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Manufacturers, experts agree: Supply chain sustainability is good business

More manufacturers are realizing that supply chain sustainability efforts hold more value than just good PR.

Supply chain sustainability is all the rage in the business world these days. Eyeing improved efficiency; reduced material waste; and, perhaps most attractive of all, enormous PR potential, companies in every industry are committing themselves to adopting sustainable business practices.

But if a sustainability strategy is to succeed, a company has to do much more than merely make itself greener: It has to make sure its entire supply chain follows suit. No company wants to be the one whose reputation is sullied by a niche supplier that's found to be cutting corners.

"You want to make sure there's no gap between what they're telling you and what's actually happening," said Kimberly Knickle, a practice director at IDC Manufacturing Insights. "It's about keeping your company off the front page for the wrong reason."

Nowhere is this truer than in the world of consumer products. And that's why the goliath of all sellers of consumer products, Wal-Mart, began asking its vendors several years ago to complete an annual voluntary survey that's designed to determine how far along they are in their sustainability efforts. Suppliers are asked for their most recent measurements of everything from carbon dioxide emissions to solid waste produced to total water use, and they're rewarded for showing progress.

"The questions come from our discovery that taking steps to measure sustainability impacts and setting targets to reduce those impacts lead to reduced waste and costs, as well as innovation and new revenue streams," reads the sustainability assessment document that Wal-Mart distributes to suppliers. "To that end, measurement and transparency into the supply chain are the focus of these initial questions."

Spreading the doctrine of supply chain sustainability

You don't have to be Wal-Mart to get your suppliers to change their behavior.

"If you do have some leverage with your suppliers, it's really worth it to put down on paper what the expectations are from a sustainability perspective," said George Favaloro, managing director in PricewaterhouseCoopers' sustainable business solutions practice. "That kind of statement coming from the right customer can make a huge difference. It causes ripples right down the supply chain."

Causing such ripples is critical if a company is to realize the full benefits of a sustainable business strategy, said Dave Meyer, a senior consultant at Environmental & Occupational Risk Management Inc., a Silicon Valley-based firm that advises companies on their environmental, health, safety and sustainability efforts. As the saying goes, it only takes one bad apple to spoil the bunch.

"You can't be a truly sustainable company unless your entire value chain goes along with you," Meyer said.

The degree to which companies now understand this is clearly indicated by the varied approaches they're taking to create a sustainable supply chain.

There's been a "huge uptick in supply chain responsibility" over the past several years, with growing numbers of companies having developed supplier codes of conduct that allow them to set expectations with suppliers, Meyer said, while many others have ramped up the auditing of their manufacturing processes throughout the entire supply chain.

Favaloro says he's seen clients get even more hands-on, hiring people specifically to work with suppliers on becoming more sustainable, or even creating remediation programs to nudge vendors who offer compelling products or services but haven't made sufficient progress on the sustainability front.

Ben & Jerry's finds sweet rewards for sustainability

Ice cream maker Ben & Jerry's takes a collaborative approach to supply chain sustainability -- it looks on its suppliers as part of an interdependent ecosystem. The company calls this concept linked prosperity. It has an employee whose sole purpose is to stay up to date on the values of the company's supply chain vendors, with a special focus on those who subscribe to fair trade practices.

It also works with a global nonprofit to ensure that its fair trade farmers in Africa and Latin America, who supply Ben & Jerry's with everything from coffee and bananas to cocoa and sugar, thrive. That can mean everything from ensuring fair market access to helping them make their crops more resilient to the effects of climate change.

"We all should be able to benefit from the success of our business, and that should trickle down to all who contribute to our business," said Andrea Asch, manager of natural resources at the Burlington, Vermont-based company.

What companies must be careful not to do is approach the topic with an iron fist. Rather, Meyer said, businesses should follow the lead of companies like Ben & Jerry's by communicating to their suppliers what's important to them so that they can work together collaboratively. Doing so greatly increases the odds of success, compared with issuing mandates.

The key, Favaloro said, is to get every player in the supply chain to care, and to understand that the customer is watching.

"The biggest thing that kills sustainability is when the business believes that customers don't care," he said. "You have to decide it matters to you, and over time, you want vendors to care about these things too."

Follow SearchManufacturingERP on Twitter @ManufacturingTT.

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This was first published in July 2014

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