Tag Archives: “green” business

Sustainability is key

If any suppliers needed more evidence of the importance of sustainability in the sourcing decisions of huge consumer goods companies, they certainly got it in spades over the last several weeks.

General Mills’ executive vice president of supply chain operations John Church announced a new corporate climate policy to track and reduce GHG emissions as part of its commitment to environmental stewardship and sustainable agriculture. In his blog post, he said this new policy requires key ingredient suppliers to demonstrate environment, social and economic improvements in their supply chains.

Shortly afterwards, Coca-Cola increased its investments in Africa to support, among other activities, key sustainability initiatives and programs there. The company also signed a letter of intent to launch Source Africa, an initiative to secure more consistent, sustainable local ingredient sourcing for its products, in partnership with the New Alliance for Food Security and Nutrition and Grow Africa.

On the heels of Coca-Cola, Tata Global Beverages announced their plans for 100% sustainable sourcing by 2020. A major focus of its sustainable sourcing strategy is sustainable agricultural practices, including reducing the use of Plant Protection Products in the tea industry.

Suppliers, take note.

Source Responsibly

Consumer pressure for sustainability has become so powerful that even a company that is dedicated to celebration and partying – Bacardi –  is taking a socially responsible position on sourcing. It has released a very detailed list of actions it’s taking.

These actions range from sustainable packaging to recycling waste to building a green-certified distillery in England. Bacardi even exclaims its goal to obtain 40% of the sugarcane-derived products used to make its rum from certified, sustainable sources by 2017 – and 100% by 2022.

Bacardi is using social media to promote its branded initiative, artfully called “Good Spirited.” So it obviously believes the initiative has marketing value. That tells us two things:  One. Sustainable sourcing is generally accepted as good for the company. Two. It’s still considered something that’s unique enough to set Bacardi apart.

The question is, how long until sustainable practices are so widely adopted and universally expected that touting them isn’t even worth it. What do you think?


Supply Chain as Marketing Message

We have talked a lot about how important supply management has become to advance the strategies of the overall enterprise, and here’s a case in point. Hotels now routinely promote their onsite recycling and energy conservation initiatives to guests. (e.g. “Please hang up your towel in the bathroom so we don’t have to wash it after one use.”) However, a San Diego Courtyard Marriott has taken that a big step further by promoting the sustainability of its supply chain. Here’s the release from the Courtyard San Diego Rancho Bernardo.
By promoting it with a news release, the hotel clearly calculates that one of the returns it expects to get from its supply chain decisions is more guests and more top line revenue.
The situation does raise issues about what the standards are for calling a purchase “sustainable.” When the term is being used as a selling point, there is always a temptation to relax the standards. But that’s an ongoing question. The message today is that the supply management isn’t always about lower costs — it’s also a driver of higher revenue.

Unilever Reports on Its Sustainability Challenge

There are plenty of companies that are adopting sustainability policies, but not many that are taking the challenge to the same commitment as Unilever, as it is described in this op-ed written by its vice president of sustainable living.
Jonathon Atwood writes that the company in 2010 adopted a 10-year sustainable living plan that calls for “doubling of the size of the company, while reducing our environmental footprint and increasing our positive social impact.” One of the goals is to source 100% of its agricultural raw materials sustainably. Two years into the program, Atwood says its working. “Brands that made sustainable living central to their product innovation and brand purpose are increasing sales.” At the same time he claims the program is saving money and reducing risks.
These are noble, but ambitious claims. How far do you think your organization is willing to go to meet sustainability targets?  How do you even define them?
Atwood says one metric Unilever uses is waste-to-landfill, and it has hit zero percent at its headquarters and R&D facilities. Food for thought from a major food processing company.

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.

Congratulations ISM Awards for Excellence Winners

Winners of this year’s Institute for Supply Management’s Awards for Excellence have been announced, and they include:

  • Delphi Corporation in the technology category
  • IBM in the sustainability category
  • L-3 Communications in the process category
  • Pfizer, Inc. in the process category
  • State of Georgia, Department of Administrative Services — State Purchasing Division in the technology category

ADR consultants know of the work from people at several of these organizations, and it’s benchmark class. We’re certain the awards were well earned and we look forward to hearing their presentations at the ISM Conference.

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.