Building Sustainability into Your Supply Chain

Stephen DeAngelis

January 24, 2012

Summer Rayne Oakes, co-founder and CEO of Source4Style, a New York-based online fabric marketplace, told Gabrielle M. Blue that “it’s an increasing liability” for a company not to build sustainability into its supply chain. [“How to Build Sustainability Into Your Supply Chain,” Inc., 23 March 2011] Based on the number of articles that discuss sustainable supply chains, I’m guessing that Oakes is not alone in her feelings. “There are a lot of companies out there, that understand that they won’t be leaders within the field,” Oakes told Blue, “but they don’t want to be laggers either.” Blue continues:

“Today’s global marketplace is forcing many companies to reevaluate, reconstruct, and even collaborate their efforts just to keep up with demands of the industry. While many leading supply chains have already dedicated years of research and figures to develop data, initiatives and solutions to the movement that seems to be steering the industry, some are still trying to decide why they should.”

As Blue states, some industry sectors have discovered benefits relating to sustainability while others are still searching for a business case to me made. Paul Anastas, assistant administrator for Environmental Protection Agency’s Office of Research and Development, told Blue that he believed that eventually all industry sectors would “understand the imperativeness of sustainability.” He explained:

“The opposite of sustainability is being unsustainable, vulnerable. Too often companies have fallen, or been greatly damaged, because of events that have taken place in other parts of their supply chain, not necessarily things in their traditional sphere of control. These events have run the range of environmental (products or materials tainted with toxic chemicals), economic (cost spikes of a feedstock), or social (poor or illegal labor practices by a supplier). Without designing sustainability into the supply chain of the company, the risk of significant adverse impact is high.”

Anastas actually provides a good framework for companies to think about sustainability. Too often the topic is approached idealistically and the result is more about PR (so-called greenwashing) than it is about becoming more resilient. This broader view of sustainability opens up many more opportunities for companies to embed good practices in their supply chains. Blue claims that IBM, which “has one of the country’s top supply chains, conducts a study every year to address just this matter.” Karen Butner, the global supply chain management leader for the IBM Institute for Business Value, told Blue, “We’re looking to uncover what’s top of mind with executives around the world and how they’re preparing their strategies as companies are forced with all of the continued challenges of globalization.” Butner’s comment about companies being “forced” to adopt sustainable practices reflects why sustainability is often spoken about in a pejorative way. That needn’t be the case. Blue explains:

“For the majority of large top supply chains, the question is not whether there’s a shortage of sustainability efforts and programs, but what are the more efficient ways to successfully execute those initiatives. Cutting out travel distance of goods or eliminating a middle-man might make the supply chain more cost-efficient for the business, and also reduces it footprint from shipping. However, other companies and smaller supply chains that don’t have the financial means to make such an aggressive push towards sustainability can still make gradual steps to take to be more socially, economically, and environmentally responsible. Building a sustainable company is a task that must be taken on from all sides. The collective and collaborative efforts of the supply chain industry, with the support from the government, is crucial. Combining the innovative alternatives from chains taking a grassroots approach with the advanced research collected by leaders in the field can help you better understand what you can do to improve your company.”

Blue reports that starting small is often the best way to begin. Although companies would like to get PR credit for efforts they are making, big sustainability efforts are generally beyond the means of most companies. Blue writes, “Decreasing your company’s global footprint won’t happen overnight—so don’t fret if your company doesn’t show great improvement the next day.

“‘When you take on sustainability, it encompasses so many different issues,’ Oakes says. So she suggests tackling the smaller issues first. ‘Some of the low-hanging fruits for a lot companies has always been transportation and sourcing efficiency. If you’re able to actually manage that, you’re able to manage sustainability in a more aggressive way within the company itself.’ The way to identify what your smaller issues might be is to take an inventory of everything that you produce. From product design to costs to recycling, in most cases there’s always room for your company to be quicker, cleaner, and better.”

Assessing where you are is always a good place to start. IBM’s Butner told Blue that a company should “step back and look at [its] overall business strategy.” I’m not sure that “business strategy” is the right (or only) thing that needs to be assessed. Everything (people, processes, and technology) needs to be included in a good assessment. Blue continues:

“Really holding a microscope to your company’s infrastructure will force you to identify and address some nuance problems that perhaps you’ve been too busy to correct. It’s common for companies to hire an outside consulting company to do this task for them, because it’s easier for an outsider to take a critical eye to your business than you and pinpoint problem areas. … Once you’ve determined which parts of your business need the most attention, Butner suggests prioritizing which one you’ll tackle first.”

