Five Steps to a More Sustainable Supply Chain
Successful sustainability efforts take collaboration, clarity—and more than a little commitment.
There is a misconception within the ranks of some growing companies: Sustainability is best left to the big guys. But Steve Caballero, senior partner, practice lead for sustainability solutions at NextGen Global Executive Search, points out that small to midsized businesses have much to gain by embracing sustainable practices.
Achieving sustainability goals throughout supply chains of all sizes is challenging, but doable.
Success relies on the basics – collaborate, keep it simple, be committed and transparent, gain employee buy-in and partner with industry groups.
In his “Open Letter to Owners of SMBs“ he states, “If you want to be part of a larger corporation’s supply chain you have to show your large customer that you can play by their rules.” He adds that it’s also an important component to attracting top talent from Generation Y and Millennial candidates. “If you want to have a prayer of them sticking around long enough to make a difference in your company, you have to show them how you and your successful business are making a difference.”
As if these value propositions were not compelling enough, consider this: Sustainability programs can save a company money and keep it “ahead of the regulatory curve,” says Anne Klee, head of GE’s global environmental, health and safety programs. There’s another pivotal benefit: The boost to a company’s overall reputation among all stakeholders. “I would argue sustainability is the single-most important factor in enhancing that asset,” she says. “You obviously need to have really good products at the right price points, but if you are the company [producing and selling] those products in the most sustainable way, increasing [your profile] with the market, that’s a huge ― yet hard to quantify ― benefit.”
One of the greatest sustainability challenges for companies of all sizes is monitoring compliance in the supply chain. According to Ford Motor Company’s 2011-12 Sustainability Report, its automotive supply chain includes 130,000 types of parts, 4,400 manufacturing sites and one million people in more than 60 countries. “The breadth, depth and interconnectedness of the automotive supply chain make it challenging to effectively manage business and sustainability issues,” the company states.
While most mid-market businesses do not have a supply chain of this scope, still, the processes to achieve sustainability throughout the pipeline can be daunting. Here are five steps that will help companies’ sustainability efforts with suppliers.
Try to collaborate, not dictate.
In a study by Green Research, a New York-based corporate sustainability research and advisory firm, 64 percent of executives said their companies can exert significant influence over their top suppliers’ sustainability performance. But bulldozing them with demands is not the route to take. “Approach the sustainability challenge as an opportunity for collaboration and shared rewards,” suggests Green Research principal David Schatsky. And make sure they are well informed about the set of measures you will be using to determine compliance. “Companies should ensure that established assessment measures expand to include environmental performance,” he adds.
Keep it simple.
When Wal-Mart first started working with suppliers, it had a lengthy and granular questionnaire that the mega-retailer says was off-putting and time-consuming for suppliers. Now, according to a recent article on GreenBiz.com, Walmart focuses on “a handful of key criteria instead of every aspect of every product,” which “has made the process more manageable.” The initial questionnaire has been pared down to just 15 questions and suppliers have reacted positively.
Show your committment. Be transparent.
Reaching sustainability objectives with suppliers and sub-suppliers often means taking the relationship to the next level. And that partnership goes both ways, especially when asking for information, once considered confidential. “Supply chain sustainability requires more transparency than some companies are accustomed to,” Schatsky says. “We’ve seen client companies ask their suppliers to disclose information that they themselves do not disclose to third parties. Setting a positive example of commitment and transparency is important before asking suppliers to do so.”
Make sure your employees at all levels are on the same page.
Sustainability efforts can get derailed when suppliers get conflicting messages about best practices from, say, a company’s procurement department as opposed to a divisional marketing department. The GE Capital white paper, Advancing Sustainability: From 1.0 to 3.0, notes, “Above all, sustainability veterans emphasize the importance of communication ― internally with employees to help a program gain acceptance and become part of the larger culture, and externally with other stakeholders.”
Partner with industry groups.
“One of the biggest opportunities for improving supply chain sustainability is working with industry groups to define standards and processes,” Schatsky says. “Companies should get involved with the groups relevant to their industry to help shape and then follow best practices and standards.” Examples of such groups include: the Sustainable Apparel Coalition, the Sustainability Consortium, the Electronic Industry Citizenship Coalition and the Innovation Center for U.S. Dairy.