Many organisations are recognising the importance of managing their supply chains in a more responsible way. The expressions "sustainable procurement" "green procurement", "responsible procurement" and many others are in regular use in businesses and public sector organisations alike. As a consultant in this field the most frequent question I have been asked recently is; "How far down my supply chain should I go?" My answer is usually an unhelpful "it depends" but I will try to shed some light on the subject.
Organisations need to think hard about their sustainability objectives and how they may apply to their supply chains. These usually fall into 2 broad categories:
To decide how far down the supply chain to investigate it is necessary to have some idea of the size of the risk or impact you are dealing with.
For example, a major sportswear manufacture I spoke to explained; "We know where every garment we sell is manufactured and under what labour conditions, we know where every metre of fabric that goes into every garment is made and under what conditions. We don't yet know where every fibre comes from to make up the material but we are working on it". Why go to such lengths? The sportswear industry suffered badly in recent memory with international news coverage of poor labour conditions and excessive profiteering, this impacted the sales and stock values of global brands in a significant way. The issue of fibres is mostly about cotton. This product accounts for 25% of the world's pesticides and has a significant impact on ground and air pollution. Furthermore, in some countries cotton is picked by forced labour. Man-made fibres have their own problems related to the energy intensity of manufacture, safety and toxic waste. Put these factors together and you have a major reputation risk for the industry so it becomes necessary to trace every fibre. Organisations with less risk related to clothing may only chose to go back to the point of manufacture, others may not address the issue at all. A robust risk analysis is needed to develop the right solution.
Tantalum or Coltan is a little known mineral but it is an essential ingredient in manufacture of electronics equipment, particularly capacitors. It is mined in very few places in the world and has great commercial value. There are abundant supplies of this product in Congo, where mines have, at times, been taken over by guerrilla groups and the profits used to support violence and oppression in the region. Companies' reputations have been hit over the past 10 years by a campaign entitled "No blood on my cell phone ". Recent reports of conflict in this region have raised this issue again. As part of their comprehensive CSR programme, Farnell, a major electronics distributor dealt with this risk long before recent reports of the conflict made the news. They sought written assurances from their 3 suppliers of capacitors that their supplies of Coltan are not sourced from this region. Having received written assurances they have informed their customers of this. They have not performed checks but they have a contingency plan to divert sourcing between the remaining suppliers if one (or even two) is found to have a problem. This is an appropriate response to a risk with potentially serious impact but low probability.
A major issue for the construction industry is the combination of natural resource use and embodied energy, this is the energy required to make and transport material. The London 2012 Olympics project claims to be the "Most sustainable Games ever" and has been very diligent in managing its carbon footprint. This is necessary given the recent announcement that their carbon footprint is 3.4M Tonnes, over 60% of which is embodied in construction. This has led to amazing new designs for venues and some innovative work in commodity procurement. The carbon footprint of concrete is tracked and managed all the way back to the quarry; this has resulted in concrete with half the carbon footprint per Tonne compared to Heathrow Terminal 5. This is very significant when you plan to use 1M Tonnes of concrete. Other construction clients tend to focus on the energy efficiency of the built environment but as our knowledge of the carbon cost of construction improves, there will be more focus on this issue. This is a constantly moving agenda and up to date knowledge is necessary to keep your strategy fresh.
Responsible organisations need to develop a deep understanding of these issues to formulate a plan. A good example of this would be a major utility operator, United Utilities, an organisation accustomed to long term planning and investment. Clear definition of their sustainability risks and objectives over the long term followed by a thorough analysis of their supply chain has resulted in a 6 year plan to address a wide variety of impacts to different levels depending on the level of risk or ambition against individual supply categories. For example, as a major civil engineering client, they want to understand the carbon and waste footprints related to the materials they use but it is recognised that this will take time. To address this they have developed a 6 year plan to identify, quantify and reduce the impacts through progressive stages of their supply chain. As a water utility company, they buy a lot of pumps, which use a lot of energy. They are addressing not only the efficiency of the pumps and motors, but also the competence of their designers to optimise the efficiency of their plants. This is an immediate objective based on carbon targets which have been declared in public and also driven by reducing the company's huge electricity bill, which helps to keep water costs to customers to a minimum. However, pumps are made of cast or forged metal, a highly energy intensive manufacturing process. Pumps are heavy and need to be transported, leading to more emissions. To address this, the company has a longer term plan to understand and manage these impacts, which will eventually start to influence where and how products are made.
Responsible organisations need to deal with sustainability risks and impacts that are important to them at the point in their supply chain where it can make most difference. This may be in a pump factory, a cotton plantation or a quarry. This is not easy and takes a long time to do, but it will support your organisation's long term success.
Do you go all the way?
5 tips to decide how to address sustainability in your supply chain