Blue asserts that even this step can appear to be a daunting task for some businesses. Her advice is not to stress over this because “there are places to find help.” The government is a good place to start. Anastas told Blue, “The EPA has state-of-the-art analytical tools that are useful in integrating sustainability into corporate operations. In addition, there is now a growing industry of technical and strategy-based companies devoted to helping businesses, large and small, adopt sustainability into their business operations.” Often “people” are considered in sustainability assessments; but, as Blue notes, “All the ideas in the world won’t mean a thing without someone there to implement them.” She continues:

“This is the perfect opportunity for you to see which of your employees are ready to take on a more prominent position within the company. But be careful! Make sure that you’re green team is comprised from varying departments of the company, so as not to leave any department short-staffed.”

Another supply chain professional who believes that sustainability can be built into a corporate supply chain is Cynthia Wilkinson, director, supply chain sustainability, Staples Inc. She told the staff at SupplyChainBrain that “sustainable business is about driving better business value at the same time as you’re driving improvements for the planet.” [“Embedding Sustainability in a Supply Chain Organization,” 20 December 2011] The article continues:

“That means energy efficiency and reduced packaging, among other things. But none of that will happen unless the culture of your business is aligned with the ‘green’ vision.”

For Wilkinson, “the ‘green’ vision” isn’t just about being environmentally friendly. She claims, “Sustainability initiatives save money.” She claims, however, that saving money “alone won’t [make] such programs a success.”

“She says it’s important to make things easy, for the customer and for the company. ‘For example, we have ways on our web site for customers to easily identify sustainable products. Our customers want to understand what’s important and relevant for them.’ Additionally, companies collaborate both internally and externally, and it’s important for all employees to recognize and be supportive of green goals. It’s equally important for suppliers to know what’s expected of them from an environmental standpoint.”

Frankly, I’m not convinced that a majority of customers base their purchases on the “greenness” products. Price seems to be a much more important factor. Nevertheless, I agree with Wilkinson’s point that the only sustainability programs that will have legs are those that are easy for stakeholders to use. The article continues:

“Things are always fluid, Wilkinson says, because new information seems to come out daily. ‘We want to understand that and know how to make that work for us.’ Staples has been quite successful in its goals, she says. ‘I think we’ve done a great job, particularly within the supply chain, on energy. We’ve had significant reductions in our energy intensity per square foot. We’ve saved lots of money in that way. We also have done a lot with recycling. So in our own operations, we’re looking to move to zero waste. ‘We recycle pallets and stretch wrap, corrugate and other materials, and we’re continuing to drive that even further. Also, we have done tremendous work on our fleet, and our fuel efficiency has improved over 30 percent.'”

Wilkinson’s point about the criticality of information in supporting sustainable programs is important to note. Without good data, it is nearly impossible to make a business case for sustainability initiatives. When asked about hurdles that must be faced, Wilkinson told the SupplyChainBrain staff, “The first thing is economics, making it financially a win as well as a sustainability win. That’s a large challenge.” I agree with her on that point. If you can’t make an economic case, you’re probably wasting both time and money. The article continues:

“When you ask people if they think green is more expensive, a lot of people think so, but it doesn’t need to be. ‘We have not changed our hurdle rate for our financial decisions. We make these projects fit our hurdle rate. You can definitely drive the economic benefits with the sustainable benefits.’ Wishing doesn’t make it so. A solid strategy needs to be in place, especially once the low-hanging fruit has been accounted for, Wilkinson says. Staples wanted to save on energy, and it did. But that was an easily achievable goal. ‘It gets harder when you dig in deeper, so that’s when you want to probably establish a strategy for your company in terms of how to drive sustainability within the organization.’ Be creative and look at things on a portfolio basis. Initiatives that work in one area should be applied across the board and throughout the company network.”

In conclusion, Wilkinson again reiterates the importance of good data and proper analysis in order to make informed decisions.

“Analysis can reveal some surprising things, Wilkinson says. ‘As we looked deeper, we recognized that we’d been spending a lot of effort on our own operations – on energy, fleet efficiency, etc. – and what we found is that the largest share of our greenhouse gas was coming from products that we sell. So we’ve shifted focus a little bit. We’re still making energy improvements and recycling, but we’re also looking to drive improvements in our packaging and in our products because that’s where the impact is.’ Moreover, you need to make customers understand the impact of the products they buy.”

Educating customers may be important, but educating suppliers is probably more important. That is especially true for companies like Staples, where the largest share of greenhouse gas is generated during the manufacturing processes of the products they sell. The bottom line is that one-off initiatives probably won’t last, and certainly won’t transform, a supply chain. Real change comes from embedding initiatives within the supply chain and those initiatives will only have legs if a business case can be made for them.