IBM: Managing Risk in the Global Supply Chain

“Ultimately, if a supplier cannot be compliant with requirements on the environment and sustainability, we’ll stop doing business with them.”

This quote, from John Paterson, IBM’s vice president of global supply and chief procurement officer, in the April 14 NY Times, is more than a hollow Earth Month pledge to reduce impact. It represents the reality that suppliers that don’t manage their environmental and social responsibility are high-risk, and high-risk suppliers are not good for business.  IBM’s strategic business decision to up the accountability ante for suppliers is designed to manage risk and ensure long-term viability through the cultivation of a robust and resilient supply chain.

IBM relies on 28,000 suppliers in more than 90 countries–a $40 billion supply chain. If even a fraction of a percent of these suppliers–or their suppliers, in turn–could not keep up with regulatory compliance, lacked availability to increasingly scarce natural resources, or became the targets of a PR campaign against them, these “weak links” could wreak havoc for IBM. By addressing the sustainability of its end-to-end supply chain, IBM is ensuring itself against disruption.

IBM’s suppliers will not be unsupported in meeting the new requirements. Significant time and money will be allocated to helping to install management systems, which will gather data on energy use, greenhouse gas emissions, waste and recycling. IBM sees this to its advantage. “It’s clear that there’s real financial benefits to be had for procurers across the world to get innovative with their suppliers,” Mr.  Paterson added. “In the long term, as the Earth’s resources get consumed, prices are going to go up. We’ve already seen large price increases and problems with water.”

IBM is not setting quantitative reduction goals for suppliers, rather, its overall goal is to systemize environmental management and sustainability across its global supply chain.

IBM is not alone in requiring supplier accountability. Wamart first announced in 2006 a goal to cut packaging in its supply chain by 5% by 2013, and developed a scorecard for suppliers to facilitate this goal. In 2009, Walmart unveiled the first phase of a Sustainability Index as a means for providing transparency about companies with respect to environmental and social metrics. In February 2010, Walmart announced that it will push suppliers to cut 20 million metric tons of greenhouse gas emissions out of product supply chains by 2015.

For readers interested in learning more about pioneering supply chain sustainability, stay tuned for Triple Pundit’s coverage of the LCA Sustainable Supply Chain USA conference next week in Chicago, where speakers will include executives and sustainability professionals from the likes of HP, Johnson & Johnson, Verizon, GlaxoSmithKline.

Sheila Samuelson is a graduate of Presidio Graduate School’s MBA in sustainable business, and works as a sustainable business strategist at Bright Green Strategy.

Sheila Samuelson is a Sustainable Business Strategist at Bright Green Strategy. She has earned an MBA in sustainable management from Presidio Graduate School, and has sustainability experience in the public, private and non-profit sectors. Samuelson has helped Greensburg, Kansas work toward a sustainable recovery from the devastating 2007 tornado; worked with the San Francisco Department of the Environment; co-founded a designed a green business certification program for the area surrounding Dubuque, IA; and helped some of the largest global corporations measure and track their sustainability metrics.

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