Tag Archives: environment

Reactions to new EPA regulations run the gamut

Reactions this week to the new EPA regulations to cut carbon pollution from power plants ranged from the most dire to the most delighted, depending upon one’s industry, state or inclination for all things environmental.

On one hand, the new regulations will result in lost jobs and higher electricity rates.  On the other, they will improve our climate, our health and ultimately lead to greater innovation.

The energy space is a complex one, and the effect of these regulations will not be as cut and dried as some might think.  For example, weren’t we headed in this direction already?  Industries have been shifting to natural gas because it’s cheaper, and wind and solar are bringing up the rear.  In addition, each of the states will be able to select their own method of implementation from a menu of policy options.

This is a long way out and we’re just getting started.  There’s a public comment period, and the regulations themselves could be challenged in congress as well as the courts.  States have two years to submit their plans to achieve the targets, and it’s always possible they could get extensions to their timetables.

I’d like to hear your thoughts on the regulations.  Is the sky falling as Chicken Little squawked or is this the best birthday ever?

Takin’ it to the street

Frustrated with Procter & Gamble’s lack of urgency in finding sustainably sourced palm oil, Greenpeace literally took to the streets in Cincinnati and London in protest.  The activists, including two dressed as a tiger and an orangutan, unfurled banners on the side of P&G’s Cincinnati headquarters and erected barricades in front of its advertising agency’s headquarters in London.  At the same time, Greenpeace posted a video on You Tube mocking the “Thank you Mom” ad campaign and focusing on the plight of orangutans.

This is a good example of how non-governmental organizations like Greenpeace are ramping up their mass communications efforts to raise people’s awareness of important environmental issues and change their behavior, while governments lumber along, taking years to initiate and enact news rules and regulations.

While Procter & Gamble may have their dander up at the bad press, Unilever executives may be smiling for the way they stayed ahead of the curve. As we wrote in September 2013, Unilever’s goal is to source 100% of its agricultural raw materials sustainably.  In the way they managed their message about palm oil, Unilever stands head and shoulders above P&G.

General Mills and Its Partners Help Small Farmers in Peru

It’s a pretty good sign that sustainability is going mainstream in the food supply chain when General Mills gets into the microloan business with Peruvian artichoke farmers, and that is happening right now.

General Mills and its supplier/partner AgroMantaro are providing the loans so small farms can buy artichoke shoots and seeds, helping them to increase yields and improve profitability.

The breakfast food giant says it is building on its long history of working with farmers around the world  by identifying very specialized methods — and partners — to help small farmers advance sustainable practices.

In Peru, these farms are typically one to two hectares, or two to four acres, and are run by women who lost their husbands during the civil unrest in the 1980s.

General Mills sources its artichokes from the Sierra region of Peru for its top-selling brand in France, Green Giant or Le Geant Vert.  While the crop has a strong export potential, farmers have struggled to capitalize on it because of lack of capital, training and education, and access to export markets.

The four-year joint commitment between General Mills and AgroMantaro will provide more than $1 million to help the farmers with training on crop management; microloans to buy shoots and seeds; training on starting farm cooperatives; and financial planning education to put together business plans.

The two companies are joining with the international humanitarian organization CARE, which specializes in facilitating community governance and local connections, and will work side-by-side with the farmers and AgroMantaro to meet the project objectives.

It’s just a guess, but $1 million over four years sounds like a pilot project for a corporation that has $18 billion in annual net sales. In the short term the benefits are likely to come primarily from maintaining a good corporate reputation. General Mills does have a well established set of responsible sourcing policies, so even a small project helps to keep its practices aligned with its stated policies.  It is also possible that General Mills is taking a long view of the situation and sees potential cost savings coming from better yields, more consistent products and lower risks from its micro-investments.

Can U.S. Supply Chains Afford To Be Ethical?

