Buyers and suppliers alike can embrace benefits whilst tackling climate change within supply chains (SC). Climate change is a well-recognised risk among many worldwide institutions. If addressed properly by the private sector, multinationals (who have a big role to play) and their supply chains may generate multiple medium and long term benefits. This article addresses the risks to SC stakeholders caused by climate change but the main focus is the rising opportunities that decrease long term risks, reduce costs and enhance economic, social and environmental performance by re-invigorating their relationships between supply chain stakeholders. Severe climatic events such as droughts, floods and storms caused by global warming are increasingly impacting supply chains. Climate change not only degrades the social and environmental state of the world but also its economic performance. Over the past few decades, multinationals have begun to change their strategies and procurement policies in order to do their part in an attempt to reverse the situation. However, many reports, such as The 3% Solution are pointing out the hidden environmental impacts embedded in their supply chains. Depending on the studies, up to 85% of the corporate CO₂ emissions occur upstream. Although already an immense task, reaping the full benefits of tackling climate change will require suppliers and buyers working together through diverse program solutions. As its title indicates The 3% Solution report explains that for the U.S to meet its IPCC target of reducing emissions by 25% from 1990 levels, its supply chains need to reduce 1.2 gigatons of CO₂ emissions which equates to a 3% reduction annually until 2020. A target not only reachable but also cost saving too. If this target is met $190 billion of savings could be made throughout corporate supply chains. This will be achieved through three main activities: Changing management and behavioural business approaches to improve energy efficiency Energy efficiency through technology improvements The deployment of low-carbon energy, particularly rooftop solar photovoltaics. Decreasing the emissions by 1.2 Gt with the three main activities can be conducted through multiple actions. Management and behaviour changes that represent 135-270 Mt CO₂ of the total can be achieved by monitoring energy use, improving transport routes and identifying and stopping energy leakages. Technology improvements represent the biggest opportunity of reduction which is 580 Mt CO₂ and can split into 3 sub-categories: industrial, commercial and transport. This includes activities such as energy and steam waste recovery, efficient lighting systems and efficiency in diesel heavy duty vehicles, respectively. An ever evolving sector makes it difficult to pinpoint the most suitable way to implement low carbon technologies. However installing natural gas turbines for on-site electricity generation and/or rooftop solar photovoltaics are increasingly becoming a viable source of energy. In 2016 the Global Risk Report published by the World Economic Forum declared that the biggest threat to the world economy was ‘Failure of Climate Change Mitigation and Adaptation’. This was also classed as the third most likely event to happen after ‘Large Scale Migration’ and ‘Extreme Weather Events’. In order to respond to this challenge and harness its opportunities, Stewardship programs comprised of sustainability evaluations that cover multiple social and environmental aspects are emerging as a solid solution to reach out to supply chain partners, launch collective initiatives, monitor and implement new strategies across your supply chains. Sustain-In’s Stewardship Program offers a concise methodology and framework to assess the sustainability efforts in place and the carbon footprint of your suppliers’ activities. Through a methodical evaluation process Sustain-In conducts a CSR assessment in order to audit and analyse pertinent policies and measures that have been implemented. The assessment is done through an online platform which allows the suppliers, the buyer and Sustain-In to interact and work towards a sustainable future. The ability for the suppliers to register, upload and save information for themselves and the buyer allows Sustain-In to monitor progress over a specific timeframe. In order to provide a clear understanding of sustainability progress a report is split into four main themes; Social Environmental Business Ethics Sector Specific Issues. The first 2 cover all typical social and environmental issues that a company may address. The latter 2 are orientated towards the specific contextual issues that occur in different sectors. The second part of Sustain-In’s framework consists of a carbon footprint of companies’ activities. Whether from the industrial or the service sector the carbon footprint includes all activity impacts from office and building facilities to transport and manufacture. Being able to monitor environmental policies and measures put in place and footprint all carbon emissions produced by a company’s activities permits suppliers themselves and buyers to draw up initiatives and construct common objectives over the long term so that they can bring climate change opportunities to fruition and meet international sustainable development goals. Sources: Carbon Disclosure Project (CDP). 2013. The 3% Solution. -The World Economic Forum. 2016. The Global Risks Report 2016 11th Edition. -Prnewswire. 2016. Companies Blind to Climate Risks in Half Their Supply Chains Finds Largest Global Study. Available at: https://www.prnewswire.com/news-releases/companies-blind-to-climate-risks-in-half-their-supply-chains-finds-largest-global-study-300209209.html.
