According to a new report by the Capgemini Research Institute, disruption in the supply chain is seen as the top risk to business growth for 89 percent of organizations, ahead of rising raw material prices and the energy crisis. Supply chain resilience is a key priority with 43 percent of businesses planning to increase investment here, while 39 percent intend to increase investment in technology to reduce costs and drive business transformation. Sustainability will be prioritized by organizations in the US and China, less so in Europe.
For this research, the Capgemini Research Institute surveyed 2,000 respondents from unique organizations with more than $1 billion in annual revenue, across 15 countries, in Nov and Dec 2022, and analyzed their investment strategies in areas such as digital transformation, supply chain, talent and skills, and sustainability for the next 12-18 months.
Priority actions to achieve supply chain resilience by diversification will include onshoring or near-shoring to boost production bases closer to demand, regionalizing supplier bases, and diversifying the manufacturing base (i.e., reducing reliance on a single geographic region). Western European countries plan to invest more in supply chain diversification, whereas APAC countries plan to invest more in supply chain technologies.
According to the report, in the last 12-18 months, owing to adverse market conditions, more than half of organizations have already reduced their environmental sustainability spend, and only 33 percent are planning to increase their investments in the next 12-18 months, even though they represent a minor share of their overall investment. In this context, less than a third of organizations say they are on track to meet their set sustainability targets. However, businesses in the US and China plan to increase investments (41 percent and 53 percent of organizations respectively) over the next 18 months, remedying some of the observable decline over the past year.
The increased pressure on sustainability investment may be in part due to the fact that most business leaders see environmental sustainability as a costly obligation rather than an investment in the future. In addition, according to the report, 74 percent of executives say that customer demand for sustainable products and services has declined, as many customers are unwilling to pay a premium for ‘greener’ products, services, and solutions in the current macro-economic landscape.