News reports of rebel advances in the Democratic Republic of the Congo (DRC) are stark reminders that the provisions of the Dodd-Frank Act regarding conflict minerals, as awkward as they might be, do address real life and death situations.  As much as we all might want the violence to end, if the conflict is actually escalating it begs two questions:
1. If the pressure of the Dodd-Frank provisions isn’t enough to reduce violence, is it worth the cost of implementing them? The rules haven’t been in place long enough to measure possible impacts, but perhaps it’s already too late.
2. If companies in China or other countries are sourcing from DRC without limitations and therefore at lower costs, have we made U.S. companies less competitive? Can we afford to do that in a competitive world economy?

I don’t have easy answers to these questions, but I think they are important enough to consider. Beyond the specific situation in Africa, can U.S. supply chains afford to be ethical when they have to compete against foreign companies with much lower standards? Especially when critical raw materials are in short supply or are difficult to source.
Although the voices of non-governmental organizations (NGOs) are often annoying, is this a possible useful role for them — to act as country-neutral watchdogs for generally accepted ethical or sustainable standards? Or are the pressures for growth and limits on media so great in countries such as China that they will negate the effectiveness of any whistle-blowing by NGOs?

The World is Moving Faster Than the SEC on Conflict Minerals

Three years after Congress passed the Dodd-Frank Act, the SEC this week finally adopted rules requiring public companies to report on the sources of so-called conflict minerals in any products they manufacture (or control the manufacturing by others).  Here’s the SEC link to the news release and full final rule.
The testimony, studies and lobbying has been intense, so adoption of the final rule was almost anti-climactic. That’s probably a good thing.  The fact is that even without the rule itself, pressure from NGOs (non-governmental organizations), news reports and consumers themselves are pushing manufacturers to take responsibility for their entire supply chain – from the extraction of raw materials to the distribution, packaging and sale of their products (and in some cases — to their post-use disposal).
The issues also go beyond mining that finances violence. Bloomberg/Business Week is reporting on the safety and environmental threats posed by small tin mines in Indonesia. It seems pretty clear that momentum is still towards more scrutiny, not less.
So the smart strategy seems to be the one that some electronics manufacturers such as Apple and Intel are taking — developing industry standards for determining chain of custody, appropriate due diligence and other matters related to socially responsible sourcing. That’s because the answer, “we don’t know” is no longer acceptable in that arena. Reporters and consumers are simply taking that reply and firing back, “Why not?”

Gibson Guitars Strums to the Tune of $700,000 Settlement

The purchasing team at Gibson Guitars learned the hard way that sourcing ebony wood from Madagascar to make fingerboards would raise eyebrows from environmental watchdogs.
The company has just settled a criminal investigation by the U.S. Dept. of Justice by agreeing to pay $300,000 into a reward pool for whistleblowers and $50,000 for the protection of wood species used in guitars. Gibson also surrendered $347,000 worth of Madagascar ebony that was seized from its offices in a raid by the U.S. Fish and Wildlife Service.
Gibson’s position on the matter is that it was pleased it wasn’t charged with criminal behavior; the leverage for the settlement was the Lacey Act, a set of laws that prohibit U.S. companies from importing wood that has been cut illegally in the source country. Gibson acknowledged that it had not acted on information that ebony and rosewood it acquired from Madagascar and India may have been illegally harvested.
In a competitive business environment it is tempting to focus on internal purchasing ethics — e.g. detailed policies about meals, gifts and entertainment from suppliers — and not quite so much on external ethics such as complying with foreign laws.
The Lacey Act may not be well known, but it is pretty clear, and that makes it fair game.
The truth is that “out-of-country” is no longer out-of-sight” or “out-of-mind.” Internet and phone technology, global social media apps easily connect passionate individuals to non-governmental watchdog organizations. No one should expect an ethical or legal lapse to “slip by.” Especially on a product that is played onstage by rock and new age guitar stars such as Tak Matsumoto.
By the way, according to Gibson’s website, the Tak Matsumoto Doublecut Custom Ebony now comes with a fingerboard made from “Richlite®, an extremely durable fabricated material composed of cellulose fiber and phenolic resin, (that) offers the look, feel and tone of ebony in a totally sustainable package.”
Lesson learned, there.

