When Supply Chain Risk Meets Wall Street: Investing for Sustainable and Lower Risk Growth

Here at Spend Matters, we often consider the procurement and business implications of supplier and supply chain risk management. We don't often take the final step in this analysis that would focus on translating disruptions, infractions and related challenges to shareholder metrics. Yet some in the investment community are beginning to consider just how prepared companies are for potential disruptions. Bloomberg recently ran a fascinating story examining how some investors are looking at supply chain sustainability around the impact of water consumption and climate change and public company preparedness. In particular, one investor challenging J.M. Smucker believes that company management isn't taking future access to water in its ingredients markets into account in its financial projections.

These are not Greenpeace activities out to make corporate America a better place for the environment. Rather, the activist leading the shareholder protest is quoted in the story saying, "We're not talking about charity here...These are investors seeking to have the company address the risks in its supply chain...At a certain point, you need to deal with the fundamental, underlying fact that these are crops grown with soil, sunlight, and water, and you can't escape the laws of nature." For water and supply chain risk, other companies might be better prepared for changes in weather conditions. Bloomberg refers to the planning and forecasting activities that Coca-Cola has undertaken, as an example.

Regardless of the specific example of the future of water availability in the supply chain (to support growing ingredients, energy production, transportation, etc.) the article introduces the overall concept of shareholder activism for supply chain risk management and issues of sustainability -- not just for CSR adherence, but broader enterprise risk management and corporate planning. It's Spend Matters view that we'll be hearing more and more about shareholder activism, plus funds that begin to more thoroughly vet and evaluate supply chain risk elements for investing. Perhaps when investors begin to vote with their currency more often in supply chain risk, we'll see more and more companies make the issue a frequent focus of boardroom conversation rather than a hot potato tossed between procurement, supply chain and finance.

- Jason Busch

First Voice


    Thanks a lot Jason for this interesting. We do observe that Investors take a closer and closer look at Supply Chain Sustainability, when they assess companies performance.
    The Dow Jones Sustainability Index, the most well known Sustainability Index have acknowledged this and are currently making a significan effort to revamp the "Procurement/Supply Chain" section of their scoring models. This should have a significant impact on Companies in 2012.

    Regarding linking "Financial Performance" and "Supply Chain Risks", EcoVadis (in partnership with INSEAD B-School and PwC) went a bit further, publishing last year a report, analysing the impact on share price of "Supply Chain Sustainability Risks". The report is available for download here :

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