Assessing supply-chain risk through 'commodity mapping'
Assessing supply-chain risk through 'commodity mapping'
When Kara Hurst, the CEO of The Sustainability Consortium — the global group of companies working to improve consumer product sustainability — first uttered the words “commodity mapping” a few months ago, I more or less intuitively got it. And it was instantly appealing: a methodology for understanding the geography of one’s supply chain, or at least the commodities being purchased, and the environmental conditions of the places from where they were being sourced.
Commodity mapping was the latest of what I’d seen in recent months: tools and information resources geared to provide insight into key supply-chain regions and, by implication, the risks a company might face from region to region.
For example, there’s GAIN, the Global Adaptation Index housed at Notre Dame University, “the world’s only index measuring the vulnerability of the world's nations to climate change and their readiness to adapt.” It rates and ranks the readiness and vulnerability of more than 175 countries by six key indicators: water, food, health, ecosystem services, human habitat and infrastructure.
And then there’s the Indigenous Rights Risk Report, which analyzes 370 oil, gas and mining sites around the world operated by 52 U.S.-based companies, located on or near Indigenous land. Ninety-two percent of these are said to pose “a medium to high risk to shareholders.”
Both seem worthy of study by any company seeking to better assess the risks facing their operations or suppliers.
Now comes commodity mapping, a deceptively simple but potentially powerful tool for matching key commodities with environmentally sensitive ecosystems.
The Commodity Mapping Innovation Project was the brainchild of Christy Melhart Slay, Research Manager and Biodiversity Project Leader at TSC, who came to the organization three years ago while working on her Ph.D. in biology from the University of Arkansas, one of two universities that co-host TSC. One of her first meetings at the consortium was with a group of companies in the beverage and agriculture sector.
“I was sitting there with all of these retailers and consumer packaged goods companies,” Slay told me recently. “And they’re saying, ‘You know, we don’t understand our commodity supply chain. We want to focus on water issues, like scarcity and biodiversity, and social issues, which are really geographically specific. But when we buy from the commodity markets, we don’t know where our stuff is coming from. It’s really hard to address those on-the-ground issues when we don’t have traceability into our supply chain.’”
Slay began gathering crop data, linking it with import and export data, creating a model that takes the country where a company is located and predicts where commodities or crops are actually being grown — “a high probability based on the model that we’ve created,” says Slay.
Slay and her team then pulled in information about biodiversity hot spots and water scarcity hot spots — not just terrestrial biodiversity but aquatic biodiversity, too. Next came at social issues. “We found data on areas that have high political unrest, which is a signal for other social issues.” They overlaid that data onto the existing crop model.
The result is a tool that maps the environmental and social risks a company faces in buying commodities around the world.
I asked Slay how she envisioned companies using the tool. “It’s hard to understand what problems you need to be addressing if you don’t know where you’re sourcing from,” she responded. “Some companies work directly with their growers, and so they have that direct contact, which is great, but a lot of companies don’t. So Step 1 is understanding your supply chain and understanding where you’re most likely to be sourcing your commodities from. Step 2 is understanding what are the issues in those regions. Step 3 is asking, ‘What can we do about it as a company?’ There’s a variety of different ways that a company could take this information and use it.”
Slay describes the tool as “a work in progress,” though it is being piloted by a handful of TSC member companies, including MillerCoors, Mars and Campbell’s Soup, which are providing feedback on the tool and putting it through real-world cases.
At Campbell’s, for example, “Our focus to date has been helping Christy by providing use examples for the tool, specifically on sweet-potato sourcing, and some feedback from our procurement department on what would be useful in future tool development,” says Dr. Daniel Sonke, Manager, Agriculture Sustainability Programs.
“We would like to put the tool in front of our ingredient procurement team,” Sonke explained. “Most of these folks are brilliant at sourcing strategies, but have not been schooled in sustainability like our CSR and sustainability teams. We tend to see buyers shifted around to different desks in the procurement department. This builds their procurement skills, but someone buying sugar today could be buying vegetables a month later. I’d like to have a suite of tools for these folks to use to learn about the sustainability issues in the supply chain they just became a key part of. The commodity mapping project struck me as just such a tool when I first saw it presented as a possibility.”
For example, said Sonke, “The new sweet-potato buyer could learn about where sweet potatoes are produced geographically, narrow in on diversity hot spots in that geography and be better equipped to ask sustainability questions in their supplier relationship. If the tool were to add additional subject areas, such as labor abuse risks or water scarcity issues, all the better.”
Like Sonke, other TSC members see high potential for the tool. At last month’s TSC member meeting in Atlanta, Slay demonstrated the tool and elicited feedback. Members saw the potential for gaining visibility into specific concerns as well as the tool’s ability to facilitate transparency, including helping them tell the “seed to shelf” story for their products. Members also saw the tool helping them provide a baseline with which to compare changes over time, and for analyzing trade-offs from supplier to supplier and region to region.
All of which has Slay encouraged that her three-year-old brainstorm just might turn into something of value for companies.
“We’re really at a good point right now,” she said. “We’ve worked through the pain of creating the model, and now we’re ready to move forward with it."
At the 2014 GreenBiz Forum, The Sustainability Consortium will conduct a workshop on commodity mapping, including presentations from member companies. In addition, Joyce Coffee, managing director of ND-GAIN, will present on the Global Adaptation Index. See here for more information about the event.