www.scemagazine.com January/February 201112

sustainability

FOUR STEPS TO ‘GREEN BUSINESS AS USUAL’Creating a sustainable supply chain requires a new way of thinking, says Paul McNeillis, Director of Sustainability Solutions at PE International.

M any leading organizations now

recognize that the impact of their

supply chains on the environment

may be an order of magnitude greater than

that of their direct operations. For a great

number of companies, the supply chain can

represent between 40–60% of their carbon

footprint and for retailers this figure can be as

high as 80%.

While customers and consumers

increasingly hold the brands at the top of

these chains accountable for reducing the

adverse impacts within them, the brands

realize that they cannot reduce these

impacts alone. Hence the dual rhetoric from

companies: on the one hand, calling for near-

term collaboration from their suppliers and,

on the other, (56% of the CDP group) saying

that in future they will deselect suppliers who

fail to manage carbon. So the motivation for

companies to work together is strong.

There have been no shortage of

programmes or initiatives, with more than 50

global corporations taking part in the Carbon

Disclosure Project’s supply chain group and

more than 60 organizations road-testing the

new scope 3 (supply chain) and product

life-cycle accounting and reporting standards

from the World Resources Institute. But actual

reports of significant supply chain reductions

have been scarce — although many

sustainability reports claim to be on target for

some fairly ambitious reductions posted out in

2020 or beyond.

With so much talk about green supply

chain initiatives on the conference circuit,

why can’t we just pick out our favourites,

distil out the ‘best practices,’ adapt them to

our organizations and string them together

into our own successful green supply chain

programme? For most organizations the

reality will not be that simple, as there are four

fundamental issues, which may present a

barrier to companies wishing to ‘green’ their

supply chains:

• A backward looking perspective focused on

risk over opportunity

• Failure to engage several key business

functions fully to a new ‘business as usual’

• Low trust, with suppliers blocking

collaboration

• A lack of co-ordinating leadership

These issues relate to ways of thinking, as

much as specific practices, and therefore

need changes in attitude to unblock process

and allow best practice to deliver real success.

Notice that all of them are either entirely

internal factors or have significant internal

dimensions and so are, potentially, within the

grasp of organizations to seize and change.

First, on the issue of risk perspective, I

have a confession. For the last 3 years I, too,

have often been looking at the world through

the rear view mirror of risk. It is easy to do.

Managing reputational risk in supply chains

has an established currency with Boards,

senior teams and procurement functions. If

brand reputation is under threat, you will get

the resources you need to at least identify

and assess the highest risks — and maybe

even get some resources to actually do

something about it. Some great industry-

wide risk management systems have been

established, which offer a standard way to

screen suppliers on environmental, social and

governance risk factors.

But, screening out environmental risks is

quite a different challenge from identifying

opportunities for reducing impacts; so

different, in fact, that it has often been split

into separate programs and teams. The

sustainability teams look for opportunities

to reduce impacts, while the corporate

responsibility teams usually examine the same

issues from the complementary perspective

of risk. Splitting the agenda, the organization,

and the mindset in this way — before

ultimately trying to reintegrate it within the

procurement function — has done little to

simplify an already complex set of issues, and

speaks to a wider need for joined up thinking

and engagement of key business functions

aligned to the leadership agenda.

Let us review the attempts made so far

by sustainability teams to engage the key

business functions in a supply chain. The

obvious place to start is procurement, since

this is the function that manages sourcing

decisions, enforces compliance programmes

and controls the relationship with suppliers.

How prepared has procurement been for the

green message? To be honest, and many

of you have attended those same meetings,

procurement’s state of readiness to embrace

this agenda in most companies has, to date,

been somewhere between, “we’re real busy”

and “get lost!” That might seem critical of

category directors and buyers, but, actually,

it is a testament to their honesty, because

in short it has told us: “we have not been

incentivized, directed or led to this as a key

goal. Moreover, no one has equipped us with

the tools to do anything about it if we were

directed in that way.”

One electronics company, in Boston,

whose sustainability team was supported

by senior management, came the closest

I have seen to cracking this issue. They

understood completely their procurement

function; identified key points of integration;

set out responsibilities in clear RACI format,

Paul McNeillis

2011 January/February www.scemagazine.com 13

provided and trained buyers with key tools

and generally won them over. They, and

some few others, were the exception and

may, therefore, be emerging leaders on this

issue. Even companies like this though,

have had to grapple with the fundamental

issue of trust, when it comes to collaboration

with suppliers. Supply chain relationships

are notoriously transactional and within that

context a compliance message is likely to get

attention, but on a shallower level than a really

significant collaborative approach. Under these

tough economic

conditions, most

suppliers are prepared to do whatever the

buyer wants to win the business.

Well it is motivation of a kind and to some

degree should it matter why suppliers catch

the train as long as they stay on for the

journey. But how do things change when

that immediate transactional reward is

spent? Consider for a moment that you pre-

qualified as a supplier and ticked the box,

but now to make real improvements and

reduce organizational and product impacts

would require you to make substantial

investments. The return on investment

timescale may go way beyond any

commitment from your customers to stay

with you. Meanwhile, you carry the higher

costs and your customers’ procurement

teams could ditch you on cost criterion

alone. In other words, unless the evaluation

mechanisms for suppliers and buying teams

alike are genuinely changed to reward green

investments and actions, then doing the

right thing could cost you the business.

The bottom line on this issue is that working

out sustainable supply chain solutions

collaboratively requires time. This is why

the Dow Jones Sustainability index rewards

longer-term supply relationships and why

the companies winning the supply chain

sustainability awards are typically glowing

examples of companies willing to invest in trust

and collaboration as much as technological

solutions. But actually, the key to sustainable

supply chains may lie beyond the narrow

focus of the procurement department and

may require examination of all stages of the

entire value chain, along with all business

functions influencing or interacting with

it. A good place to start is the marketing

function. As professionals who are focused

on understanding customers’ needs and

communicating value, they should be powerful

allies for the sustainability cause.

