Supply Chain and Reverse Logistics: The New Center of the ESG Conversation

Supply Chain and Reverse Logistics: The New Center of the ESG Conversation

Over the last two years, a growing  trend has multiplied, resulting in increased awareness for consumers, suppliers, investors, and those who facilitate the transfer of goods: Social responsibility.  Or, more broadly, environmental, social, and governance (ESG). And now, more than ever, the supply chain is factoring in—not only when it comes to satisfying consumer demand, but also regarding product returns.

Recently, the Reverse Logistics Association (RLA) explored this very topic in a webinar titled, “Why Using Nonprofits for Returns Management is Socially Responsible.” The webinar featured moderator, Tony Sciarrota, Executive Director and Publisher of RL Magazine, and three expert panelists: Claudia Freed, President and CEO of EALGreen; Travis Laws, President of WIN Warehouse; and Bob Anderson, Business Development Executive for PRIDE Industries. 

The discussion was one of depth and breadth; however, ESG dominated the conversation—notably transparency in the return process as well as re-use and environmentally ethical disposal of goods. Further underscored was an increasing shift in consumer awareness when it comes to requiring companies to be socially and environmentally responsible—an expectation that includes the entire supply chain. And to satisfy these expectations, companies are requiring their suppliers and transporters to have some kind of ESG framework in place.

“Almost every RFP or RFI that comes out now has some questions about what you do about sustainability,” said Bob Anderson of PRIDE Industries. “Also, what you do about people and your hiring practices.”

“Two-thirds of an organization’s ESG commitments lie with its suppliers”

– Jagmeet Lamba, Forbes Council Member

A 2021 McKinsey report supports Anderson’s observation. Referencing this report, a recent Forbes article summarizes that “two-thirds of an organization’s ESG commitments lie with its suppliers.” The article further notes “. . . choosing the right supplier partners and managing them well is perhaps the most impactful decision for a company when it comes to sustainability.”

This is where nonprofits, when it comes to returns management—and supply chain, in general—shine. Because they are largely mission-driven, nonprofits typically already have a positive social or environmental focus built in. For example, both EAL Green and WIN Warehouse leverage used/donated materials—Green, to fund college scholarships and WIN, to help companies save on taxes while repurposing used materials. And PRIDE Industries? This social enterprise leverages its business services to create employment for people with disabilities.
Also built into each of these nonprofit’s business models is transparency.

In the webinar, Claudia Freed of EAL Green notes, “. . . transparency has now become an organizing principle . . . a nonprofit helps generate that value proposition.” She goes on to explain that, unlike a traditional corporation, a nonprofit must disclose its tax returns which, for example, reveal the highest-earning employees’ salaries. This requirement speaks to the “social” element of ESG, allowing stakeholders to discern the level of “pay equity” an organization cultivates.

When it comes to supply chain and reverse logistics, transparency is also achieved through traceability throughout a product’s lifecycle. Again, nonprofits are uniquely positioned to leverage their already-in-place transparency measures. For instance, because nonprofit donors want to know what their donations fund, nonprofits tend to be structured around allowing them to do this with relative ease.
“From a returns standpoint,” said Bob Anderson of PRIDE Industries, “we have a responsibility to show our customer where, when, and in what condition an item was received.” Anderson went on to say, “For example, if a company says to salvage part 1, 2, and 3, we act as a vehicle between them and the recycler—with transparency every step of the way. Plus, our customers get the added social impact of employing people with disabilities.”

Unfortunately, the benefits of using nonprofits for supply-chain needs aren’t yet on many companies’ radar. But the webinar’s panelists see that changing.

“I think the market is going to demand it,” said Travis Laws of WIN Warehouse. “Increasingly, consumers are going to want to know more and more. And we’ve seen that from younger generations.” Laws went on to note that the new generation of customers will, in time, be investors who carry their ESG awareness forward.

“The concept has evolved, from a charity that would go out with its hand” [out . . . to] “shaking hands . . . being a partner,” Freed, of ELAGreen, pointed out, underscoring the fact that nonprofits can, increasingly, offer the same business advantages to customers that traditional corporations do—while also offering tax breaks and a positive social impact.

“It’s a matter of awareness,” said Anderson, mentioning that a tech giant has relied on PRIDE Industries’ kitting and packaging services for 15 years—the kind of partnership many potential customers don’t yet associate with a nonprofit.

“It’s going to take time to change people’s mindsets,” continued Anderson. “And I’m confident that we will get there.”

Want to learn more?

The reverse logistics cycle is a key touchpoint for customers—a foundational process that provides opportunities to influence and improve customer loyalty. Find out how you can optimize the reverse supply chain to enhance the customer experience.

“. . . choosing the right supplier partners and managing them well is perhaps the most impactful decision for a company when it comes to sustainability.”

– Jagmeet Lamba, Forbes Council Member