Transcript Slide 1

Overview of Green Supply Chains
Understanding Supply Chain ResponsibilityTM
Paula Ivey
Assisted by Eric Heimbecker
The CSR Group LLC
Presentation Outline
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Setting the Landscape
Moving Beyond Simply “Green”
The Business Case for Supply
Chain Responsibility (SCR)
Standards and Certifications
Industry Initiatives
SCR in Practice
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Starbucks
Patagonia
2012. All copyrights reserved.
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Making Headlines
“Gap Inc. Reaffirms Commitment to Improving The Lives Of Workers In Lesotho”
Gap Inc. Press Release
Images are still shots taken from Sky News video.
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2012. All copyrights reserved.
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Making Headlines
“In China, Human Costs Are Built Into an iPad”
NY Times January 2012
Image from New York Times article.
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2012. All copyrights reserved.
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Why Supply Chain Responsibility TM?
Increasing regulation
and consumer
expectations
Risk and Reputation
Management
SCR
Increased responsibility in
supply chain >>> increase
transparency
Outsourcing increases >>>
companies held accountable
for Supply Chain
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SCR The Book – Why Now?
Information Age
Social Media
Empowered, engaged, actionoriented consumers
Shareholder
resolutions/activism
Immediacy of information
Viral communication
Consumer’s demand
transparency
Global
Trends
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Globalization
Complexity
Smaller, more connected world
from outsourcing
Finite resources
Climate Change
Supply chains have become
networks of supply webs
Heightened awareness of
externalities
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Moving Beyond Simply “Green”
“SCR extends CSR to the Supply Chain. It is defined as a holistic
responsibility for all aspects of your supply chain, including
environmental, social, cultural and economic, and encompasses what
you make, how it is made, and how it is transported.”
The CSR Group LLC
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2012. All copyrights reserved.
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What is SCR TM?
Includes a variety of issues such as:
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Labor and working conditions
Human Rights/Child Labor
Women’s Rights
Environmental Protection
 Product and Components
Environmental Impact
 Transportation
Cultural Responsibility
 Sustainable Agriculture
 Product Design
 Packaging Design
 End of Product Lifecycle
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What is SCR TM?
Benefits suppliers:
Extends Sustainability to a company’s direct
and indirect suppliers
The semantics:
The terms Ethical Trading, Responsible
Sourcing, and Supply Chain Responsibility
are used interchangeably
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2012. All copyrights reserved.
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The Business Case for SCR
Perception Gap
• The CSR Group helps bridge the gap between a companies
leadership and consumer’s perceptions of a firm’s SCR
Consumer
perception of SCR
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The Gap
Knowledge
Environmental responsibility
Labor/Human Rights
Audits
Full transparency
Leadership
perception of SCR
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First Mover Advantage
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First movers in sustainability can benefit from being early
adopters, preventing consumer doubts to reactionary measures
Image from Rogers, E. M. Diffusion of Innovations, 2003.
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The Business Case for SCR
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A recent study (NBS, 2011) suggests that proactive SCR management
INCREASED from of 50% to 57%, and reactive management
DECREASED from 50% to 43%.
1. Brammer, Dr. S., Hoejmose, Dr. S., & Milington, Dr. A. Network for Business Sustainability. Managing Sustainable Global Supply Chains. May 2011.
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The Business Case for SCR
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A number of stakeholders
are driving the push for
sustainability in supply
chains1
Integrating sustainability into
core business functions is
considered the most
important leadership
challenge facing business
today for almost two thirds
of company leaders2
Bancilhon, C., BSR. Maximizing Benefits From a Sustainable Supply Chain, March 2011.
BSR & GlobeScan. State of Sustainable Business Pol 2011, November 2011, .
