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P&G Launches New Supplier Scorecard to Enhance Collaboration, Innovation, Environmental Sustainability

Kathryn Siranosian | Thursday May 20th, 2010 | 2 Comments

Four billion times a day, Procter & Gamble brands touch the lives of people around the world. So, there’s no doubt that the company has an enormous impact on the global consumer marketplace.

Now, though, P&G also wants to make a different kind of impact, one that could potentially enhance supply chain collaboration, innovation and sustainability throughout the entire consumer goods industry. How? Earlier this month, the company launched a new supplier scorecard and rating system that’s designed to measure and improve the environmental sustainability of its 75,000 suppliers. And, what’s more, P&G took the unusual step of making the scorecard “open code,” so that any interested organization can use it.

“Environmental sustainability is very important to P&G, and for more than ten years now we’ve been reporting on the eco-efficiency of our operations,” said Len Sauers, P&G’s Vice President of Global Sustainability, in a phone interview last week. “This new supplier scorecard is a next step in our journey.”

By all accounts, it’s a step the company took carefully and with much deliberation. The new supplier scorecard is the result of 18 months of work and close collaboration with the organization’s Supplier Sustainability Board, which includes more than 20 leading supplier representatives from P&G’s global supplier network. In order to minimize redundant efforts and build on existing best practices, the scorecard relies on accepted worldwide measurement standards, including protocols from the World Resources Institute, the World Business Council for Sustainable Development and the Carbon Disclosure Project.

And according to Larry Loftus, P&G Purchasing Manager, this process was all part the company’s effort to create an initiative that can have far reaching cross-industry impact. In fact, P&G suppliers are encouraged to use the scorecard within their own supply chains.

“That’s why we made the scorecard open code,” Loftus explained. “Flexibility was a guiding principle, and our goal was to create a dialogue from end-to-end to improve sustainability in the supply chain.”

You can check out P&G’s downloadable open code scorecard here.

Initially, P&G is rolling out the scorecard to about 400 of its key suppliers, which represent approximately 50 percent of the company’s total spend. These suppliers will have a full year to prepare and report their data before the scores can adversely impact their supplier rating with P&G. After that, more suppliers will be asked to participate, and ultimately, P&G will use the scorecard to determine each supplier’s sustainability rating as part of the company’s annual supplier performance measurement process.

(It’s important to note here that this new scorecard focuses on environmental stewardship. P&G addresses the social aspects of sustainability through its Supplier Code of Conduct.)

Greening the supply chain is not a new concept, and within the past year or so several organizations, including Walmart, IBM and Kaiser Permanente, have introduced similar supplier scorecards. While all of these initiatives are laudable, for many they also raise a new level of inquiry characterized by questions such as: What’s the role of a sustainability supplier scorecard if the product being manufactured isn’t particularly sustainable?  For example, imagine this: a supplier uses an eco-friendly chainsaw to cut down irreplaceable trees in the Canadian boreal forest. Would that supplier score as a sustainable supplier?

To clarify, that example is purely hypothetical–and when addressing it, Sauers and Loftus first offered assurances that P&G purchases wood pulp from suppliers that practice principles of sustainable forest management, as verified by independent forest and chain-of-custody certification.

Then, they explained that one of the fundamental purposes of the sustainability supplier scorecard is to uncover precisely those types of unsustainable practices. In short, skeptics need to realize that the process has to start somewhere, Loftus said.

“We recognize that for any product, we can learn more about production methods. That’s why we developed this scorecard,” he explained. “We’ll be using it to learn more about how to improve the supply chain.”

After all, the greatest potential for improving a company’s sustainability may be embedded in it supplier network, Sauers added.

“Establishing a collaborative environment is very important, and innovation is key,” he said. “I’m sure many of the great ideas about how to improve P&G’s sustainability will come from our suppliers.”

Loftus agreed. “We’ve all got to work together, or we don’t solve problems,” he concluded.

For more information on P&G’s commitment to sustainability, visit: www.pg.com/sustainability.


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