Tech brands tackle supply chains for social, financial wins
Many companies apply principles of efficiency, differentiation and forecasting to the supply chain for success. However, a growing number are also applying sustainable values as well. The Electronic Industry Citizenship Coalition is a group of electronics companies that have banded together to apply environmental, social and governance ideals to global electronic supply chains. Jessica Lyons Hardcastle of Environmental Leader reported that Ford Motor Company recently became the first automaker to join the Coalition.
The Electronic Industry Citizenship Coalition
Founded in 2004 for the opportunity to "drive positive change and increase efficiency," the EICC is made up of over 110 companies across 17 industries. Their combined annual revenues exceed $3 trillion, according to the EICC website. Many of these companies are competitors, but they work together for the common goal of better governance and sustainability in the global supply chain.
The EICC's stated goal is to foster "the idea of a shared industry code of conduct on key social, environmental and ethical issues in the electronics industry supply chain." EICC members include electronics industry leaders such as Apple, Xerox, Toshiba, IBM, Sony, Microsoft, Logitech, Intel, Cisco and Best Buy. Ford's membership as the first automaker makes sense as today's cars have more electronic components with increasing automation.
In order to gain full EICC membership, Ford will have to identify its high-risk facilities and conduct audits on at least 25 percent of them. Before joining the coalition, Ford had established a number of sustainability initiatives, such as self-driving cars and Smart Mobility. Smart Mobility includes several dozen experiments that will leverage Big Data and connectivity to improve global transportation. Fifteen percent of Ford's suppliers are EICC members, so the automobile manufacturer already has a great head start.
The EICC members, while caring about sustainable issues, are also for-profit corporate entities. So what are the key financial benefits of sustainable supply chains?
- Preparing for regulations: Applying sustainable values to the supply chain can reap many financial benefits in addition to the social ones. First, many countries are preparing to enact regulations in light of the COP21 talks. Improving supply chains will help these multinationals meet the new regulations and save them from paying any penalties. Companies that have been preparing on their own will be in a much better position when these regulations go into effect.
- Sustainable savings: Suppliers that apply sustainable practices can enjoy significant cost savings, reported Jocelyn Timperley of GreenBiz: "Those suppliers that did disclose their climate information reported combined savings of $6.6 billion. The savings also increase with time." Suppliers that reported this information for over three years enjoyed an average of $1.5 million in emissions savings.
- Risk management: Working with suppliers can be risky if they're not aware of, or don't care about, ESG issues. Many of these suppliers are risking potential disaster for their clients by turning a blind eye to these issues, especially with new regulations looking. Continuing to work with these suppliers can be dangerous for global corporations.
- The millennial shift: Another important reason for sustainable supply chains: Millennials. Millennials have made a major impact on the economy through shifting the focus from consumption to values, reported Elsie Maio of Green Money Journal. As a generation coming of age during the worst recession since the Great Depression, millennials learned to borrow, buy used and upcycle more than previous generations. How is this so important now? Because $30 trillion of investable wealth has transferred to millennials, noted Elsie Maio of Green Money Journal. This generation cares deeply about sustainable business practices. They show by their investment, purchasing and career choices.
EICC members are tackling a number of issues within the global supply chain. Workers' rights, trafficking or forced labor, materials sourcing, student workers and environmental sustainability are among the most pressing missions. Water usage is also a key area of concern for supply chains, considering the shortages that many areas of the world are experiencing. Timperley noted that water usage is a very strong starting point for companies concerned about supply chain sustainability.
With the addition of Ford, the EICC expects to see an expansion of this type of collaboration across new industries, noted Kaitlyn McAvoy of Spend Matters. By addressing the sustainability issues plaguing many suppliers and applying ESG ideals, these companies can enact positive change while also seeing financial benefit.