Why a nexus of regulatory requirements may take IT by surprise

Editor's note: This is part 2 of a four-part series covering the state of sustainable supply-chain management in the IT sector. Read part 1 focused on product takeback and e-waste recycling here.

My previous post Product takeback and e-waste recycling: A growing business opportunity discussed best-in-class solutions to the challenge posed by state-level legislation mandating e-waste recycling. To recap, Malk Sustainability Partners (MSP), a specialty management consultancy that guides businesses in developing profitable corporate sustainability strategies, engaged 29 global IT companies and five industry experts to investigate the key drivers, important issues, and popular strategies behind the sector’s adoption of sustainable supply-chain management (SSCM). MSP then synthesized this information into a study describing the state of SSCM in IT, available for download here.

This post will discuss key drivers of SSCM strategies identified by interview respondents.

Sustainability and supply chain managers at IT companies identified four drivers of SSCM strategies as primary to their companies’ efforts at similar frequencies:

  • Stakeholder interest – 34 percent
  • Leadership – 24 percent
  • Risk and cost management – 31 percent
  • Regulatory pressure and compliance – 31 percent

Managers who identified stakeholder interest as a primary driver of SSCM strategies typically referred to stakeholders as customers and investors. Customers, listed as government, enterprise buyers, individual consumers, universities, original equipment manufacturers, and retailers, communicate interest in corporate sustainability up the supply chain through self-assessment questionnaires and supplier codes of conduct. Public sector customers were reported as adding sustainability requirements to their procurement decisions by referencing standards such as the Electronics Product Environmental Assessment Tool (EPEAT) registry. Apple’s recent decision to remove and then subsequently re-list their products in the EPEAT registry demonstrates the power green labels can exert when coupled with increasing stakeholder interest in corporate sustainability.

The 24 percent of respondents who cited leadership as a primary driver of their companies’ SSCM strategies highlighted pressure to implement originated from internal interest and industry forums. Respondents indicated internal interest in SSCM strategies originates from bottom up or top down initiatives. Bottom up efforts were characterized as struggling to maintain a consistent budget due to limited "buy-in" from top level management, but top down efforts were mentioned as lacking the "on-the-ground" understanding of functional silos required to implement a successful SSCM strategy. Industry forums, like the EICC and GeSI, were highlighted as both a driver and valuable tool for SSCM. Companies are driven to participate to remain competitive on sustainability issues because these forums provide a compass to navigate diverging regulatory standards across regions, tools to implement SSCM initiatives, and platforms to showcase accomplishments.

Respondents who referenced cost management as a primary driver of their companies’ SSCM strategies identified reductions in operating, product delivery, and compliance costs. Specifically, SSCM strategies that focus on green purchasing policies improve the efficiency of internal production processes; often through decreased use of energy, water, and other production inputs. Likewise, SSCM strategies that partner with vendors to reduce packaging in product shipments improve cost competitiveness. In 2006, for instance, Nokia reduced the packaging for its phones by over 50 percent. By the end of 2007, this SSCM-improvement translated into financial savings of over $130 million. Finally, certain IT companies reported having developed life-cycle assessment (LCA) tools to leverage concern for compliance risk and drive new business.

Respondents who referenced risk management highlighted NGO efforts, like those of Greenpeace and the Enough Project, as compounding the risk associated with unsustainable business operations being discovered and driving corporate action in SSCM.

Next page: Avoiding holes in SOX