Companies are increasingly experimenting with ways to make their global supply chains greener amid pressures to address environmental concerns, public health issues and growing stakeholder expectations.
Managing massive supply chains spanning borders and cultures is a herculean task but not insurmountable, according to the World Environment Center (WEC), which has spent the last four years working with large multinational companies on green supply chain initiatives.
Terry Yosie, the nonprofit's president and CEO, analyzed the group's work to uncover best practices for making green supply chain initiatives succeed, which he details in the latest GreenBiz Report, "Greening the Supply Chain in Emerging Markets: Some Lessons from the Field."
The paper makes the case for green supply chain initiatives and identifies the value the efforts can bring to a company. Fostering business continuity, maintaining quality, protecting brands and strengthening the bottom line are all benefits green supply chain initatives can deliver.
"We're not talking about public relations," Yosie said in a GreenBiz Radio interview. "We're not talking about politics. Greening the supply chain is about dollars, it's about cents, it's about creating business value in a way that's aligned with sustainable development."
Yosie emphasized the need to have people on the ground managing supply chains outside a company's home state.
"You cannot manage greening the supply chain initatives in corproate headquarters," Yosie said. "Can't be done, and I think maybe some companies are still under the delusion that they can issue some policy statement from on high and it will get carried out. But our experience is that a direct, on-the-ground level of capability is really the place where you need to start because many of the suppleirs do need training."
One of the best ways to do this is through partnerships because global companies will not have all the knowledge needed to navigate supply chain issues in developing countries.
"And so it will by necessity have to look for other organizations to partner with, to provide services, to deliver information and the support so the supply chains achieve the objectives that the company wants," Yosie said.
It is essential for companies to work within the context of local cultures.
"This is not something where Western-oriented companies can just impose their value system and their way of thinking on the SME suppliers," Yosie said. "In many ways, I"m seeing evidence where the local suppliers are imparting knowledge that will inform the global company."
One of the best ways to get suppliers to embrace green supply chain initiatives is by giving them incentives. Yosie cites as an example the WEC's previous work with Alcoa and some of its suppliers in Romani, where their management practices and technology were "Soviet-era."
Alcoa and the WEC put in place a series of training programs and technical support activities. Alcoa sent a signal that its suppliers' performance in the program would have a direct impact on their future business success with the company. They were also offered access to business practices and technologies for making cheap and easy improvements in lighting and air conditioning.
"Keeping in mind that Romania, at the same time, was also applying to become a member of the European Union, which meant ultimately a plant like this would have to be subjected to EU environmental standards, and so the plant managers were aware of that," Yosie said. "Our project with Alcoa gave them an ability not only to strengthen their relationship with their customer, but ultimately prepare them for what they were going to have to deal with in terms of the regulatory process."
Companies must get beyond the belief that greening the supply chain is passing an audit or negotiating the cheapest contract. Yosie said he's seeing a lot of audit fatigue.
"If you want suppliers to be viable businesses and sustainable businesses in their own right -- these issues of cost, while always important and these issues of passing an audit, while important -- have to folded into a broader business relationship," Yosie said.