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Supply Sustainability Roadmap

  1. Do the Right Things A Roadmap to Supply Chain Sustainability
  2. Agenda 5/28/2013 2 What Is Sustainability? Why Pursue Sustainability? Sustainability and Profitability Why Extend to Suppliers? The Supply Chain Sustainability Roadmap Information Resources
  3. What is Sustainability? • Balancing short and long term interests • The “Triple Bottom Line” – Social – Environment – Economic 5/28/2013 3 “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” - Brundtland Commission Sustainability programs seek to establish and maintain priorities for social and environmental impacts on par with economic or financial performance
  4. What Is Sustainability? • Social – Human Rights – Labor Practices – Fair Operating Practices – Consumer Issues – Community Involvement and Development • Environment – Regulatory Compliance – Pollution Prevention • Greenhouse Gas Emissions • Waste Generation • Incident Prevention & Mitigation – Biodiversity • Economic – Profitability – Financial Risk Management – Sustainable Resource Use “Natural Capital” • Water Usage • Energy usage • Raw Materials 5/28/2013 4 Diagram by: Johann Dréo Also described at People, Planet and Profit
  5. What is Sustainability? 5/28/2013 5 Upstream (Supply) Suppliers & Distributors Contract Manufacturers Inbound Transportation Raw Materials – selection and utilization Supplier operations Freight optimization Internal (Production) Manufacturing/Assembly Warehousing Facilities & Equipment Employees Energy Efficiency Pollution Prevention Waste Reduction Downstream (Sales) Customers Outbound Distribution Product/Customer Support Product Usage and Lifecycle Reverse Logistics Re-use, Recycling & Disposal Supply Chain Scope Sustain- ability Impacts This presentation focuses on the upstream segment with emphasis on environmental aspects
  6. Agenda 5/28/2013 6 What Is Sustainability? Why Pursue Sustainability? Sustainability and Profitability Why Extend to Suppliers? The Supply Chain Sustainability Roadmap Information Resources
  7. Why Pursue Sustainability? It’s the right thing to do for the environment • Scientific data shows a strong historical relation between GHG levels & surface temperatures • As the global economy grows, especially in developing countries, CO2 emissions grow rapidly • CO2 levels are already believed to be the highest in 450,000 years • Scientists anticipate rising: – Surface temperatures - as much as 3.6 ⁰C (6.5 ⁰ F) global average – Sea levels – Extreme weather episodes • Even if you are unsure about the science, consider the potential impacts 5/28/2013 7 “No-one can predict the consequences of climate change with complete certainty; but we now know enough to understand the risks... Our actions over the coming few decades could create risks of major disruption to economic and social activity” – Sir Nicholas Stern, “Review on the Economics of Climate Change” Source: NOAA “Keeling Curve” High in previous warm periods was 300 ppm
  8. Why Pursue Sustainability? Perception is important • U.S. news stories about major weather events frequently include commentary about global warming or climate change • It’s no wonder, since according to a September 2012 study by Yale and George Mason University… and • Therefore, it’s understandable that a March 2012 Accenture survey of 250 global executives finds: 5/28/2013 8 “A large and growing majority of Americans (74%, up 5 points since our last national survey in March 2012) say ‘global warming is affecting weather in the United States’.” “Americans increasingly say weather in the U.S. has been getting worse over the past several years (61%, up 9 percentage points since March).” “Just over half think that customers are not currently demanding sustainable products as much as they will in the future” and “over a third say they can’t keep up with demand for sustainable products”
  9. Why Pursue Sustainability? It’s the right thing to do for your business • Improve company image/branding – Customer loyalty – Community support – Attract and retain top talent • Accelerate product and process innovation • Meet customer requirements – Consumer demands for sustainable products – “Trickle down” requirements - large, visible companies pushing requirements upstream • Reduce likelihood or impact of new regulatory requirements – Sustainability leader status may provide opportunities to influence regulations – Better preparation for compliance under a controlled, lower cost implementation effort • Increase competitiveness and profitability - many sustainability initiatives also improve efficiency and reduce costs 5/28/2013 9 “getting an A-plus from the Global Reporting Initiative, the only company in our sector, being ranked the No. 3 greenest company in America by Newsweek, being the only telecom company selected to the Dow Jones Sustainability Index -- these are the kinds of things we try to assign a brand value to.” – Dan Hesse, Sprint CEO “I’m proud to announce a series of steps and commitments that will make Walmart’s supply chain, in the United States, here in China, and around the world, more sustainable,” Mike Duke, President and CEO, Wal-Mart Stores, Inc. “GE’s healthymagination and ecomagination strategies are aimed at developing and highlighting new solutions; this thinking is extending throughout our product development pipeline.” –
  10. 5/28/2013 10 What Is Sustainability? Why Pursue Sustainability? Sustainability and Profitability Why Extend to Suppliers? The Supply Chain Sustainability Roadmap Information Resources Agenda
  11. Sustainability and Profitability • Financial viability is a critical element to make sustainability programs sustainable themselves • If done well, business and sustainability gains go hand in hand • According to MIT Sloan Management Review in their 2012 research report “Sustainability Nears a Tipping Point”: – 67% say sustainability related strategies are necessary to be competitive – 31% say that sustainability-related actions and decisions added to their profitability (the “Harvesters”) 5/28/2013 11 “Harvesters are looking at sustainability as a source of innovation, increased market share and improved profitability.” - MIT SMR
  12. Sustainability and Profitability Dual Gains are Achievable • Walmart announced it will add $150 million to it’s bottom line in FY13 due to sustainability initiatives, additive to $231 million saved in FY12 • GE’s ecomagination program is generating major revenues through product innovation • The Container Store cut transportation costs by 20% on average, reduced fuel surcharges by half and carbon footprint by 40% by switching from truck to rail – Wall Street Journal article 5/28/2013 12 With 34 new products and services generating $21 billion –ecomagination revenue continues to grow at twice the rate of total company revenues.
