By Richard Edwards

Increasingly ethically-aware consumers are helping sustainable sourcing to shoot up the corporate agenda, according to a leading figure at US-based business ethics and corruption specialists, Ethisphere.

Robert Leffel, associate director at the Ethisphere Institute, whose company recently published its annual World’s Most Ethical Companies league table, told Sustainable Sourcing that procurement operations were rapidly moving from the periphery of corporate responsibility to becoming one of its bedrocks.

“In today’s globalised economy with its intricate supply chains, it’s no longer enough to produce a good quality product at a competitive price,” Leffel said. “How a product is produced and what kind of impact it makes along the supply chain has become an important issue that can define or destroy a company’s competitive advantage.”
 
Almost all of the companies in this year’s list – among them some of the biggest names in global business, including Google, Toyota, HSBC and BMW – had done, or were in the process of, implementing sustainable sourcing practices.
 
“Even in the industries that were not traditionally associated with environmental protection (e.g. service oriented) there is a growing trend to contribute to environmental sustainability by, for example, sourcing renewable energy supply for office buildings, improving energy efficiency, reducing waste, supporting alternative transportation modes for employees, and so on,” he said.
 
Of those top performers, external pressure was, Leffel claimed, forcing consumer product manufacturers to raise their game.
 
“Consumer product manufacturers and retailers can also be singled out for a higher concentration of ethical and sustainable sourcing practices, perhaps due to the consumer pressure and product liability issues,” says Leffel.
 
However, a lack of transparency in companies operating outside of the Western world, still meant that this year’s list – the third published by the company – was dominated by companies from Europe and the U.S.
 
“..this does not mean that other countries or continents have no ethical companies,” Leffel said. “Nor does it mean that business ethics or sustainable sourcing has an exclusively ‘western’ domain. We are convinced that there are many companies, big and small, around the world that meet the criteria for good corporate citizenship including sustainable sourcing practices. But there is still a problem with information availability and sometimes transparency.”

This week’s World Economic Forum report into supply chain decarbonisation provides a deep look into the carbon footprint of the world’s corporate supply chains as well as ways in which it can be reduced.

Global carbon emissions amount to around 50 gigatonnes (50,000,000,000) annually with logistics and supply chains (from a small truck in India to global transport groups like DHL) contributing about 5% of that.

And according to Sean Doherty, associate director and head of the logistics & transport group at the WEF, the contribution which logistics and supply chains make to overall global carbon dioxide emissions could be halved. “The main message is that there’s considerable scope to reduce the carbon content of global supply chains, and not always in the ways that often pop up, such as road miles,” said Doherty. “What we tried to do was to quantify, of the 20 or 30 strategies, which ones had the biggest reduction potential and were also economically feasible.”

He explained how sourcing from a different location came top of that list, but that the manufacturing of the sourced goods must be taken into account as well as the transportation route. “In most supply chains, manufacturing is a large part of emissions,” he said.

Despeeding is another strategy which Doherty pointed to as key to reducing carbon emissions – and it is a strategy which has already been taken advantage of by many companies, not least in the automotive sector who were using ships as “floating warehouses”.

It’s a further example of how environmental and economic decisions often go hand in hand.

David Rae

Buyers should plan for slower and better-optimised transport systems if they are to successfully reduce the carbon footprint of their supply chains according to a comprehensive report published yesterday by the World Economic Forum.

The lengthy study, which was carried out with the aid of Accenture, recommends a series of measures that key stakeholders in the supply chain can take in order to improve the overall environmental impact of product sourcing and delivery.

According to the WEF, buyers are in an excellent position to, “take decisions which actively drive positive change up and down the supply chain”.

The areas in which buyers can make a substantial impact include:

Product and packaging design
By agreeing standards and targets around packaging and agreeing modularisation of transit, goods can be shipped far more efficiently.

Low-carbon sourcing
By developing sustainable sourcing policies that consider the carbon impact of primary production, manufacturing and rework activities (to browse company sustainable policies, see our Policy Bank).

Tactical nearshoring opportunities
Buyers should take the carbon emission impact into account when considering nearshoring options.

Mode switches
Buyers should consider mode switches across supply chains and despeed the supply chain so that larger quantities are delivered less frequently.

Carrier incentivisation
Build environmental performance indicators into the contracting process.

Consumer incentivisation
Support better understanding of carbon footprints and labelling where appropriate, work with consumers to make recycling easier and more resource efficient.

Technologies and techniques to help synchronise supply chains
Encourage collaboration among shippers and carriers and invest in data exchanges to increase the visibility of co-loading and other collaboration opportunities.

You can find a full version of the report on the WEF website.

David Rae

As professor of logistics and supply chain management at the Newcastle Business School, professor David Oglethorpe is working closely with the UK government’s food and rural affairs agency, Defra.