→ Brand Value and Reputation
Implementing CSR strategies at an organisational level to enhance not only one’s company but also its own supply chains’ performance is becoming the favoured way to accelerate strong relationships among stakeholders, reduce risks and boost brand value and reputation. The following short article will focus on the latter and illustrate potential policies and actions that may increase a company’s brand value and reputation. Integrating CSR into your HR policies, procurement policies or contractual clauses increases a company’s standards and values and in turn strengthens brand identity, attracts customers and differentiates the brand from other competitors. A report produced by Business in the Community and the Doughty Centre for Corporate Responsibility identifies companies that implement ecological practices, and shows that enhanced corporate values and standards and customer care increases the ability of companies’ brands to attract consumers, employees and investors. They also state that many consumers surveyed « claim to be influenced in their purchasing decisions by the CSR reputation of firms ». An organisation’s image is ever changing as economic, social and environmental standards increase and market expectations rise. The financial bottom line is no longer sufficient to attract stakeholders, investors or enhance a company’s reputation. Employees’ needs, local/regional communities and protecting the environment are now much higher on the agenda. In order to meet these expectations and gain a competitive edge over other companies, a solid commitment towards sustainability must be deployed so that stakeholders can track the progress being made. Demonstrating their commitments will therefore enhance responsible stakeholder management and brand performance and in turn encourage companies to increase their sustainable practices even further. Another reason to build one’s company image and reputation is for tender applications. It is increasingly common for companies’ to have to provide a sustainability performance evaluation for tenders. It is an optimal way to demonstrate a company’s strengths and progress in terms of sustainable policies and actions implemented. Thus, making one stand out from other competitors that also apply to tenders. Such evaluations will generate CSR reports that lay out what is in place within your organisation so that you can communicate your performance to the public or use it for tenders. Whether in the public or private sector, CSR commitments or evaluations are increasingly requested for tenders to verify a contractor’s activities and suitability. There are multiple ways to enhance your brand and reputation. Please find listed a series of potential actions to take (dependant on sectors): Design products for maximum recyclability and « circularity » Design for lower energy and material use in the life cycle Design for positive influence on consumers’ health Source from local or micro suppliers Source from certified ethical suppliers in conflict zones Consider sustainability criteria in facility’s location decision Use alternative fuels Follow international standards (ISOs) Implement fair-wage policy Invest/Partner with local community projects A report published by the World Economic Forum and Accenture identified 31 practices that empower responsible value chains and local sourcing is among them. More so today than in the past decades, local sourcing strategies are implemented not only to cut costs but to enhance branding. For local sourcing, three main approaches emerge for leveraging small local holders; Operational Efficiency, Licence to Operate and Local Market Penetration. Operational Efficiency is mainly focused on forming connections with smallholders to reduce supply chain disruptions, improve quality, reduce production losses and create durable relationships with local and regional communities. Regarding Licence to Operate, the report implies that by being involved in sustainability, there is potential to gain credibility with local communities, NGOs, media and governments. In turn, avoiding bureaucratic difficulties and enhancing local opportunities, better pricing and government subsidies. Local Market Penetration involves the companies that market their products locally. Not only do they create efficient operations by sourcing locally but they use their brand reputation and affinity with local markets to provide local products for local tastes and needs. By gaining access to these additional local markets they enjoy not only increased profits but also the reduced taxes that come with fewer international imports. Implementing CSR strategies or, for example, the possible 31 practices identified by the report will bring many benefits to a company’s brand value but also to many other areas of business. For instance, a 5% to 20% increase in revenue for responsible products, a 9% to 16% reduction in supply chain cost, a 13% to 22% reduction in greenhouse gases and an increase in brand value from 15% to 30%. Sources: -World Economic Forum and Accenture, (2015). Beyond Supply Chains – Empowering Responsible Value Chains. World Economic Forum, Cologny/Geneva. Available online. -Doughty Centre for Corporate Responsibility and Business in the Community, (2011). The business case for being a responsible business. Cranfield’s Doughty Centre, Swindon. Available online. – Virdi, I., (2012). Corporate Social Responsibility Practices – An Operations and Supply Chain Perspective. Australasian Supply Chain Institute. Available online.
