Can supply-chain transparency avoid a 'Nike moment' for IT?

The latest Newsweek Green Rankings showed that seven of the top 10 U.S. companies are from the technology and telecommunications sectors: IBM, HP, Sprint, Dell, CA, Nvidia, and Intel. It seems curious at first — after all, these companies make products that contain toxic materials and unrecyclable plastics, whose use consumes ever-increasing amounts of electricity, and whose disposal has become problematic for communities around the world. Oh, and are made by low-wage workers, often under suboptimal conditions.

So, why all the green love? It’s the supply chain, stupid.

Over the past few years, infotech firms have been engaging their supply chains as never before, at least on the environmental front, which is what Newsweek assesses. It has become a necessity for companies to do this — to reduce risks, but also to ensure efficient, cost-effective operations in a global marketplace. And while supply-chain scrutiny and transparency isn't a cure for all environmental and social ills, it is moving companies toward more successful outcomes.

“The majority of IT companies’ environmental and social impacts are not within their own operations, but instead are spread out across their supply chain,” explains Zach Goldman, a partner at Malk Sustainability Partners (MSP), a management consultancy focusing on this sector. “For many of these firms, their actual Scope 1 and Scope 2 impacts are almost negligible, relative to the size of their balance sheets.” That means environmental and social impacts reside almost entirely within their supply chains.

It is important to note that not all such companies outsource all their dirty work. One example is IBM, which continues to manufacture semiconductors and “package” them — that is, encapsulate and mount them on substrates — which are among the most environmentally sensitive aspects of electronics manufacturing. But IBM, which ranked first in Newsweek’s U.S. rankings and fourth in its global rankings, is an admirable outlier in this regard.

A study published today by MSP (download-PDF) sheds light on sustainable supply-chain management across the value chain in the information and communications technology (ICT) sector. It examines why companies in the sector are focusing on these issues, which issues they are concerned about, and how they are addressing them. The study was based on interviews with supply-chain managers, including those from Akamai, AT&T, Cisco, Dell, EMC, Facebook, HP, Sony, Sprint, and 20 other companies.

The study found that supply-chain issues are growing rapidly among ICT companies, with nine in 10 companies now having a sustainable-supply-chain policy. Seven in 10 supply-chain and sustainability managers believe sustainable supply-chain management strategies create business value in their firm. They are driven almost equally by stakeholder concerns, regulatory pressures, and issues related to risk and cost management. And, of course, nobody likes to see their name in the news, as Apple and other customers of Foxconn have recently.

You can read insights about the study by Michael Shoemaker, one of its authors, here.

“This is our industry’s ‘Nike moment,’” Tim Mohin, Director of Corporate Sustainability at AMD, is quoted saying in the study. He’s referring to the footwear and apparel company’s reputational challenges related to their alleged use of sweatshop labor in the 1980s and 1990s. “We are heading for continued upward awareness and scrutiny on supply chain behavior,” said Mohin.

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