Most businesses are not directly involved in the manufacturing process and the environmental impact of their products may be unapparent to management as well as customers. Savvy businesses know, however, that the responsibility for their products begins when they are conceived, designed, and ordered.
This sets in motion a cascade of events that includes resource extraction, transportation, production, packaging, distribution, sales, consumer use, and disposal. Each step in the process has its associated environmental ills, and a conscientious company would be expected to account for all of them.
Even use and disposal, which have traditionally been considered consumer issues, are strongly influenced by decisions made during the design phase. In this way, a company dictates the energy use of its products during operation, their health effects on users, and their ease of recycling or remanufacturing.
During last month's Socially and Environmentally Responsible Supply Chain Conference at the Stanford's Graduate School of Business, leading businesses including Starbucks, Wal-Mart, Disney, Gap, Timberland, and Hewlett-Packard shared some insight into their efforts to green the supply chain.
Each has made great strides in aligning profits with principles and responding to the demands and values of its consumers. Several themes kept coming up during presentations and follow-up discussions that continued for the better part of a day:
1. Start with the Top
No effort to take a long, hard look at the way a company's products are made will be successful without the support of top-level management. Many resources and substantial funding are required to tackle such a project and intern al champions will need all the support they can get.
2. Make the Business Case
Besides its inherent moral value, sustainable supply chain management has direct business benefits that must be clearly communicated to doubtful employees and managers. Chief among these are the public relations benefits of developing a positive brand identity and the reduction in risk that such a strategy provides. Shell Oil took quite a pounding when the public found out it planned to sink the Brent Spar in the Atlantic, and it took many years for its image to recover.
3. Develop a Code of Conduct
Before rushing out to identify possible certification firms, it is important that a company assess the various certification schemes that exist and develop a code of conduct that describes the values it is seeking in a socially responsible supply chain. After an exhaustive vetting process, Starbucks decided to develop its own C.A.F.E. standards because it did not feel that any of the certification schemes went far enough.
4. Collaborate with Critics
Especially for companies that re developing a sustainable supply chain strategy due to past criticism from NGOs or human rights organizations, no tactic does more to convey the sincerity of a company's efforts than an invitation to critics to participate in the process of changing course. That is why Home Depot worked with the Rainforest Action Network, Starbucks consulted the Rainforest Alliance and Transfair International, and Wal Mart has asked Environmental Defense to open an office in Arkansas.
5. Use Scorecards to Rate Suppliers
Vague ideas about responsible supply chain practices do not give suppliers enough guidance as they seek to improve their performance vis-à-vis company standards. Developing scorecards to rate suppliers is therefore a critical component of any effort to improve performance and also businesses to document their efforts for auditors.
6. Verify Through Third-Party Certification
It goes without saying that a self-certifying program is no better to the public and especially to critics than no program at all. Any truly credible effort to address supply chain issues must include an outside audit to document compliance with accepted standards and to identify areas for improvement.
7. Team up with Competitors
The global head of procurement at Starbucks was adamant in his call for convergence between varying supply chain standards within an industry. He said that it makes no sense to recreate the wheel when another company has already done the leg work but joked that no other coffee retailer has yet to license the C.A.F.E. standards from Starbucks despite his company's sincere desire to do so.
8. Take Corrective Action
Often companies cite the possibility of failing a compliance audit as a reason not to engage their suppliers in responsible supply chain management. Participants at the forum pointed out, however, that unless there is public proof that a supplier rating scheme has teeth, it will not be perceived as a valid form of certification. In other words, flunking suppliers are an excellent public relations opportunity.
9. Empower Suppliers Build Capacity
While repeated failure to meet standards is grounds for supplier dismissal, companies are advised to engage their suppliers before it gets to this point to facilitate compliance and to improve performance. Most importantly, suppliers should be given the capacity to increase their own performance. Starbucks, for example, has several Farm Development Centers that help farmers to improve their farming practices so they use fewer chemicals and maintain soil health.
10. Encourage Transparency
A successful responsible supply chain management strategy is not complete without publicity. After all, while internal standards are laudable, true industry-wide shifts in procurement will not happen until companies feel the need to compete on a social and environmental level, not just an economic one. Without public awareness of corporate social responsibility efforts, competitors will not be encouraged to develop programs of their own.
To initiate a sustainable supply chain strategy, then, it is critical to gain management buy-in, collaborate with non-profits to develop credible standards, help suppliers achieve best practices, and let customers know about your efforts. Numerous firms like Bureau Veritas and Verité can help businesses improve their current standards or start a new program from scratch. In the end, companies will find that their efforts provide marketing and performance benefits that make the whole process worthwhile.
Nik Kaestner is the principal of Green Squared Consulting, a sustainability consulting firm that shows businesses and organization that environmental stewardship can improve their bottom line while protecting the environment. His firm can be reached through its website, Green2Consulting.com or (415) 287-0476.