2012. All copyrights reserved.
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Offensive Business Case for SCR
 Increase
shareholder value
 Increase market share & customer base
 Increase operational efficiency & cost savings
 Build and maintain brand equity
 Employee attraction and retention
 Gain access to socially responsible investors
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Offensive Case: Efficiency & Savings
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Operational efficiency
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Cost savings
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Key initiatives include energy, solid waste, and water
Many companies find “low hanging fruit” in environmental
initiatives that reduce cost, increase efficiency, and allow companies
to begin their sustainability journey
Corporations with best-in-class CSR efforts have experienced
significant cost savings compared to those with average or laggard
efforts1
Senxian, J. & Jutras, C., Aberdeen Group. The ROI of Sustainability: Making the Business Case, April 2009
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Defensive Business Case for SCR
 Retailer
demands & customer demands
 Risk management
 Reputation management
 Stakeholder engagement management
 Preparation for the changing regulatory
environment
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Defensive Case: Risk Management
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Risk Management
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“Minimizing the risks of criticisms and concerns from NGOs, the public,
and customers” is one of the two key motivators in the adoption of socially
responsible supplier practices1
Corporations are held accountable not only for their own practices but also
for the practices of their suppliers2
“Any type of business can be implicated in human rights abuses” (Human
Rights Watch)
Billions of dollars are at stake for companies with strong brands
Examples:
Awayshesh, A. & Klassen, R. D. The impact of supply chain structure on the use of supplier socially responsible practices, International Journal of Operations &
Production Management, 2010
Amaeshi, K. M., Osuji, O. K. & Nnodium, P. Corporate social responsibility in supply chains of global brands: a boundaryless responsibility? Clarifications, exceptions, and
implications”. Journal of Business Ethics, 2008
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Defensive Case: Changing Regulations
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Changing Regulations
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California Transparency in Supply Chains Act of 2010 (SB 657)1
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Dodd-Frank Wall Street Reform and Consumer Protection Act (§1502)2
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Enacted in January 2012
Pertains to all manufacturing and retail companies with worldwide annual gross
receipts of $100M+ which are doing business in California
Requires disclosure of efforts to remove slavery and human trafficking from
direct supply chains
Estimated adoption by June 2012
Pertains to disclosure regarding conflict minerals
Section of larger act establishing improved regulation and accountability
European Union: RoHS Recast Directive (2011/65/EU)3
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Adopted and was enacted in January 20134
Pertains to Restriction of the use of certain Hazardous Substances in electrical
and electronic equipment (RoHS)
Update to previous RoHS legislation
*Sources from legislation websites
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The Business Case for SCR
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SCR actions bring tangible benefits to both buyers and suppliers,
building the business case for a sustainable supply chain1
1. Bancilhon, C., BSR. Maximizing Benefits From a Sustainable Supply Chain, March 2011.
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Supply Chain Standards
Navigating the Landscape
• Standard and certification fatigue
• Working to implement a sustainability policy can be overwhelming with
the vast amount of standards, codes, policies, legislation, and governing
bodies addressing SCR today
• T4SD – most extensive database globally of standards and certifications
Image created using wordle.net with list of codes from International Trade Centre. Standards Map, 2012.
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Sample of Existing Standards & Organizations
Agricultural
Standards
Labor Standards
SA8000
Rainforest
Alliance
ETI
Sustainable
Agriculture
Network
FLA
Workers’ Rights
Consortium
Fair Trade
WRAP
Other Industry
Standards
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Initiatives &
Tools
SEDEX
Other Relevant
Standards
AA100
Sustainable Consortium
Joint Initiative
GSCP
Global Alliance
Business Social
Compliance Initiative
ISO 26000
ISO 14001
ISO 1404
ISO26000
Social Accountability in
Sustainable Agriculture
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SA8000 by Industry
Lighting
Others
Facility Services /
Accessories
Pest Control Services
Agriculture
Waste Management
Transportation
Toys
Textiles
Apparel
Sporting Goods &
Equipment
Automotive
Plastics
Packaging
Building Materials
Metals
Business Services
Chemicals
Medical /
Pharmaceutical
Cleaning Services
Industrial Equip.
Housewares
Construction
Furniture
Consulting
Food
Footwear
Energy
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Electronics
Cosmetics
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Agricultural Standards
Other Agricultural Standards
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Marine Stewardship Council
Forest Stewardship Council (FSC) with
Rainforest Alliance
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European Sugar Manufacturers'
Committee Code of Conduct
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International Code of Conduct for
Production of Cut-Flowers
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Code of Conduct for the Tea Sector
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Sustainable Bio-industrial Standards
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Tools & Initiatives
Labor Standards
Agricultural
Standards
Tools &
Initiatives
• SEDEX
•Sustainability Consortium
•GSCP
• Joint Initiative
• Global Alliance
• Social Accountability
Agriculture (SASA)
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SEDEX
Suppliers Ethical Data Exchange (SEDEX)
• Web-based system for sharing information on supply
chain labor practices between suppliers and retailers.
• Reduces duplication in auditing.
• Has memberships for companies reporting data and for
companies accessing data.
•Has more than 6,000 suppliers and 70 brand name
companies—Tesco, Sainsbury’s, Marks & Spencer, The Body
Shop, Cadbury Schweppes, Hallmark Europe, Natures Way
Foods
•Organization is UK NGO.
• http://www.sedex.org.uk
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Examples of industry initiatives and
trends
SCR Industry Trends
Increased:
 Collaboration
 Industry specific initiatives and Codes of
Conduct
 Industry standards
 Tools (like Sedex and GSCP) for supplier
data consolidation
 Supplier expectations
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Industry Standards – Representative sample
CONSUMER GOODS
Electronic Industry Code of
Conduct
International Council of Toy
Industries, Code of Business Conduct
World Federation of The Sporting
Goods Industry Model Code of
Conduct
Carpet Industry Sustainability Code
of Conduct
Green Seal (for Industrial and
Manufactured Products)
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EXTRACTIVE INDUSTRIES
International Council on Mining &
Metals Sustainable Development
Framework
Kimberly Process Certification
Scheme for Conflict Diamonds
Principles for the Conduct of
Company Operation within the
Minerals Industry
Suggestions for a Code of Conduct
for the Oil and Gas-Producing
Industries
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Collaboration
• Collaboration is emerging as a meaningful and effective means to create
real change in responsible supply chain movement.
