2. We need a comprehensive approach to social, environmental, and ethical practices. The range of topics making their way into strategies, policies, assessment and improvement practices, and multistakeholder collaboration has broadened over time, and, happily, there are also a growing number of tools available to help.
Energy and greenhouse gas management is now a mainstream part of sustainable supply chain management, with the WBCSD/WRI’s Scope 3 emissions standard, the Carbon Disclosure Project’s reporting requirements, and the Electronic Industry Citizenship Coalition’s Carbon Reporting System representing just a few of the tools for companies to work with suppliers on energy issues.
Other supply chain environmental topics include air pollution, waste management, water usage and wastewater management, and impacts on land and biodiversity. Walmart and Procter and Gamble have created supplier scorecards to collaboratively manage a range of environmental impact metrics (in addition to their labor standards programs). H&M, adidas, C&A, Nike, and others have committed to gradually phasing out hazardous chemicals, which follows Greenpeace’s high-profile detox campaign. Puma, which also committed to managing chemicals in 2011, released an environmental profit and loss statement this year that quantified and monetized supply chain impacts on greenhouse gas emissions, air pollution, water use, land use, and waste.
Over the past few years, due to new standards and legal requirements such as the UN Guiding Principles on Business and Human Rights and the U.K. Bribery Act, many companies have prioritized human rights and ethics. The concept of human rights due diligence and responsibility for managing impacts, no matter where they occur in supply chains, has also found its way into standards such as the OECD Guidelines for Multinational Enterprises (and OECD guidance on conflict minerals specifically), the ISO 26000 CSR Guideline, and the forthcoming update to the Global Reporting Initiative Guidelines.
3. It’s important to look beyond the first tier of suppliers for the most significant impacts. The standards described above require companies to better understand their supply chains beyond the first tier.
The Guiding Principles, for example, require companies to “prevent or mitigate adverse human rights impacts that are directly linked to their operations, products, or services by their business relationships, even if they have not contributed to those impacts.” In practice, this means that poor social and environmental management is now a concern both up and down the supply chain.
Specific industries have also launched efforts to move beyond the first tier of suppliers. In 2009, BSR’s Mills & Sundries Working Group started developing standards and tools covering labor, health and safety, and environmental impacts of textile mills and button, zipper, tag, and label suppliers. In 2011, the Sustainable Trade Initiative, a multistakeholder process funded by the Dutch government, launched a program in the electronics sector to focus on the second-tier suppliers in Southern China.
In addition, some of the most significant impacts from a lifecycle perspective often occur several tiers removed in the materials extraction and processing phases. In the realm of conflict minerals, BSR has discovered the imperative and challenges of working at multiple levels of the supply chain, from raw materials, to processing, to manufacturing, to retailing.
4. Integrating supply chain sustainability into core business practices remains the Holy Grail. The concept of “internal alignment” has become shorthand for ensuring that supply chain sustainability is built into core business strategy-setting and implementation across all departments and functions.
In BSR’s Beyond Monitoring Working Group, we approached this on the practical level by sharing lessons across industries–for example, how to manage internal deadlines without causing overtime on the factory floor, and which information to review during supplier selection processes. We examined how e-learning and workshops can be used to educate and engage procurement staff, and we heard how companies were building supplier performance metrics into procurement staff evaluation and bonuses. Through our recently launched Center for Sustainable Procurement, we are looking at how to integrate product and supplier sustainability considerations and information into procurement decisions.
Next page: A vision for positive impact