  13. Agenda 5/28/2013 13 What Is Sustainability? Why Pursue Sustainability? Sustainability and Profitability Why Extend to Suppliers? The Supply Chain Sustainability Roadmap Information Resources
  14. Why Extend to Suppliers? • Increase leverage for greater environmental benefits – Multiply your beneficial impacts • Business gains can be realized through better management – Collaboration with suppliers to accelerate product innovation – Focus and discipline yield direct and indirect benefits - similar to quality management – Product lifecycle improvements increase reliability and reduce costs – Supplier efficiency gains may yield cost reductions • Win * Win * Win – suppliers, your company and the environment 5/28/2013 14 “If you’re going to focus your strategy on carbon reduction or environmental impact or social impact you need to engage your suppliers. Without them you cannot succeed.” - Edgar Blanco , MIT Sloan “We want to stimulate innovation over the whole lifecycle of our products. And clearly, if our suppliers can bring innovation into the supply chain, that will help us on a lifecycle basis improve the performance of our products.” – Peter White, Proctor & Gamble
  15. Agenda 5/28/2013 15 What Is Sustainability? Why Pursue Sustainability? Why Extend to Suppliers? Sustainability and Profitability •The Critical Foundation •Planning and Strategy •Supply Implementation Framework The Supply Chain Sustainability Roadmap Information Resources
  16. The Critical Foundation Practicing Sustainability 5/28/2013 16 Senior Management Commitment/ Promotion Impact Assessment (Scopes 1 & 2) Business Case Measurement & Trending Goals and Initiatives Initial Impact Reduction Environmental Management System Public Reporting & Goals ISO 14001 Product Lifecycle Analysis Design for Sustainability Sustainability Leadership Significant Impact Reduction A solid internal sustainability program is essential for: 1) Credibility to encourage and influence supplier sustainability 2) Readiness to assess & support supplier-initiated changes SuggestedMinimum InternalProgram
  17. The Critical Foundation Why is the Business Case Important? 5/28/2013 17 Identify all costs and benefits • Necessary to get and keep support for the program effort and costs Guide areas of focus • Product innovation, market share, brand image, cost reduction, risk mitigation, compliance Drive value capture • “Companies realizing profits from sustainability activites are three times more likely to have a business case than others” – MIT SMR
  18. Executive Leadership Committed People Capable Processes Goals & Objectives Resource Allocation Measurement & Review Corrective Action / Continuous Improvement Individual Improvements Are Valuable… But it takes a systematic approach to optimize and maintain performance Planning & Strategy 5/28/2013 18 Individual Initiatives Sustainable Change
  19. Planning & Strategy Confirm status of internal program and assess supply base Understand your intended scope and leverage Decide what you expect suppliers to do Update the business case Decide how hard you will push 5/28/2013 19
  20. Supply Implementation Framework Phase 1 Getting Started Phase 2 Progress Phase 3 Maturity 5/28/2013 20 Focus=Supplier Communication, Engagement &Initiative Kickoff Organization=Single Coordinator or Small Team Approach=Promotional Supplier Participation=Voluntary Key Developments= Program Documentation, Investigation & Learning, Initial Successes Focus=Information & Org/Process Development Organization=Business Unit Staffing Approach=Persistence Supplier Participation=Necessary Key Developments=Expansion, Refinement, Growing Benefits Focus=Institutionalization & Leadership Organization=Chief Sustainability Officer Approach=Sourcing Impacts Supplier Participation=Required Key Developments=Organization, Integration, Performance Leadership Internal Sustainability Foundation
  21. Conclusions You don’t have to be a huge international corporation • Smaller organizations can have significant impact by leveraging the supply chain Progress is feasible without committing major resources • You don’t have to take on the whole challenge at once You can and should get started • Then decide how fast and how far to progress 5/28/2013 21
  22. References • World Resources Institute – • Global Reporting Initiative – • United Nations Global Compact - • US EPA - • GHG Protocol – • International Standards Organization – (26000 & 14000 standards) • National Oceanic and Atmospheric Administration –, • Iternational Panel on Climate Change – • International Energy Agency - • MIT Sloan Management Review – “Sustainability Nears a Tipping Point” • Dow Jones Sustainability Index - • Carbon Disclosure Project - • The Climate Registry - • World Business Council for Sustainable Development - • C2ES Center for Climate and Energy Solutions (former Pew Center on Global Climate Change) - • The Sustainability Consortium - • Green Suppliers Network - • “Long-Term Growth, Short-Term Differentiation and Profits from Sustainable Products and Services” – March 2012, Accenture • “Extreme weather and climate change in the american mind” – September 2012, Yale Project on Climate Change Communication & George Mason University Center for Climate Change Communication 5/28/2013 22
  23. Contact Us For More Information Supply Chain Consulting Assess – Decide - Deliver 5/28/2013 23 This presentation is based on a TransCelerate project to develop a supply sustainability program roadmap for a nationally recognized sustainability leader and Climate Leadership Award winner