The impact of supply chains on the overall environmental footprint may surprise you. Walmart says that 88% of its carbon footprint is outside of its walls, in the control of its suppliers. Is it any wonder then that the world’s largest retailer is spending so much of its time, money and leverage, to get its suppliers to become more sustainable?
Yet in a best practices study we conducted recently with 25 leading corporations — representing over $800 Billion in market value — we found that sustainability in the supply chain was one of the major areas they acknowledged needed improvement.
The impact of supply chains on the overall environmental footprint may surprise you. Walmart says that 88% of its carbon footprint is outside of its walls, in the control of its suppliers. Is it any wonder then that the world’s largest retailer is spending so much of its time, money and leverage, to get its suppliers to become more sustainable?
Yet in a best practices study we conducted recently with 25 leading corporations — representing over $800 Billion in market value — we found that sustainability in the supply chain was one of the major areas they acknowledged needed improvement.
The impact of supply chains on the overall environmental footprint may surprise you. Walmart says that 88% of its carbon footprint is outside of its walls, in the control of its suppliers. Is it any wonder then that the world’s largest retailer is spending so much of its time, money and leverage, to get its suppliers to become more sustainable?
Yet in a best practices study we conducted recently with 25 leading corporations — representing over $800 Billion in market value — we found that sustainability in the supply chain was one of the major areas they acknowledged needed improvement.
We believe that companies that choose to ignore the supply chain are missing tremendous opportunities to become more efficient by helping their suppliers become more sustainable. Not only will they reduce the overall environmental impact in their value chain, but operations costs as well, through improved packaging, reduced materials, and reduced transportation.
So what should companies do? Here are some of the best practices that emerged from our study:
Select and prioritize
Any mid-size to large company has hundreds, if not thousands, of suppliers providing goods and services. Pick the top 15-20% representing the majority of your purchases or the source of environmental impact and prioritize among this list based on what’s known about the sustainability of their operations.
Set expectations through a Code of Conduct
Companies should communicate their expectations with a sustainability code of conduct, and require a commitment in writing. Suppliers who refuse should be considered for replacement. In most cases, suppliers will commit, but some may fail to comply. Periodic audits are vital, to ensure compliance with the code of conduct, or to identify areas for remedial action.
Require suppliers to report GHG emissions and resource use
Another important step in assessing supply chain sustainability is to get major suppliers to report on their GHG emissions and resource utilization. When tracked over time, this can provide valuable information to customers on how their suppliers are improving (or not) in their sustainability efforts. At least one organization, the Carbon Disclosure Project, provides a common format and web-based tools that allow suppliers to provide such information consistently.
Develop a partnership
Leading companies in our study told us that formal or even informal partnerships are the most productive way to advance sustainability with suppliers. That way, both parties share a common purpose and objectives, and are in alignment on how to meet them. They set goals that are realistic and practical, and agree on metrics to measure performance. Suppliers provide reports on a periodic basis to measure progress and identify areas for improvement. Leading companies even offer sustainability training, at their own cost, to their major suppliers.
Dig deeper
Beyond the relationship between customers and their direct, or Tier 1, suppliers, a truly sustainable company looks deeper - to their supplier’s suppliers. Herman Miller, for example, expects even some of its Tier 3 suppliers to follow its stringent code of conduct about the materials and chemicals that wind up in its products.
Provide transparent reporting
Leading sustainability companies are not afraid to publicly disclose the issues and challenges they face in getting their supply chain to be more sustainable.
Greater disclosure increases the likelihood that the issues are going to be addressed, and reduces the likelihood that the company or its suppliers will be accused of “greenwashing.”
Conclusion
If you haven’t started looking at the supply chain for sustainability already, now would be a good time to start, since it is likely that some of your competitors are already down this path. The steps outlined here will not only help your company become more sustainable, they will likely also increase your competitive advantage.
To read an expanded version of this article visit the Kanal Consulting [2] site.
Links:
[1] http://www.sustainableminds.com/files/images/blog/091221_vk_1.jpg
[2] http://www.kanalconsulting.com/Sustainability_SupplyChain_KanalConsulting.pdf
