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A Green Supply Chain Starts with a Promise, But Needs Verification Too

3p Contributor | Wednesday June 2nd, 2010 | 7 Comments

By Dave Meyer

In the past month, a number of large-scale products manufacturers (IBM, Ford, Intel, Procter & Gamble, Puma) and service providers (Kaiser Permanente) have issued sustainability focused supply chain related announcements.  As noted by Green Advantages’ Andrew Winston, a common theme of each of these mandates focuses on “transparency.”  Also, new reports are emerging that companies are taking climate change programs to their respective supply bases as a means of supporting corporate responsibility reporting.

But, while a “Green Supply Chain” starts with a promise and a goal or two, what I have heard from many logistics and sustainability professionals that the hard work centers on actually requiring and monitoring supply chain compliance.  Most practitioners believe, as I do, that sustainable sourcing and green supply chain effectiveness must include supplier monitoring and “verification” to truly be effective and sustainable.  This need was also underscored recently by reports out of China that many IT suppliers to major global electronics manufacturers were in “gross” violation of many of China’s environmental regulations (see China’s IT Poisons in the Huffington Post http://huff.to/a3mlcx).

That is why the mandates from IBM, Procter & Gamble and Kaiser Permanente stand above the rest and offer great promise.  Each of these programs includes a verification element to supplier conformance.  In addition the IBM and Procter & Gamble initiatives contain a component that rates individual vendors on the basis of maintaining a proactive environmental management system and other key environmental performance metrics important to each company.  This data in turn is rolled up to support company-specific corporate sustainability performance criteria.  Monitoring and verification through demonstrated performance metrics is strongly encouraged through implementation of proactive management systems (such as ISO 14001-2004 or other continual improvement based certifications).  This step assures that the information provided by suppliers is accurate (so as to not compromise what is reported and to avoid reputational risk in corporate social responsibility reporting).

There is no doubt in my mind that green supply chain management 1) improves logistics agility by helping companies mitigate or leverage risks and speed innovations, 2) increases adaptability by fostering innovative processes and continuous improvements, and most importantly, 3) promotes alignment, by creating a platform to negotiate policies between suppliers and customers, thus resulting in better alignment of business processes and principles.

Last month I spoke at the Aberdeen Research Group Supply Chain Summit in San Francisco on strategic and tactical steps that companies can take to green their supply chain.  A key takeaway from many of the presentations at the conference was the critical importance and value of “collaboration” and optimized value chain management to leverage supply chain positioning.  These two elements are critical elements to successful supply chain “greening” as I recently noted.  Three tactical tools that I discussed at the Aberdeen Summit include:

1) Prequalification of suppliers

  • Require/encourage environmental criteria for approved suppliers
  • Require/encourage suppliers to undertake independent environmental certification (ISO 14001)

2) Environmental requirements at the purchasing phase

  • Build environmental criteria into supplier contract specs
  • Incorporate 3BL staff on sourcing teams

3) Multi-tiered supply base environmental performance management

  • Supplier environmental questionnaires
  • On site supplier environmental audits and assessments

Finally in order to be successful in implementation of sustainable supply chain practices, it’s vital that suppliers are engaged early in the supply chain development process by  working with industry peers to standardize requirements; informing suppliers of corporate environmental concerns by issuing statements related to triple bottom line priorities to suppliers or distributing a comprehensive green supply chain management policy ; and  promoting the exchange of information and ideas through sponsored supplier events and mentoring programs.

I summed up my presentation (which can be viewed here) with a few key points:

  • Look for the win-win and make the business case, both internally and externally
  • Consider the holistic supply chain – engage your key suppliers that are most vital to your most important product
  • Consider all aspects of your business & innovate
  • Consider the Extended Enterprise both up and downstream of your organization (several tiers deep)

Perhaps most importantly, get started today and engage your supply chain to implement green practices.  Improving sustainability in the supply chain and implementing verification practices may be the key to pulling away from your competitors and establishing your company as sustainability-focused, “best-in-class” leader.

***

Dave Meyer serves dual roles as VP of Sustainable Economic and Environmental Development Solutions (SEEDS) Global Alliance (Northwest Operations) and SVP of Greenbridge International, LLC , a global ISO 14001 training company. His principal focus has been to help public and private organizations achieve environmental sustainability program excellence, leverage regulatory compliance risks, optimize organizational effectiveness, and create up stream value in highly competitive markets. You can also follow Dave on Twitter (@DRMeyer1)


▼▼▼      7 Comments     ▼▼▼

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  • http://www.localinsuresearch.com Tim Gordon

    This is great. Whatever happens, this should be supported by the government. At times like the present, we should sort out all of our options to help the environment. And this is included in that sortie.

  • mgabriel1234

    I read the linked Huffington post. The links in that post about the press release and gross violations was written in Chinese, so I couldn't read it. I would like to see the details of this. Any info would be appreciated. Thanks.

  • Pingback: A Green Supply Chain Starts with a Promise, But Needs Verification … | Green Company Report

  • Hannes

    Not all suppliers have the money to go through this stage “Require/encourage suppliers to undertake independent environmental certification (ISO 14001)”. Don't force expensive management compliance, but instead create incentives or support mechanisms for environmental practices.

  • tkovach

    As someone working on energy and sustainability for small businesses, I feel that this issue is going to be a key item for our member businesses over the next few years. Unfortunately, due in large part to the difficult economy and the small profit margins that many small businesses operate with, most of our members find themselves constrained on what, if any, steps they can take to become more sustainable. At COSE, we have begun to try and push this point on supply chain sustainability home for our members, as it is going to directly affect them in the long, and possibly short, run. If they wish to provide or continuing providing larger companies with supplies, then it will soon become imperative for small businesses to make these changes to become greener.

    Unfortunately this has been a fairly difficult road to hoe thus far, as much of this field is still fairly new or even theoretical to some extent. But we hope that as more large companies adopt these environmental commitments and sustainability becomes the norm rather than the exception in business, that our members will see that going green is not a liability but a real opportunity that can provide competitive advantages for them.

    - Tim Kovach
    Product Coordinator, Energy at COSE
    http://www.cose.org/blog
    http://www.twitter.com/COSEenergy

  • Business mgmt classes LA

    Very interesting debate! i'm sitting on the fence.

  • Hannes

    This study might be of interest to people here:
    “How Material is ISO 26000 Social Responsibility to Small and Medium-sized Enterprises (SMEs)?”
    http://www.iisd.org/publications/pub.aspx?id=1009

  • Hannes

    This study might be of interest to people here:
    “How Material is ISO 26000 Social Responsibility to Small and Medium-sized Enterprises (SMEs)?”
    http://www.iisd.org/publications/pub.aspx?id=1009