Eight keys to supply chain sustainability
Figuring out how to create a comprehensive and compelling supply chain sustainability initiative can be overwhelming. Here's guidance on getting it right.
In today's competitive landscape, sustainability is critical both as a key ingredient of brand image and as a compliance issue.
Yet it can be overwhelming to sift through the seeming mountains of information and determine just what qualifies as a supply chain sustainability initiative. Ideas, theories and metrics abound as to what should be "standard." For example, initially, Wal-Mart started its sustainability program with a 1,500-point questionnaire for suppliers. Clearly, such complexity is a nonstarter for many companies, and it's important to get clear on the basics.
To that end, here are eight keys that will help you get strategic about supply chain sustainability.
1. Access company industry information.
When starting an initiative it's important to take stock of where you are currently, including how you compare to others in your industry. Your industry association can help you do this. Many have done considerable work to establish best practices. Industry associations are generally a good source for standards guidelines, best practices, thought leader papers, conference information and information on working groups. All of these can help you gain an understanding of issues, actions other companies have taken to address the issues and what might be the most practical path forward.
2. Use key areas to create goals.
Segment the work, but think cross-functionally. Strategy should focus on these key areas:
- policy related to legal and ethical practices;
- product design, packaging and manufacturing;
- logistics and transportation management;
- supplier management.
- labor management; and
- environmental health and safety.
Prioritizing a review of policies related to waste reduction, safety improvements and responsible use of resources should be your critical areas of focus, although you may decide to expand beyond those areas. Employee and trading partner involvement is essential since they have the best ideas, and they are the ones who will be expected to implement these.
3. Collect data.
One of the bigger challenges is creating a credible evaluation method for your supply chain sustainability performance. Before we consider tools, it is important to know that there are internal views as well as external reporting expectations these days. Some reporting is the law. But others are based on third-party organizations that rate organizations on their social and environmental responsibility. You may be unable to avoid this, so getting the house in order is important. Data should show you where you have issues today as well as risks for tomorrow that must be addressed. Many enterprises may have a goal to be certified by trade or standards organizations like the International Organization for Standardization (ISO). These organizations have guidance on what kind of data you need and how it should be collected and maintained.
4. Use the data to improve.
Although this may seem obvious, keeping supply chain sustainability momentum going once your initiatives are in place is critical. Once your organization begins the journey, dropping the ball will create poor morale and has the potential to become an unpleasant public issue that can affect your company's reputation. So be sure your company collects data and uses it to improve your sustainability efforts. One idea is to get a third party to conduct the audit and use this data to help adapt the plan and the priorities. There is also audit software on the market that may help here.
5. Make processes repeatable.
Technology is critical to creating repeatable processes since manual processes and data collections aren't sustainable. Moreover, manual processes can be inaccurate. Some enterprise systems have what is called global risk management and compliance, which mostly focuses on financial risk. But there are several good packages on the market today that cover many of the categories related to supply chain sustainability, such as social; green, in the form of materiality assessment; and environmental, health and safety. Sustainability reporting and corporate social responsibility software have assessment templates, metrics and reporting.
Part of the systems strategy should be to monitor the supply chain sustainability with technology that gives greater insight into the supply chain. Thus, implementing trace-and-track solutions does double duty by helping to ensure quality and reducing supply chain costs.
6. Establish a supplier program.
More is being done today on the procurement side of the business to deal with suppliers and rewards for compliance -- and punishments for lack of compliance. Create compliance and audit programs with real substance, quality standards and educational programs. Here, supplier management and supply chain risk products can help get suppliers on board. They can then be used to monitor suppliers and their environments.
7. Get certified.
Many organizations are working to gain key certifications from trade associations as well as international standards like ISO. A few standards and certifications are:
- ISO 45001 and 18001 relates to occupational health and safety.
- ISO 26001 focuses on social responsibility.
- ISO 50001 relates to effective energy management or improving energy efficiency.
- Energy Star program certification, which relates to energy efficiency.
- LEED certification, which relates to facility standards, resource efficiency and green building certifications.
8. Build an ethical framework for your supply chain.
At its core, supply chain sustainability is about ethics and people. Fair labor standards are the law in developed economies such as the European Union and the United States. These require occupational health and safety standards, and unemployment and workman's compensation. However, such standards are not the norm in most undeveloped nations. In these nations, a job injury could send a mother or father home for life, leading to children being taken out of school and sent to work to support the family. With more than a third of the world subsisting on less than a few dollars a day, the ability to exploit workers will always be high.
Ethical behavior requires fair treatment by managers and the wherewithal to do so. If the only real metric we use with suppliers is price, they have little room to increase pay or provide benefits.
For the managers and owners of the supplier companies, no amount of systems and corporate dictates from retailers and big customers will ensure they do the right thing. So, for your suppliers, you need to replace platitudes with incentives, marketing with training. When people understand the impacts of their behavior as well as the incentive to do things right, behavior does change.
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