P&G CEO: We want sustainability without tradeoffs

Interviewed by the Wall Street Journal, Proctor & Gamble CEO Robert McDonald said only 15% of consumers will accept tradeoffs (i.e. higher prices) for products that are more environmentally sustainable. The other 85% may appreciate sustainability, put won’t pay more for it. That’s why he says P&G is focusing on innovations that add sustainability without higher prices or compromising other features of its products.
As a way, perhaps, of encouraging others to walk the walk as well as talk the talk, P&G is also making its supplier sustainability scorecards generally available. It might also be a strategy of fishing for new suppliers with sustainability innovations — because that’s clearly the way the CEO is thinking.

How to Hug a Tree With Your Boots

An article in the September Harvard Business Review by Timberland CEO Jeff Swartz describes a great example of how chain of custody issues can put you right in the crosshairs of powerful non-governmental watchdog organizations such as Greenpeace.
As Swartz describes it, Timberland is known for its leadership in global sustainability — especially deforestation. Nevertheless, Timberland and other shoe companies became the targets of a Greenpeace email campaign claiming some of the leather in its boots came from cattle that were grazing on recently deforested Brazilian pastures.
Timberland received 65,000 challenging emails and quickly realized it didn’t have a quick answer because it had no chain of custody for leather beyond its immediate supplier. Hides are considered waste parts by meat processors, so the documentation isn’t as reliable as it is for beef.
Swartz describes Timberland’s response in detail, but a key fact for supply managers is that it is taking the company more than 18 months to implement a system that tracks every hide back to the farm on which it was raised — and assures retail customers that the farm is not on recently deforested land.
All in all, this is a great cautionary tale of how global watchdog organizations can drop a dangerous challenge to your company — right at your boots.

Where did the cadmium come from?

According to the New York Times, McDonald’s is paying customers $2.00 to bring back drinking glasses they bought as a promotion for the movie “Shrek Forever After.” It turns out the painted image of the bright green but gentle ogre contained cadmium — the toxic heavy metal that led to a huge recall of Wal-Mart jewelry earlier this year.

McDonald’s reaction, although the actual risk is not that high, is not surprising, but it did expose a gap in their supply chain of custody system.The company could quickly identify the source of the glasses, but according to the Times, a McDonald’s spokesman said the company didn’t know the source of the paint or the cadmium.

Maybe someone did a risk mitigation analysis and decided a strategy of paying a premium to buy back defective product, and running an aggressive PR campaign to back it up had a better payoff than tracking all raw materials used in a promotional item.

But my guess is that the better investment would have been either a complete supply chain environmental sustainability assessment or a chain of custody system that could track all materials used in the glasses. Either one would have likely turned up a “flagged” chemical, such as cadmium.  As even a consultant for the International Cadmium Association told the Times, “Our position is that cadmium pigments should not be painted on consumer glasses.”

Here’s the link to the New York Times coverage:

http://www.nytimes.com/2010/06/09/business/09mcdonalds.html?ref=business

Chemicals

I recently had a good conversation with Richard Weissman at Purchasing Magazine about buying chemicals. I can tell you a few things I told him — or you can read the whole article (with good comments also by Tom Brossart, the director of global logistics and trade and compliance at W.R. Grace in Columbia, Md.).

http://www.purchasing.com/article/CA6635527.html?q=bill+michels

1. Nothing really replaces an in-person supplier visit. Travel budgets are tight, but risks from low-cost country sources are significant.

2. An example of an area of risk is environmental practices. You can no longer “export” pollution to countries that have less stringent laws than the U.S. Organizations are monitoring practices around the globe, and consumers hold companies here accountable for what their suppliers do abroad. Sustainability and the environment are critical issues that reach through the whole chemical supply chain.

3. The chemical supply chain is suffering from the same effects of the credit crunch as other products. Buyers are extending terms. Suppliers are squeezed and risks of disruptions are increasing. We work with clients to run simulations that gives us clues where the stress is greatest, so we know where we ought to line up standby sources.

It is easy to think of chemicals as commodities that need to be evaluated almost exclusively on price, but when you add considerations of risk — environmental, logistical or financial — procurement strategies have to more carefully constructed to accommodate them.