So how has the sustainability community

embraced this powerful and influential

profession? Well, a favourite word on the

lips of sustainability folk in 2010 has been

‘Greenwash.’ Any attempt to communicate

on green issues and achievements has been

stifled not only by NGOs and activists, but also

in the sustainability bubble by throwing around

the ‘G’ word. This singular failure to mobilize

(and in some cases to alienate) marketing was

probably the biggest misfire of the year, and

must not be repeated. In fact, there is a new

emerging term ‘Greenhush,’ which applies to

companies saying nothing for fear of being

accused of the ‘G’ word.

Clarity

and wide

dissemination of

measurement standards can

help to restore the right balance of confidence

and credibility to sustainability communications.

This year should see companies building on the

newly available standards for scope 3 supply

chain emissions, product carbon footprint, and

making wider use of environmental product

declarations to get accurate and robust

messages defined. Of course, ‘translating’

these actions into messages that customers

can understand and absorb, without losing

integrity, is a challenge where real collaboration

between sustainability and marketing

professionals will be required. Ultimately,

marketing and sustainability professionals

share the same goal — as one sustainability

leader eloquently put it recently, “we should

do something good and then speak about it.”

Increasingly, companies are ready to position

themselves as selling greener solutions.

The key to

sustainable supply

chains may

be beyond the

narrow focus of

the procurement

department.

www.scemagazine.com January/February 201114

sustainability

In 2008, the SMART 2020 report was

commissioned by the Global E-Sustainability

Initiative, from McKinsey and Climatecare,

on behalf of the global ICT industry, and

made the case that while this industry

contributes 2% to global emissions their

solutions have the potential to reduce global

emissions by 15%. Last year, there were

the first signs that specific providers were

really starting to pick up on that generic

claim and propose their specific commercial

solutions as having the potential to reduce

impacts in areas relevant to supply chain,

like smart logistics. We should embrace the

fact that companies like these are mobilizing

real commercial commitment behind the

green agenda. Buying and selling of greener

solutions is a good thing for sustainability

and should be supported.

Technical and engineering functions have,

perhaps, had a better time of it. After all,

they have deep knowledge of processes

and products that link them to their peers in

the supply chain. Technical mindsets fit well

together — wherever they sit in the value chain

— and work readily to find solutions, given a

chance. Life-cycle thinking and assessment

has now become a key and well-established

discipline in science and engineering

professions, leading to a growing competence

in both specialist advisory firms and in-house

teams to examine the impacts within value

chains with a rigour and accuracy that informs

a whole new level of sustainable decision

making. Where technically-driven companies

draw on their technical talent pool for senior

management roles, this thinking is well placed

to gain further influence, in time, as these

individuals’ careers advance and life-cycle

thinking advances along with them.

Then there is the design function. The

opportunity to influence decisions, like material

choices at the design stage, has long been

held out as the ultimate point of leverage, and

for those who have embraced it, the benefits

appear compelling. Chairing the recent LCA

product design Europe conference, in London,

recently, the message came across clearly:

“democratize green design.” To date, the tools

for modelling product impacts have needed

technical experts to operate them. This has

separated sustainability management from

the live act of design and, therefore, removes

the opportunity to get desktop influence

at the earliest stage. By not having tools

available that are built to facilitate or enable

green design options, opportunities are being

missed. Now providers have addressed this

issue head on and designers can get their

hands on interfaces, which are user friendly

for them and which, nevertheless, pull in

robust information about environmental

impacts. Real-time green design promises to

be amongst the ‘killer’ trends for sustainable

supply chains in 2011.

Other functions also have a role to play.

The legal department is a prestigious

business function that has often held sway in

discussions on sustainability. A very honest

legal counsel, who I met in the US last year,

admitted to me that if the company received

adverse information on suppliers, but did

not have the capacity to act on it, this could

create a potential liability for the brand.

More heartening was a recent example of a

European company that stated, after many

long debates within its organization, that they

had finally got senior level support to write

into their supplier contracts a year-on-year

commitment to reduce their impacts if they

wanted to retain the business.

And where has senior leadership been

in all this? Divided is the trite answer, as

the sustainability agenda has been split

— like the countless conferences — into

corporate responsibility, sustainability, risk

management, EHS, quality, sustainable

supply chain and across the many core

business functions described here. The

single biggest opportunity for companies

to drive sustainability through the supply

chain, and other key business functions, has

been to pull all of these fragments together,

usually under the leadership of new senior

sustainability positions variously entitled —

Chief Sustainability Officer, Vice President of

Sustainability, or similar. These people, often

from senior business operational positions,

have the experience, breadth of vision and

now the authority to pull together different

stakeholders and business functions around

key agendas, like greening the supply chain, in

a truly holistic way.

Ultimately, it is this holistic life-cycle thinking,

examining the entire value chain from raw

materials to end use by customers, and

considering all internal business functions in a

coherent operating model that holds the key

to achieving real success. So, as we look to

2011, out go the tactical initiatives, albeit with

a great legacy of lessons learned, and in come

the heavyweights, with an opportunity to get

real implementation of sustainability into supply

chains. While they have a challenge, there is

great optimism that new thinking will complete

the integration of sustainability into the new

‘business as usual’ — a transition from “green

to blue.” •

More information www.pe-international.com

Life-cycle thinking and assessment has now become a key and well established discipline in science and engineering professions, leading to a growing competence.