
The assumed dynamics are clear: People care about sustainability and B2C companies that want to remain relevant need to show how they integrate and deliver on people’s concerns about sustainability.
The B2B Model
Again in general terms and with the same disclaimers, B2B companies are increasingly active in sustainability, however I would not say they are increasingly embracing sustainability. The approach to sustainability in this group appears driven by two broad pillars:
This results in many B2B companies approaching sustainability with a narrow and shallow perspective. They are trying to act on a few basic elements to a degree that will satisfy perceived societal interest. It is a check-box approach to sustainability public relations. It’s not that these efforts aren’t authentic, rather it’s just that they are minimal.
To read the sustainability reports year-over-year (when available!), it is easy to find B2B companies stagnating in their perceived responsibilities and efforts. For them, sustainability is about basic compliance…and the objective is to fulfill requirements with minimal effort or investment.
The assumed dynamics are clear: People care about sustainability, but B2B companies don’t need to be relevant to be successful.
The Missed Opportunity
The missed opportunity for B2B companies stems from an underestimate of just how important supply chain dynamics have become to B2C companies advancing sustainability business strategies and to individual consumers interested in sustainability themselves. Simply consider this recent advice from McKinsey & Company guiding the sourcing practices of B2C companies:
" Companies that fail to secure adequate supplies of scarce green materials may need to pay steep premiums, or else they will fall short of their target commitments, potentially harming their relationships with customers, investors, and other stakeholders."
Most B2B companies may not be popularly recognized, but that doesn’t mean they aren’t relevant.
Many large B2C companies are now pushing sustainability compliance and reporting standards through their supply chains, but these are basic minimum standards and the B2B companies engaged as suppliers are simply complying with these standards. It’s a start, but it is not a competitive advantage.
What many B2B companies are missing is that your positioning in sustainability can be a competitive advantage. As a supplier, you have long competed against other suppliers on grounds of price, quality, and reliability--and now your competitive landscape is expanding to include elements of sustainability. This expansion is still in its early stages, but this is precisely when you want to stake your claims.
As a B2B company, the positive impacts you can optimize and the negative impacts you can minimize are passed along and recorded and reported as becoming part of the impacts of the B2C company at the leading edge of the value-chain you are part of. All of your Scope 1 and Scope 2 impacts across all metrics (not only carbon emissions!) effectively become the Scope 3 impacts of a B2C company striving to meet ever increasing consumer and investor expectations.
As a B2B company, what you do and how you do it is of direct interest to the B2C company you are selling to which in turn is of direct interest to consumer and investor markets. The pressure to integrate sustainability in business operations is growing and is nearing a tipping point among B2C companies.
As a B2B company supplying these other companies, you can treat sustainability as a basic compliance issue and remain a liability within a supply chain or you can treat sustainability as a competitive advantage and become an asset within a supply chain. The choice is yours.
The more you do, the more the B2C company you are selling to can be seen to be doing--and consumer markets favor companies that are doing more. So, in terms of sustainability:
What are you doing?
How are you reporting it?
What are your clients doing and what are they concerned with?
Are your actions framed in a context that is transferable to your clients?
What you do in sustainability is directly passed on to your clients, and in a time of ever tighter competition on price, quality, and reliability among suppliers, sustainability seems a welcomed competitive differentiator. Don’t sleep on this opportunity.