Procter and Gamble, having recently completed a one year pilot of their Supplier Environmental Sustainability Scorecard is now rolling out a new version that moves from benchmarking their suppliers to rating and rewarding them. The new scorecard was introduced with three major goals in a sustainability initiative that is being led by the Chief Purchasing Officer:
- Enhance supply chain collaboration;
- Improve key environmental indicators; and
- Encourage the sharing of ideas and capabilities to deliver more sustainable products and services for our consumers
Last year’s program year was devoted to finding out whether clear and meaningful data could be collected. The answer was a resounding yes, though some adjustments did need to be made to provide additional flexibility. How else, asked Larry Loftus, P&G’s Global Director of Supplier Capability & Strategy, could an ad agency, an oil supplier and a technology services company all use the same scorecard to achieve meaningful results. The modifications include:
- A clearer process for exceptions (measures that don’t apply)
- More transparent and consistent ratings methodology
- Ability to reward year-on-year improvement
- Additional instructions and validity checks
The new scorecard will be used to pinpoint where additional effort is needed to achieve the company’s ambitious long term vision, which includes:
- Plants powered by 100% renewable energy
- 100% renewable or recycled materials for all products and packaging
- Zero waste from factories or consumers going to landfills
- Products that delight while maximizing conservation of resources
Supplier ratings will help determine the amount of business they receive in the future. In addition, those companies whose performance is exceptional will be publicly rewarded. According to one supplier, it is not just a list of directives but a collaborative tool that provides numerous benefits to the suppliers themselves, particularly in helping them focus on what P&G considers its priorities.
At the core, the scorecard measures energy use, water use, waste disposal and GHG emissions for each business..
Last year the program was deployed to 383 supplier, 81% of whom responded. These 250 suppliers realized a collective 4.2% reduction in electricity usage among other savings.
The new questionnaire, which will be distributed to roughly 600 suppliers includes an automatic scoring function that shows if the supplier has improved over the previous year. This helps suppliers to align their metrics with P&G’s, which, in turn, allows them to incorporate environmental sustainability considerations into their day-to-day decision making processes.
The scorecard is available online in an open-source manner as an Excel spreadsheet. Some suppliers are using it with their suppliers. Perhaps it, or some variation of it will become the industry standard.
The scorecard bears a resemblance to the one created by Walmart whose initiative to compact laundry detergent had a profound impact on P&G. According to one story, Walmart‘s initiative cost P&G as much as $200 million for them to retool in order to provide laundry detergent in more concentrated formulations containing less water therefore requiring less energy to ship. The costs will be recouped over time and in the end it should be a win for everyone.
This is clearly a good examples of a sustainable domino effect that started with the retailer and is now moving down the supply chain.
RP Siegel is the co-author of the eco-thriller Vapor Trails, the first in a series covering the human side of various sustainability issues including energy, food, and water. Like airplanes, we all leave behind a vapor trail. And though we can easily see others’, we rarely see our own.
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