Local and Global Trends in Sustainable Supply Chain

This article is adapted from Cameron Neil’s presentation to the 2nd UNGCNA Environment Leadership Council meeting in Melbourne on 23 April.

Sustainable supply chain management is one of the most exciting and dynamic areas of corporate and sustainability practice at the moment. For many, it represents the next frontier in corporate sustainability.

Companies are moving on from solely managing the impact of their own operations (where they have control), to seeking to influence their suppliers and further down the supply chain.

There are five key trends we are currently seeing in this space: collaboration, supplier capacity building, strategic supplier relationships, metrics & impact, and human & animal rights.

Collaboration

As companies push in to the supply chain space, they can quickly discover that the problems and challenges are quite big and complex, and are beyond the scope of one company to tackle. They may also discover that the risk and costs may be too high to act alone, and taking action may undermine their competitive position. These 2 factors have seen a rise in collaboration – between competitors, across sectors, and with NGOs.

1. Between competitors

There are a number of initiatives where competitors in a sector have banded together. In one such example, H&M, adidas, Nike, Puma, Levi’s and a number of others have committed Zero Discharge of Hazardous Chemicals (ZDHC) in the supply chain by 2020 and released a Joint Roadmap detailing how they will work together to achieve it. The Sustainability Consortium is another large scale collaboration that is working to develop a standardized framework for the communication of sustainability-related information about products within sector working groups such as toys, electronics, and personal care.

2. Across sectors

When Starbucks wanted to reduce the impacts of their disposable cups, they realised that in order to increase recycling rates they would require both consumer behaviour change and a change in recycling infrastructure. The company's convened all the players in the system – government officials, suppliers, manufacturers, retail and beverage businesses, recyclers, competitors, conservation groups and academics – to a ‘Cup Summit’ to develop an approach that worked for Starbucks as well as the food service sector as a whole.

3. Engaging with NGOs

NGOs such as Greenpeace and Oxfam have played a large role in exposing issues in the supply chain in recent years. Now some businesses are using those skills to their advantage and engaging constructively. Unilever recently allowed Oxfam unprecedented access to its Vietnamese supply chain, where Oxfam assessed labour conditions and provided recommendations to Unilever to address issues. Unilever in return allowed the assessment to be public, to stand as an example of transparency and leadership.

Supplier capacity building

To achieve real improvements, companies cannot rely on applying a compliance approach to their suppliers, demanding that they meet a certain standard, but must invest with those suppliers to help them improve. One great example of this has been the use of mobile phone applications provided to farmers to provide information on sustainable farming and help them track and reduce water, pesticide, and fertiliser use. The Cool Farm Institute and PepsiCo have both used this approach successfully.

Another example is the UK’s Supply Chain Sustainability School, which is an industry collaboration to provide sustainability training to their construction suppliers. The school involves a self-assessment, action plan, e-learning modules, and other tools, and has already been nominated for awards from Guardian Sustainable Business and Ethical Corp. Net Balance is currently working with the Infrastructure Sustainability Council of Australia to make the school available in Australia.

Strategic supplier relationships

Resource scarcity and competition for ingredients is becoming a key issue for manufacturers. To ensure the long-term viability of their products, they are having to lock in arrangements with suppliers. Under a long term arrangement, it also serves the company to invest in those suppliers, ensuring the sustainability and quality of supply.

Even without an exclusive arrangement, companies can improve their access to supply by helping suppliers increase their productivity while also improving supplier loyalty. For example, the Coca-Cola Company has provided training and support for farmers in Uganda and Kenya to increase the production of mango and passion fruit juice. In another, SABMiller committed to improve the production of cassava in south Sudan and while providing a long-term market for farmers.

Metrics & impact

As sustainability programs mature across the board, organisations realise they need to measure their impact to justify and focus ongoing investment. Stakeholders are also getting smart – it’s not just about what actions you’re taking, but are they focused on the most important issues and what results have they achieved. Companies like Puma, who released the first environmental profit & loss (E P&L) statement for 2010, and Unilever, who publicly reports on over 60 sustainability targets, have done this well.

A few organisations are applying the same approach to social metrics, though this is less developed. Methodologies such as Social Return on Investment (SROI) allow organisations to understand the social metrics that matter and track those to ensure social and community programs are achieving desired outcomes. Net Balance is leading the way in SROI, with two of the only 4 accredited practitioners in Australia.

Organisations are also using environmental and social data to focus their efforts where they will have maximum return. For example, not for profit New Earth has created an online portal, the Social Hotspots Database (SHDB) that provides information on social risks and opportunities in 227 countries and 57 sectors. On the environmental side, the Product Sustainability Forum analysed 50 grocery products to identify those with the largest impacts. The Co-operative Group, Nestlé and Sainsbury’s are using that information to focus on their own products in the high impact categories, including bread, potatoes, bananas, and milk, and are undertaking pilot projects to decrease the footprint of those products.

Human & animal rights

While energy/carbon, waste and water have seen significant focus from many companies in the past, human and animal rights are high on the agenda this year. We have seen major campaigns from Made in a Free World, Walk Free and Not For Sale focusing on slavery in the supply chain. The California Transparency in Supply Chains Act 2010 requires major retailers and manufacturers to disclose their efforts to eradicate slavery and human trafficking from their supply chain. Julia Gillard also recently signalled a “new whole-of-government strategy” for procurement to avoid any goods or services associated with slavery or people trafficking.

Similarly, a campaign from Animals Australia has gotten significant attention in Australia this year. Meanwhile grocery retailers across the globe are introducing policies to end sow stall pork, provide cage free chicken and eggs, hormone free beef, and sustainably sourced fish. Australian retailer Coles has been especially active in making all these standard for their Coles Brand products.

This article is adapted from Cameron Neil’s presentation to the 2nd UNGCNA Environment Leadership Council meeting in Melbourne on 23 April.