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Promoting Sustainability in Supply Chains

Green Impact had the opportunity to partner with liz muller & partners late last year to deliver a sustainability workshop and sustainable procurement policy, survey and guidelines for a large service company. Below Liz reflects on some of her insights and lessons learned from her work on supply chains.

There is also a lot of talk – and action – around the need to drive sustainability down supply chains. Many brands recognize that the bulk of the negative social and environmental impacts that people associate with their products occurs here. While many brands understand that they have ample room for improvement, they may not be aware of the enormity of the task.

Most companies have vast supply chains that involve hundreds of suppliers using various materials in a wide range of processes across the globe. Over the past few years I have helped various clients develop tools and programs that promote sustainability and ethical practices in their supply chains. For the most part these initiatives have fallen within one of the following three frames: banning minerals from conflict regions of the Democratic Republic of the Congo or adjoining countries to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which requires companies to conduct sufficient due diligence and disclose the presence of conflict minerals in their supply chains (see Autumn 2012 newsletter); developing programs to eradicate slavery and human trafficking in their supply chains to comply with the California Transparency in Supply Chains Act of 2010 (see Autumn 2012 newsletter); or developing voluntary sustainability procurement programs across many products and services to align with a company’s corporate sustainability policy and goals.

Regardless of the driver and objective of a sustainable and responsible sourcing initiative, the basic steps to develop a program are largely the same: 1) map your supply chain; 2) prioritize materials, issues or suppliers; 3) communicate expectations to suppliers; and 3) track compliance and/or progress. I also recommend developing supporting guidance documents. Let’s look at each of these activities.

Map your supply chain. When you take the time to map a supply chain you can gain incredibly valuable insight into the materials used and the types of processes and actors involved in the creation of an end product. Undertaking this exercise for even one particular material (e.g. conflict minerals) can seem daunting to most because you need to follow the material all the way back to its origin through many processes and material transformations. You will also need to trace the material to actors with whom an end buyer conducting the mapping may have neither a relationship. Equally challenging is the act of mapping a supply chain across several end products. Companies taking on the latter objective may find that they are only able to map suppliers down one or two levels (first or second tier suppliers). Regardless of the scope of the mapping exercise, it is essential for you to have a strong understanding of the materials, processes and actors that you hope to influence before you move forward with a sustainable supply chain initiative.

Prioritize issues, suppliers, materials and processes. Your next step is to use the knowledge gained in the mapping exercise to prioritize the issues, suppliers, materials and processes to optimize the impact of available resources and level of influence throughout your supply chain. Some of my clients have done this by identifying the leading purchases or products by volume, spending (procurement) or sales (retail). You can also focus on products with known social or environmental impacts (e.g. the forestry impacts of paper), or a brand’s signature product or material (e.g. cotton for apparel retailers).

Communicate expectations to suppliers. Effective communication of your expectations to suppliers will be critical to implementing a successful program. Communication can come in different forms, depending on the program’s objective. Regulatory-driven initiatives (e.g. conflict minerals, California’s Transparency in Supply Chains Act of 2010) can involve letters that clearly communicate expectations citing specific legal requirements and request specific documentation (e.g. third-party certification). Voluntary procurement initiatives may involve more data driven responses (e.g. greenhouse gas emissions of a given product or service). Regardless of what request you communicate, and in what form, keep in mind that your suppliers may receive several sustainability surveys that can be a distraction from core business. This can be a challenge for suppliers who already have limited time and resources. When you align your questions and information requests with those most often requested by others in the industry you are likely to improve the quality of the responses you receive. For example, suppliers may be more likely to invest in calculating their carbon footprint if many other buyers – not simply you – are also asking this of them.

Track progress or compliance. You must support efforts to track progress in and/or compliance with sustainability efforts if you want to continue to drive positive change, manage data and information, and measure results against your priorities. The data and information that you are tracking should be aligned with the agreed upon priorities and be easily gleaned from the communications you sent and the information requested by the suppliers. A data management system can be as simple as a basic spreadsheet or it can be integrated into existing data management systems utilized by a company. Important considerations include how you will collect, consolidate, evaluate and report data. The ability to rank suppliers against different criteria should be integrated in the system if the information is going to be used in the selection of suppliers.

Develop guidance documents. When I assist clients with the above steps, I often develop guidance documents and other resources to assist sourcing or procurement teams understand the basics of sustainability (e.g. terminology, common key performance indicators), what materials and processes are preferred (or should be avoided), and how to decipher – and possibly rank – anticipated supplier responses. To further strengthen a sustainable procurement program, I always recommend that my clients establish a policy that addresses the four priorities outlined above, protocols to implement the program, and clear definitions of key stakeholders’ roles and responsibilities.

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