A sustainable supply chain offers many benefitsJuly 2016
By Adam Woodhall — The demands on an ethical organisation of consumer and client expectations, government regulation and voluntary standards, make doing good business ever more complex. Companies are now expected to not just provide a good service or product, but also ensure that they, and their supply chain, don't do any social and environmental ‘bad'.
This is why a focus on a sustainable supply chain and procurement is becoming ever more important to businesses, in practices and in strategy. For example, Accenture estimates that in manufacturing, the supply chain accounts for 50% to 70% of total of greenhouse-gas emissions. Post-COP21, reducing those emissions is high on the agenda of many companies. Furthermore, according to a study by World Economics, on average more than 25 percent of a company’s market value is directly attributable to its reputation. As has been demonstrated in many cases, the halo that surrounds good products can be tarnished by poor management of supply chain sustainability—particularly in the case of tech and apparel companies in regard to worker rights in the factories of third party suppliers in undeveloped countries.
It's not just about risks, though. There can be many benefits from working effectively with the supply chain, in both efficiencies and innovations that drive triple bottom line value. For example, more than a third of Carbon Disclosure Project members have benefited from new revenue streams or from savings gained as a result of their suppliers’ carbon reduction activities.
Great business is often about effective collaboration, and focusing on a sustainable supply chain can go a long way to securing great relationships. Continuity of supply is critical to most businesses, and therefore, appropriate transparency throughout the supply chain enables companies to better understand where the risks might be and consider how to mitigate them.
This interest goes to the highest levels, as demonstrated by a survey for the UN Global Compact, with 88% of CEOs surveyed globally singling out supply chain as an area of specific importance, and 54 percent indicating they had achieved supply chain sustainability.
In light of those statistics, it is interesting that a Vigeo Eiris study published in June 2016 observed that "Only a minority of companies are able to demonstrate responsible management of their supply chain." Who is closer to the truth in their observations: the CEOs or Vigeo Eiris? Is it possible that some of the CEO's are suffering from a case of 'the emperor’s new clothes'?’ Do small steps in more sustainable management appear to be larger than they are? Or is more progress being made than can be easily quantified?
Whatever the apparel status (or lack of one) of these senior executives, Ethical Performance prefers to celebrate good practice. As supply chain is such a vast topic, we will focus on one industry: the built environment, which accounts for over 40% of the UK’s carbon emissions, and on a leading driver of innovation in that sector, the Supply Chain Sustainability School, and consider how some of its members have gained value from the partnership approach it encourages.
Supply Chain Sustainability School
The School represents a common approach to developing sustainability competence in the supply chain. Funded via its 43 partners, it is a free resource available to any supplier, however large or small. The knowledge transfer is facilitated mainly online—for example, with e-learning modules and Tool Box Talks, and via self-assessment, which gives an opportunity to track and benchmark progress.
It is very encouraging that such high levels of cooperation can be generated in this industry. Not only is it highly complex—founding partner Skanska has 5,000 suppliers—it has also been historically highly adversarial and competitive.
The stimulus for The School came from Shaun McCarthy, who is its Chair and also a Director of the supply chain specialists, Action Sustainability; "I was personally inspired to develop the School from my experience as Chair of the Commission for a Sustainable London 2012. The Olympic Development Authority set unprecedented standards of sustainability but if this legacy was to be shared across the industry, something needed to be done to improve the capacity of the supply chain."
To simplify the structure of the 13,000 members, it splits into the 43 Partners, who are either the clients, such as United Utilities, or the main contractor, such as Carillion. These organisations make the key procurement decisions about specification and purchasing. The rest of the membership are the suppliers, who can range from some of the largest companies in the UK to micro businesses.
As the School encourages Partners to standardise the bidding process, it means that rather than having to fill out different forms for each contract, there is one template for the suppliers which speeds the upskilling and competence growth.
Kieran Brocklebank, the Head of Innovation of the water company, United Utilities, observes: "The problem is suppliers are not sure what the priority should be, where to get help and how to make a difference. That’s where the School comes in. Clients, constructors, manufacturers, architects, designers and many others; every member of the supply chain is represented and welcome"
One such supplier is the road marking specialists, WJ. Paul Aldridge, the MD of their southern division feels they have gained considerably from the School. An example he highlights is in regard to inclusivity. "If organisations are not ‘Inclusive,’ they fail to understand their client’s and societies needs, but more importantly, perhaps miss out on all the opportunities that will stimulate and develop their business."
The final comment comes from David Picton, Head of Sustainability of the integrated support and construction services business, Carillion, who observes "Martin Luther King once explained that 'we must learn to live together as brothers or perish together as fools.' If we are to develop and maintain tomorrow's buildings and infrastructure, we must act today to ensure the next generation of tradespeople are suitably skilled, prepared and conscious of their impacts."