Increasingly it seems that just about every organization or product is claiming to be “green.” Even if your company is not planning to address becoming greener this year, your customers, your competitors and your government probably are, but supply chain professionals and regulators are also growing increasingly skeptical of unsubstantiated “green” claims and wary of brands that fail to address sustainability in a transparent & systematic manner.
What are the major trends in sustainable supply chain management, and what can you do about them?
Business and governmental leaders around the world are grappling with unprecedented and simultaneous economic, environmental and social turmoil that calls for new approaches to decision making in the production and consumption of goods and services. Increasingly, systems thinking, sustainability and transparency are the core principles behind the new approaches being taken to avert disaster and restore confidence. In addition, new standards, sustainability management tools, social networks and web 2.0 capabilities are increasing the ability to detect unsustainable “green” claims.
Systems thinking seeks opportunities and solutions to problems by understanding the linkages, interactions and processes between the elements and conditions that comprise whole "systems" end-to-end. Sustainability requires decision-making that takes economic, social and environmental system factors into account considering the full “cradle to cradle” lifecycle of products and product systems. Transparency is a foundational sustainability concept that addresses the disclosure, accessibility and verification of standards-based product lifecycle data.
An increasing number of firms are aligning their decisions with the four sustainability system conditions called for within the Natural Step framework: i.e. To reduce and eventually eliminate the ways in which the goods and services they purchase or produce contribute to:
- ongoing build-up of substances taken from the earth's crust
- ongoing build-up of substances produced by society
- ongoing degradation of natural systems by physical means
- undermining the ability of other people to meet their social & economic needs
Many large companies have set explicit objectives for minimizing the negative impact of their supply chains, including the impact caused by their suppliers.
In response, several major supply chain management organizations such as the Institute for Supply Management (ISM) and the Sustainability Purchasing Network have developed sustainable purchasing initiatives and US Federal Trade Commission is expected to intensify scrutiny of green marketing claims in the next several months.
According to ISM “The development and implementation of measurement and performance criteria is important to the success of sustainability and social responsibility programs. Integrating goals and objectives with relevant measurements will ensure the ability to track and report progress against various initiatives. Supply professionals must consider impact, influence, and positioning when selecting and developing metrics to embed throughout the: (1) supply organization, (2) entity and (3) supply base.”
A metrics document was developed by ISM to provide supply professionals and management with a broad-based list of possible metrics. Despite differences in emphasis, sustainable procurement activities in both the public and private sectors take four main approaches:
- Procurement of eco-labeled products or services
- In-house product/service evaluations
- Third-party product/service evaluations
- Industry or product category supply chain programs
Members of the Sustainability Purchasing Network (SPN) take the economic value for money (price, quality, availability, functionality) as well as the environmental, social, and ethical impacts of the goods and services they purchase- at local, regional, and global levels. When purchasing products the SPN members consider:
- What the product is made from and how long it lasts.
- The energy, material, and emissions "footprints" associated with its manufacture and transport.
- Who has made it, how it's made, and under what working conditions.
- How it will ultimately be disposed of.
- Whether the purchase needs to be made at all.
The range of objectives such sustainability purchasing programs might consider include:
- Contact information for Chief Sustainability Officer publicly available
- Use of sustainability criteria in procurement decisions
- Processes in place to embed sustainability & social responsibility into supplier
- qualification and certification decisions
- Maintain appropriate records to feed into corporate sustainability & social responsibility reporting
- Development of relationships with key suppliers to gain access to protected information on chemical makeup of products being purchased
- Published internal policies and guidelines
- Waste prevention and reduction
- Green buildings and construction
- Paper and paper product consumption
- Transportation and logistics management
- Pollution and toxin reduction
- Water conservation and consumption
- Reduction of greenhouse gas (ghg) emissions
- Biodiversity maintenance
- Wages and working conditions
- Employee health and safety
- Growth of a sustainable economy
- Support for local economy
- Support for social enterprises
- Minority procurement & diversity
- Participation in Consortia
- Awards and certifications
- Education and communication initiatives
- Sustainability policy built into supplier contracts and measured
- Fair trade
While factors like eco-toxicity and recycled content remain important to consumers, three specific environmental metrics – water use, energy use & global warming potential (GWP) – are of increasing concern to supply chain professionals and regulators due to the relevance of current energy and climate change concerns. GWP combines emissions that trap heat in the atmosphere into units of CO2 equivalents (CO2e), or the amount of CO2 that would have an equivalent effect as the emitted greenhouse gases.
With gas cap and trade legislation expected from congress this summer and a new global climate change treaty expected to be agreed upon in Copenhagen this December a host of new “carbon management” software applications are coming to market that can help suppliers to major corporations and government agencies address rising demand for lifecycle data and sustainability performance reporting.
Microsoft has recently incorporated an Environmental Sustainability Dashboard into its Microsoft Dynamix offering that is designed to help Microsoft Dynamics AX customers track their energy consumption and greenhouse gas emissions, also known as their carbon footprint. The Environmental Sustainability Dashboard enables companies to track and report on four environmental performance indicators related to energy and emissions as prescribed by the G3 guidelines from the Global Reporting Initiative, an internationally recognized organization formed to facilitate sustainability reporting.
Microsoft is not the only major player in enterprise software to throw its hat into the sustainability & carbon management software ring. SAP has recently acquired Clear Standards, a company that provides enterprise software solutions to help global organizations accurately measure, mitigate, and monetize greenhouse gas (GHG) emissions and other environmental impacts across their internal operations and supply chains.
Yet another Sustainability Management Software As A Service (SAS) offering that seeks to extend sustainability and carbon management into the supply chains of large organizations has recently been introduced by Hara, a startup funded by venture fund Kleiner Perkins Caufield & Byers (which former Vice President Al Gore joined as a partner in 2007.)
Hara maintains that in addition to the established business processes and systems used to strategically manage the five key drivers of shareholder value— customers, employees, supply chain, financials, and products— there is a sixth “system of record” and corresponding lever of shareholder value that is emerging — the environmental record — which includes the information across an organization and its supply chain related to its natural resource consumption and energy usage, and the resulting emissions and environmental impact.
As a wider array of stakeholders become more engaged in environmental issues and the lifecycle impacts of corporate supply chains, their scrutiny of green marketing claims and their demand for transparency and disclosure of sustainability performance is likely to grow. Joel Makower refers to this trend as “Death by Disclosure” and warns that new green gospel has become “Judge thyself, lest ye be judged in your stead.” If your company plans to become greener this year, employ systems thinking and be sure that your green efforts are sustainable.