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The challenges the supply chain function is facing today are perhaps more complex than they have ever been before. Nowadays this function is struggling to renew its pool of talents and to roll out systematic succession plans. Our Hopes and Fears Survey conducted in 2022 with 52,195 participants revealed that 1 out of 5 employees are likely to switch employer in the course of the next 12 months. When exploring the reasons why talents consider changing jobs, employers’ transparency on societal issues stands out. Based on this data, employers can’t expect workers to leave their views regarding social issues at the door. More than half of the employees said that social matters are very important to them and they expect companies to react and pick a side in the public debate. Well-being is another important factor that influences the decision of changing employer. 60% of survey participants said it has significant importance to them whether the team cares about their well-being or not, and only 26% agree that the workload is manageable within their organisation. Employees call for social responsibility and global disruptions. They demand actions to revamp supply chain through sustainable measures to address social topics close to their heart.
A situational analysis of today’s supply chain based on the PwC’s ADAPT framework shows two major asymmetries. The first being the increasing business demand associated with difficulties to rise prices, whilst facing the challenge of a tightened labour market – worsened by the low female employee rates in the industry – and a higher demand in workforce resulting in an upward trend in wages. On the other hand, the increasing complexity in supply chain presses for more diverse and eminent skills, yet the industrial trends show cost cuttings in upskilling efforts due to economic reasons.
Global crises such as Brexit, the Ukraine and Russian conflict, COVID-19 and ongoing lockdowns in China and the US-China trade war lead organisations to focus on external factors disrupting the industry and causing for example supply shortages, capacity issues, increases in average lead times for production materials, etc. In parallel, changes in regulatory requirements pressure companies to focus on their sustainable impact by reporting about human rights and the environmental impact of their operations.
Demographical trends, in particular related to age, are also key influential aspects that need to be considered. The population is ageing and the newer generations are less attracted to professions subject at risk. Attracting the right talent with the required technical skills and leadership competences is crucial for business objectives to be met.
In terms of polarisation (digital maturity across the industry), research shows that only 30% of employees are preoccupied that their role will be replaced by technology. However noticeable and rapid technological changes require the adaption of new skills. The polarised perceptions about digital technologies’ value hinders the strategic upskilling of the current workforce making digitalisation a source of anxiety for workers. Studies show that only one in four Learning & Development (L&D) specialist/business leader is confident that skills required in the future can be identified, whilst 39% of employees are concerned about not getting enough training to develop their digital and technological skills.
Moving to the last dimension of the framework: trust. The demand for transparency from employees towards organsations, especially when it comes to pay transparency, holds a reputational risk. However, it also offers an opportunity for organisations to build trust with their employees, something that is crucial to succeed in the war for talents.
With increasing global risks within the supply chain touching ESG (Environment, Social, Governance), new regulations are being adopted all around the globe. In many cases, the social factor is taken more and more seriously with working condition aspects ranging from employee safety to employee satisfaction. The most notable regulation pushing companies to report employee’s’ working conditions is The European Sustainability Reporting Standards (ESRS).
On 16 November 2022, the European Financial Reporting Advisory Group (EFRAG) approved the updated versions of the European Sustainability Reporting Standards (ESRS). These standards outline requirements for detailed corporate reporting on a wide range of environmental, social, and governance issues. More specifically, companies will have to disclose how sustainability is integrated within their business and how the relevant ESG impacts and risks are recognised and tackled (including polices, action plans, road maps, targets and KPIs).
The social component of ESRS focuses on four areas:
For the sections which are relevant to the supply chain workforce challenges, we notice the following requirements in terms of working conditions which, if improved, will result in positive impact in talent retention.
The future starts now. Are you ready? The challenges that leaders face today are more significant and complex than they’ve been in generations. Global crises such as increasing wealth disparity, massive technological disruption, demographic pressure and declining confidence in governing institutions all demand urgent action. At the same time, a breakdown in global consensus with growing nationalism and populism has influenced the political agenda of many historical donor countries.
These social standards will help companies understand material impacts on their workforce, as well as related material risks and opportunities within their supply chain to drive it towards a more sustainable function.
Support your suppliers by opening the dialog, collaborating, involving them in your challenges and projects. Share with them your sustainability actions regarding the workforce. Develop a code of conduct for your suppliers, establish processes for supplier engagement, including routine information exchange. Stimulate innovation through tailored collaboration platforms and supplier development programmes.
Diversify your suppliers’ list in order to invest in their development. Companies can extend their impact beyond their workforce, creating economic opportunities, influencing sustainable practices within their supply chain, as well as supporting the development of stronger, more inclusive and prosperous communities.
Focus on workforce diversity by becoming more gender (but not only) inclusive. Attract and upskill more females in the candidate pool and help break the industry stigma.
It is crucial for organisations to think strategically when it comes to Learning & Development. It is recommended to determine the skills needed for the future and to start upskilling efforts in due time thus ensuring a sustainable talent pipeline. Digital and technical skills, leadership skills, social competencies, various professional skills (e.g. change management, project management, etc.) and solid expertise in supply chain capabilities (e.g. enterprise resource management, supply chain risk management, supply chain strategy and analytics, etc.) are areas where supply chain organisations would benefit from excelling in.
Leverage pay transparency with commitment and tangible actions on social matters.
Launch actions focusing on the well-being of employees via a manageable workload and a good work-life balance. Give space to your workforce to openly voice what matters to them.
Regulations are the starting point giving the push that most supply chain functions need to evolve towards a more sustainable and a more human function. In any value chain, the workforce is the core and the heart of the business. Therefore, driving change via the workforce can only be a clear success factor in the future way of doing business, having positive impact, and generating value.
Are you ready to start your supply chain revolution?
#social#
Senior Consultant, People & Organisation, PwC Switzerland
Tel: +41 79 766 76 47
Manager, Sustainability & Climate change, PwC Switzerland
Tel: +41 79 716 28 85