• Electronic Industry Citizenship Coalition® (EICC®):
 A code of best practices adopted and implemented by some of the world’s
major electronic and telecommunication brands and their suppliers
 Goal is to implement a single supply chain social responsibility code of
conduct in the electronic sector supply chain.
 One of the main objectives is the unification of codes and practices in the
electronic industry.
 EICC sets forth performance, compliance, auditing and reporting guidelines
across five areas of social responsibility:
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Labour
Health and Safety
Environmental
Management System
Ethics
source: http://www.csr-supplychain.org/standard/gesi
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Collaboration across industries
Conflict minerals:
EICC – conflict minerals use in electronics industry
LBMA - The London Bullion Market Association
– Responsible Gold Guidance requires audits of LMBA-accredited gold refiners’ due
diligence *
RJC - Responsible Jewelry Council
– Supports LMBA
– Chain-of-Custody Standard just launched March 2012
OECD- Organization for Economic Co-operation and Development
AIAG
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– Automotive Industry Action Group
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Supply Chain Responsibility
In Practice
SCR Today in the US
Wal-Mart – Supplier sustainability requirements leads
to Sustainability Consortium
Intel – Requiring sustainability reporting of top 75
suppliers
Chrysler – 15 “suggested” requirements of their tier
one suppliers
Walgreens and United Airlines– Just announced in
past few months
Whole Foods – At meeting with top 100 suppliers
released 17 requirements of suppliers within next 2
years.
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SCR Applied
Energy Efficiency Savings
DuPont...$2 billion in savings (1990-2000)
3M…Annual energy savings of $25.6 million
Frito Lay ...30% ROI on energy saving initiatives
Solid Waste Reduction
Interface, Inc. (carpet manufacturer) …Eliminated over $90M in waste
Hewlett Packard …Saved $2.4 million in 2007
McDonalds …Reduced its solid waste by 30% by changing food wrapping materials
Water Reductions
Ford…Reduced water use by 43%
Coca Cola…Reduced water use by 19%
Unilever…Saved 1.6M kilograms of CO2 from reverse osmosis system
Sources: Company Website and The Climate Group
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CSRG Client Example – SCR Applied
Large Global Retailer
Multi year engagement
Project work in multiple business units
Involved complex issues
Developing systems
Supplier engagement
Select supplier auditing
SCR management plan
Risk and reputation management
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Patagonia
A Best Practice SMB
• The Footprint Chronicles:
• Promoting traceability, transparency and accountability
• Interactive map of all suppliers on website
• Our Common Waters:
• Water Footprint
• Common Thread:
• Reduce, Repair, Reuse, Recycle
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CSRG SCR Toolkit
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Supplier Code of Conduct
– Best practice examples of supplier codes of conduct
– The CSR Group, LLC recommended template for supplier code of conduct
– Informational resource on supplier codes of conduct
People & Society
– Templates and language around child labor and corporate policies with regards to
supply chains
Energy And Climate
– List of recommended software providers for managing and tracking GHG
information
– Standard GHG Tracking Template
Water & Waste
– Water Usage Template
– Waste Footprint Template
Geographic Risk
– Geographic Risk Tool
Management/Implementation
– List of prequalified auditing firms
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Some of our clients…
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The CSR Group’s SCR Flow
Operational
Change
Cultural
Change
Auditing and
CAP/Improvement
BEGIN:. Assess
the Landscape
Analyze – Define.
On-Going Activities:
Collaboration
Communication
Change Management
Implement
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PLAN
(including Data
Management
System)
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Take-aways
• Supply Chain Responsibility (SCR) is reaching mainstream
• Uptake is growing rapidly
• SCR is driven by retail and the brands, but ultimately by the
consumer
• Grocery Manufacturers and FMI Survey just released by
McKensie showed that Resource Depletion and Supply
Chain Sustainability issues are the top two issues they face
today. CSRG survey of the Natural Products Industry shows
the same.
• Capacity Building in APEC Countries is an opportunity
• Industry is coming together to create efficiencies
• Public Policy and governments can play an important role
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Questions?
Thank you for your time.
Holistic Supply Chain
What you make (Product/Food)
 Product Components, Ingredients
 Product Design
 Packaging
 Environmental Impact of Materials
 End of Product Lifecycle
How it’s made (Process)
Working Conditions
 Local Community Impact
 Energy Sourcing
 Environmental Impact of Process
How it gets to there (Transportation)
 Environmental Impact
 Working Conditions
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Starbucks Coffee and Farmer Equity (C.A.F.E.)
Practices Program
• Comprehensive programs including forest conservation, responsible
purchasing and microfinance
• Network of Producer Support Organizations (PSOs) provide supplier
development to small-scale farmers
• 93% (509M lbs.) of Starbucks’ coffee was ethically sourced in 2012, including
90% through C.A.F.E. Practices
• Applicant non-compliance decreased by 92% over three years and there was
a 112% strategic status achievement over the past five years
• Green Coffee Pricing Model rewards compliant suppliers with premium
prices while fostering price stability and mutually beneficial relationships
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