As Joel Makower highlighted back in February of this year, sustainability standards, particularly those that represent the broad spectrum of indicators within sustainability, are needed and becoming increasingly common.
But the unanswered question is this: Does a company's investment in implementing a sustainability standard have tangible business benefits? The question remains no matter whether a company is exploring a product certification, operational system, investor ranking or set of supplier requirements.
To try to dig up an answer to this increasingly pressing question, I set out to speak to a few industry leaders about the sustainability standards they had implemented. In defining the term "standard" in this realm, I included product certifications, sustainability rankings, operation standards and supplier standards.
What I found was that, regardless of whether the company's experience in standardization was focused on the supply chain, on consumer-facing green labels or on broad industry rankings, some key themes emerged:
- The usual reason for creating or utilizing a standard was to clarify a fuzzy concept and create differentiation;
- The flip side of this is that standardization begets commoditization, and in some cases it isn't clear if these standards are a good use of scarce resources and attention;
- We should beware of trendy "declarations" or rankings that may not truly demonstrate environmental or social benefit.
Why Utilize Standards?
When a company creates or utilizes an industry standard, it requires time and financial investment. A champion inside the company has to make the business case to the organization's leadership that the standard will be accretive to the brand or produce some beneficial business result.
The champion then has to learn or teach the standard to affected stakeholders within, and outside, of the organization. The standard then has to be implemented, and product or operational changes made.
Invariably, there is then marketing cost to explain the standard or communicate benefits to consumers or other stakeholders. A company should also be transparent about the status of a standard's implementation within the company -- and its value chain.
This seems like a lot of work. So why bother?
As anyone working in sustainability or corporate social responsibility can attest, explaining what it means to offer a "sustainable", "green", "responsible" or otherwise environmentally or socially beneficial product or service is an uphill battle. These words have many interpretations. When trying to communicate intentions, requirements and accomplishments -- specific, measurable clarity is essential.
Next page: How Clorox, Bonterra Vineyards and AMD Put Standards to Work
Thanks for the great article.
Thanks for the great article. I think the supply chain is the best opportunity for moving on the path to greater sustainability that exists right now.
Kenton Harmer is correct that large players like Walmart, Kaiser, GE, Nike and others do impose costs onto their suppliers by requiring these things. The benefits however far outweigh the costs. I, as a supplier, do what my customers ask me to do. These vendors can go find other customers after all.
The top tier OEM's and retailers can make the situtation better if they can come together to
1. Lessen the number of standards to comply.
2. Have universally acceptable standards with solid third party verification.
3. Show their vendors how becoming more sustainable makes them more competitive by saving money and reducing risk.
The electronics industry has made strides in this with the EICC Code of Conduct. But speaking to sustainability managers I often hear that one of their biggest problems is reporting to so many standards. Who (if any) organization, for profit or not, might be responsible to try and meld these many similar standards into just a few?
Jim Verzino
www.jimverzino.com
Nice subject! At Good Things
Nice subject!
At Good Things Green, a start up that has not yet launched publicly, we've been rating the raters for 3 years.
We've worked closely with companies (some very large, some very small) to help them understand the need for auditable third party systems. The days of a company telling the world that they know best what's important to their customers are over.
In-house sustainability departments NEED to choose third party systems to help them not only rate themselves, but go deeper into each and every area- and be completely transparent about their paths. If they choose to only talk about their accomplishments, well, there's a reason. And that reason will lead to areas of opportunity for improvement.
Very interesting article!
Very interesting article! Standards truly are just a minimum requirement that companies should follow. After looking into their business operations, many companies will find that going beyond them and implementing new and innovative sustainability options in the correct manner will open up many opportunities for cost savings.
Greening-up the supply chain,
Greening-up the supply chain, as this article mentions Kaiser & Walmart are doing with sustainability scorecards, can be an effective way to leverage their market positions towards real impacts. But pushing some of the hard work of improved sustainability performance onto their suppliers (while taking credit for the improvements) also comes with responsibilities at both the company and sector levels that aren't always being met.
There is a real cost to suppliers to meet the reporting burdens now being placed on them. Organizations such as Walmart have to make the business case much clearer for taking on this cost - what is the ROI that the purchaser will guarantee in return for robust reporting? Often it seems it is couched in language such as 'preferred status' but the link needs to be clearer about how improved sustainability measurement and performance will tilt purchasing decisions. As well, a greater degree of tangible support is required. A GHG inventory, for instance, is a technical and consuming process. Without providing either technical support or a price incentive to obtain it from the market there is a risk more rigorous reporting requirements will be only feasible for companies able to allocate significant internal resources towards it. This stratifies the supply chain by making it harder for smaller suppliers to participate in sustainability reporting and to continue to compete and grow.
At the sector level, there has to be alignment and consolidation of sustainability data requests between competitors for their shared supply chain. To answer one thoughtful assessment represents a huge step forward for many suppliers and for sustainability. To be asked to answer a different set of questions for each major customer will potentially lower the participation rate as suppliers become overwhelmed by these requests.
During a time when economic conditions have put the major market players in a leadership role for sustainability, sometimes out in front of consumers, it seems that within the domain of certifications the focus should be increasingly concentrated on the buyer-supplier relationship. This is important because the confusion consumers have around green certifications is also being felt at supply end of the value-chain. The responsible evolution of the supplier sustainability scorecard lies in its standardization across sectors in a way that embraces and benefits suppliers. To get to the end that is stated in the article of " improving environmental outcomes and safety for humans and other living beings" means someone has to change the way they are doing their job. That someone is a supplier and that change will be made more enthusiastically and effectively if those asking for standards to be met and certifications to be obtained become much more precise about about the questions they are asking, the support they are providing and the returns that they are projecting.