→ Supply Chain Stewardships
Rising environmental and social impacts are causing governments and NGOs to pressure consumer companies to implement sustainable strategies internally but also across their supply chains. The following article will explain the importance of Supply Chain Stewardship in order to respond to these rising issues. Supply Chain Stewardships are: Software and managed services that enable firms to collect, aggregate, monitor and report EH&S and sustainability metrics from their suppliers to fulfil compliance requirements, augment EH&S and sustainability performance and voluntary disclosures, and allow the application of sustainability, responsibility, and ethical sourcing criteria to supplier selection. As the global economy expands and millions more join the consuming class, increased stresses on social and ecological services are occurring and in turn induce risks to operational activities of companies, ecosystems and society. In response to the situation, governments, NGOs, research institutions and the private sector are now focusing on the impacts caused by a company’s activities (direct / scope 1) but also impacts that occur from their suppliers (scope 2 and 3). 2 different types of risks emerge that companies can address. The first is linked to the sustainability impacts of providing goods and services. Whereby a consumer company’s overall impacts occurs mostly throughout its supply chain and particularly in scope 2 and 3, in other words not from their own operations. It is estimated that 80% of greenhouse gases emissions and 90% of impacts on air, land, water, biodiversity and geological resources are caused before it reaches the consumer company’s operations. However recognising, monitoring and analysing all impacts from multiple stakeholders is a major task. Adding to this are the complexities for a consumer company to engage scope 2 and 3 suppliers as they need to dedicate a lot of time and construct specific frameworks or initiatives for specific supply chains. Supply Chain Stewardships provide solutions to these problems. Such solutions can be executed with an online platform, a dedicated team and systematic processes that engage, register, guide, audit, analyse and synthesise all supplier policies and actions towards a sustainable future. The second risk is that social and environmental impacts actually hinder both the good functioning of supply chains and their good image as these impacts will be held responsible to the consumer companies for conducting bad or underdeveloped procurement and sustainability policies. GrainCorp a large Australian agricultural business reported that a drought cut its deliveries by 23% which lead to a 64% loss in profits. Unilever estimates that it does not capitalise on 300 million euros per annum due to increasing water scarcity that results into higher food prices. In order to prevent risks to supply chains, understanding the impacts of goods and services through the multiple production steps is essential. As previously mentioned, each sector will have its specific issues meaning each sector will conduct sector specific or orientated programs that reflect internationally recognised standards and goals. To mention a few recommended steps, identifying critical issues across a supply chain, linking to international standards and best practices and provide a comprehensive mechanism for all stakeholders to work towards to the same goals. Currently procurement departments among others are starting to see the benefits that emerge from implementing such sustainable measures. The market as a whole is acknowledging the direct, the indirect and long term beneficial effects where increasing efforts and collaboration with all stakeholders may bring less disruptions to market place, enhance performance whilst combating climate change. CDP and WWF published a joint report stating that if the U.S consumer staple and consumer discretionary sectors implemented strong CO₂ reduction schemes that represents their fair share of reduction targets established by the IPCC and reached them, they would save $15 billion and $38 billion respectively. All the aforementioned points bring to conclusion that Supply Chain Stewardships are a rising solution to many issues that emerge from supply chains. Some research and consulting firms now project that the Global Market for Supply Chain Stewardships may almost double from $369m to $648m from 2016 to 2021. Sources: -Global Supply Chain Stewardship Spend Will Nearly Double in the Next Five Years. (2016). Available at: http://www.verdantix.com/blog/global-supply-chain-stewardship-spend-will-nearly-double-in-the-next-five-years. -Bové, A. and Swartz, S. (2016). Starting at the source: Sustainability in supply chains. [online] McKinsey & Company. Available at: https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/starting-at-the-source-sustainability-in-supply-chains. -Thorlakson, T et al. (2018). Companies’ contribution to sustainability through global supply chains. Proceedings of the National Academy of Sciences, 115(9), pp.2072-2077.
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