The paper that professor Oglethorpe is working on suggests that locally-produced organic goods are more harmful to the environment than mass-produced goods for supermarkets. His conclusions are likely to upset those who herald a return to local produce as one way to reduce road miles and therefore carbon emissions.

“As consumers, the more we draw away from the production [of] food and leave this up to large-scale business processes, the more cost-efficient overall production and consumption will be,” he told the Daily Telegraph. “Business-led production happens in a cost-efficient, profit-making environment. Consumption does not. Making a 20-mile round trip to a local farm shop for a small amount of produce in your car is simply not as efficient as buying food from a nearby supermarket that’s been brought to the shelf by a heavy goods vehicle with around 25 tonnes of other stuff.”

Oglethorpe’s findings may not come as too much of a surprise to all. But it does highlight the need to look at the bigger picture. It also reminds me, indirectly, of a story I heard at a Procurement Leaders roundtable on sustainability last year. The story related to the proposed sinking of Shell’s Brent Spar oil drilling platform which was jumped on by Greenpeace as an environmental disaster waiting to happen due to the amount of heavy metals it could release into the ocean. Following a huge campaign, the proposed sinking was canned and instead it was towed to a wrecker’s yard for demolition.

Which, from an environmental perspective, was the worst-possible solution to the problem – it turned out that the total amount of heavy metals on the Brent Spar equalled that of a single AA battery.

By Meryl Bushell

Talk of sustainability has grown considerably over the last 10 years, but how much of the talk is translated into action, especially in these challenging economic times?

When I first started having discussions about CSR in supply chains I was met with a lot of resistance. It was not easy to convince others that there were business benefits in adopting ethical and sustainable practices in procurement. I can remember many debates where the topic was dismissed as unimportant or “hobbyist”.

Over the years, climate change science has alerted the developed world to the folly of ignoring the impact of CO2 emissions and a huge number of organisations have started to take action to limit their environmental footprint.  But how many organisations have done this in a rigorous and thorough way? Most organisations start by looking at their own usage and introduce programmes to reduce their in-house energy consumption. At the simplest level these are about turning the lights out and reducing the heating a notch or too. We have all seen hotels pleading with us to reuse our towels, and many companies have introduced double sided photocopying or conference calls in place of travel. While worthy, these initiatives are hardly ground breaking and cynics will remark that they smack of self interest as they double as cost saving initiatives.

Some organisations pick a high profile sustainability item and channel all their efforts into their flagship area – many bespoke recycling activities fall into this category.

Few organisations meet best-practice levels of a comprehensive sustainability programme which encompasses all of their activity. I believe that there are three areas that need to be systematically addressed:

Own Use
Ensuring that all in-house production and operating activities are executed with minimum impact on the environment (and this does not mean coming down heavy for items affecting employees, but allowing senior executives to drive around in gas-guzzling company cars).

Bought in Goods and Services
Laying down minimum standards for suppliers and actively selecting only those goods and services which meet environmental specifications. Simply designing a questionnaire and getting suppliers to tick boxes serves only to keep bureaucrats  employed. Sustainability standards should be part of every adjudication process, and given the same level of weighting as other product specification items. Quality checks and audits should take place for sustainability criteria in the same way as they do for other criteria.

Product and Service Design
Developing goods and services which actively help an organisation’s customers and stakeholders improve their environmental impact.

Of course, sustainability should not be constrained to items impacting the environment but should also embrace human factors, diversity and ethics. The credit crunch and the subsequent economic downturn have led many firms to abandon their high ideals and instead drive for short-term cost savings. If they had studied the available research they might have thought twice before embarking on this course of action.

While consumers are indicating that the financial climate may force them to purchase fewer organic products, demand for Fairtrade and other sustainably-sourced produce is holding up, and if anything the indications are that demand will increase. In studies undertaken by Feel Research, 92% of consumers claim to be willing to pay extra for ethically-sourced products, and a recent PricewaterhouseCoopers report found that 58% of consumers said they are currently buying fewer sustainable products than they would like to.

So, driving comprehensive CSR policies and practices islikely to help organisations to maintain and win market share and revenues even in an overall declining market. The business case for CSR in supply chains is even stronger in times of economic woe, and procurement professionals should be championing sustainability at the board level to help their companies survive and thrive.

Meryl Bushell is an independent consultant and executive coach. She is the former chief procurement officer of BT.

Watch out for Fairtrade Fortnight which runs from 23 Feb to 8 March.

David Rae

SustainableSourcing has researched the world’s largest 500 companies to find those that have published a dedicated sustainable procurement policy and, for those companies that have, what information lies within. While many companies that cover sustainable procurement in their CSR reports deserve credit, we only have space for those with dedicated policies. 

The information below is intended to give procurement executives that haven’t developed a sustainable procurement policy the raw material to get started. It will also help those that have started to improve, collaborate and move forward.

To put forward your own companies sustainable procurement policy, email the editor.