New tools for small suppliers in global value chains

New tools for small suppliers in global value chains

Belching smokestacks were once viewed as encouraging signs of progress. Today, a smokestack showing a cloud on condensing water vapor is viewed with suspicion. Companies are expected to meet a daunting array of certifications, standards, reporting requirements and best practices; and to drive these requirements across their global supply chain.

Companies are caught in a dilemma. To maintain economic competitiveness, they have no choice but to obey the global logic of markets. However, sustainability is inherently place-based. The appropriate response is dependent on the unique features of the local ecosystem and the values and development priorities of the community.

The United Nations Environment Programme (UNEP) and the Society of Environmental Toxicology and Chemistry (SETCAC) are partnering to promote a capability approach that can help small- and medium-sized enterprises (SMEs) at lower tiers of the supply chain develop the necessary life-cycle management systems and structures to effectively balance global economic drivers with local sustainability requirements.

Balancing Performance Measures with Capability Development

The various reporting and certification initiatives, such as GRI G3 guidelines for sustainability reporting or the ULE 880 Sustainability for Manufacturing Operations are vital and necessary contributions to developing some common vision of what is meant by sustainability and for holding organizations accountable. However, these efforts are not sufficient by themselves. The National Research Council, in its report Our Common Journey, noted that a critical challenge of sustainability is the interactions among environmental and human activities that were previously treated as separate and distinct, creating an urgent need for strategies that “can better integrate incomplete knowledge and experimental action into programs of adaptive management and social learning.”

Our attitudes about smokestacks also reveal that stakeholder demands evolve over time as conditions change, such that today’s solutions often become tomorrow’s problems. Therefore, building the capacity for transformation — an organizational culture that continually questions and reframes complex problems — is just as important as meeting current performance targets.

Organizational change research has shown that sustained high performance requires a balance of top-down initiatives for results-driven action, and bottom-up organizational development to create a culture of learning and continuous improvement. The UNEP/SETAC life-cycle management capability maturity model (LCM-CMM) is intended to guide SMEs in developing the requisite organizational competencies, routines, and structures for sustained performance toward various sustainability objectives.

The LCM-CMM was adapted from research conducted by the Lean Aerospace Initiative hosted at Massachusetts Institute of Technology. The consortium was organized in 1993 to develop a generic framework, or roadmap, for effective implementation of a confusing array of principles, tools and practices lumped under the banner of “lean production,” a situation similar to that faced by SMEs attempting to respond to supply chain sustainability requirements. The lean transformation model was adapted based on the learning experiences of global sustainability leaders. SMEs are guided through a logically-structured sequence of improvement activities enabling them to move up the life-cycle learning curve more quickly.

Practical Self-assessments

The LCM-CMM is designed to be used by SMEs to guide their improvement efforts with limited technical support, minimizing the burden on global customers to provide technical consulting services for supplier development. A self-assessment questionnaire guides the organization through an evaluation of the maturity of decision-making in 12 key business activities covering leadership processes, life-cycle management processes and enabling infrastructure processes. The maturity assessment is integrated with the SME’s business strategy and priorities to develop improvement plans that satisfy both near-term performance targets and longer-term development needs for an organization. The capability approach emphasizes continual improvement and using repetitive cycles of Plan-Do-Learn-Act to gradually build the components of a comprehensive management system.

The focus on decision-making provides a practical basis for evaluating company maturity and builds key skills that will support company effort to improve competitiveness as well as satisfy sustainability objectives. These decision-making skills include the following:

  • use of diverse sources of information,
  • sensitivity to boundary definition and interconnections,
  • xsystemic view of problems,
  • causal analysis to promote innovative solutions,
  • inclusive processes to resolve conflicts and engender support, and
  • open communications to facilitate trust and collaboration.

UNEP/SETAC Initiative

During the initial phase of the project, the self-assessment questionnaire and an associated workbook were reviewed by some 40 individuals representing ~30 organizations (companies, universities, industry associations, and nongovernmental organizations) and pilot-tested at two SMEs (in China and Thailand). Key feedback was that the materials needed to be further simplified to ensure they could be used in organizations with limited experience with or knowledge of life-cycle or sustainability.

The revised materials were used to conduct a one-day workshop in conjunction with the first Indian Life Cycle Assessment and Management Conference, in August 2012, hosted by the Federation of Indian Chambers of Commerce and Industry and UNEP. A two-day LCM Academy is scheduled to be held at the [avniR] 2012 LCA Conference in Lille, France, in Nov. 2012.

The relevance of this effort has been recognized by the European Commission (DG Environment) and the International Life Cycle Board (ILCB) of the UNEP/SETAC Life Cycle Initiative. The LCM Academy has been made possible by their support with financial and substantive contributions. Feedback from participants at these workshops will be used to finalize the assessment questionnaire and workbook. The next phase will be to work with selected SMEs in developing economies to pilot test the revised materials in 2013.

Capable Suppliers, Vital Communities

Developing sustainable business models requires a balanced approach that drives results-oriented action with the parallel and perhaps longer-term needs of organizational learning and development. Standardized performance measures help build consensus on overarching goals for sustainability and are necessary to hold corporations accountable to stakeholder demands. A capability framework provides the underlying skills and competencies required to comply with these measurement standards.

Further, it builds the capacity of all value-chain partners to assume responsibility for identifying the specific issues relevant to their competitive context and to the environmental issues and developmental priorities of their host communities. In today’s turbulent business environment, LCM-CMM decision-making skills are as crucial to financial success as to the protection of the environment. This shared-responsibility model engages all value-chain actors in collaborating to achieve the goal of sustainable value chains, while preserving community vitality.

For more information on the [avniR] 2012 LCA Conference or LCM Academy, contact: Jodi Bricout: [email protected]; Tel +33 (0)3 2113 0680. For more information on the UNEP-SETAC LCM-CMM project, contact: Tom Swarr: [email protected]; Tel: +1 860 575 4274 or Sonia Valdivia: [email protected]; Tel: +33 (0)1 4437 7628; or see Life Cycle Management Capability Maturity Project.