10 Things to Know About Engaging Suppliers for Green Programs

Some of the world's largest companies have embraced what Larry Goldenhersh calls a new era of "supply chain environmentalism."

Last year, Goldenhersh, the president and CEO of sustainability software firm Enviance, described to GreenBiz.com readers how the retailer community is shaking up the marketplace by considering the carbon dioxide (CO2) content embedded in products a differentiator for the first time. Walmart is often cited as one of the biggest players behind the practice, while consumer products makers Procter and Gamble (P&G) and IBM have led the way in creating scorecards to rank their suppliers on sustainability performance.

But the movement has also crept into a range of industries, with companies in the health care, utilities and construction sectors putting their supply chains under the microscope. Kaiser, for example, unveiled plans to rate its $1 billion medical supply chain, while Pacific Gas & Electric (PG&E) announced earlier this year it would become the first company in its sector to map the carbon footprint of its utility supply chain.
 
The Power of 10With all of this in mind, we turned to some of these industry leaders for advice gleaned from working to bring their suppliers on board for green initiatives. Here are 10 lessons learned from Walmart, P&G, PG&E and the World Environment Center, whose "Greening the Supply Chain" project includes work with Shanghai General Motors.

1. Make Sure Your Stars are Aligned

Before you start down the road on a green supply chain initiative, make sure you have all your assets on board, from your CEO down to workers on the ground. PG&E, for example, began by building alignment with the individuals in its supply chain department so everyone was on the same page. "We are the voice to the supplier, so we need to speak with one voice and speak the same language," said Yonnie Leung, PG&E's supply chain manager.

It is also important to secure support from upper management of both your company and the supplier, said Terry Yosie, president and CEO of the World Environment Center, which asks supplier senior executives to sign a commitment letter before beginning work on green supplier initiatives. "The commitment letter that we're asking people to sign is tangible, which is very important as the project goes on because middle managers know they've signed on," Yosie said.

2. Connect It to Your Business Strategy

There must be a strong business case for your supply chain initiative, such as reducing risks or bringing down the costs of goods. Walmart's supply chain efforts, for instance, mesh well with both its environmental goals for green power, greener products and zero waste, as well as its stated business purpose: "Saving people money to help them live better."

"Because the Walmart supply system is many times larger than the company's direct footprint, in many cases, the biggest, fastest, most economical efficiency gains and GHG reductions are not at the retail-level, rather up or down the value-chain of consumer products, either in raw material extraction, product manufacturing, transportation, customer use, or end-of-life," said Lea Jepson, Walmart's director of sustainability, Private Brands.

Don't go down this path if you don't have a business strategy connected to it, Yosie warned. "A high-profile initiative that generates short-term P.R. -- don't do that. It won't work, and they'll forget about it quickly."

3. Identify Strategic Suppliers to Test the Waters

Consider starting a pilot program with a group of select suppliers before deciding if and when to bring it to the larger supplier base in order to troubleshoot your program and work out any inefficiencies.  PG&E reached out to a small group of suppliers first, Leung said. "We also wanted to work with suppliers we knew were already in that green frame of mind."

Don't start with too many suppliers, said Larry Loftus, director of purchases capability and strategy at P&G. "Learn from the right sized group." P&G, for example, started with 30 suppliers before expanding to its top 400 suppliers for the first year of the program.

4. Engage Suppliers Directly and Communicate Your Goals

Avoid confusion from the start by bringing suppliers to the table and clearly explaining the business case behind the initiative and expectations for their participation. "It goes back to education and making sure suppliers understood what we were doing," said Leung from PG&E.

P&G convened a supplier board, bringing suppliers together to discuss in a collaborative way which areas made the most sense for mutual engagement. "We could learn from one another," Loftus said, "measure and improve, and also hear new ideas."

5. Recognize that Suppliers Will Be at Different Levels

Don't assume that your suppliers will all be novices; some may be further ahead of the curve than you are, giving you a chance to learn from them. "Some suppliers will have different capacities," Yosie said. "There is no one-size-fits-all. Some are large and sophisticated, others may be mom-and-pops."

In Loftus' experience, those who are already embracing sustainability are delighted to showcase their improvements. "Those who haven't -- because we've made the process collaborative -- are willing to start. To me, that is very encouraging."