In a discussion as part of Sustainability 24, Accenture’s annual online business forum, leading industry figures explained what sustainable supply chains mean to them
In terms of the business case for addressing sustainable supply chain management, climate change has entrenched itself at the top of the list.
Climate change not only has a direct impact on business operations, for example flooding from extreme weather and procurement difficulties due to resource constraints, it is also ushering in a global wave of regulation.
Regulations governing emission thresholds and carbon offsetting vary from region to region and country to country. This means that large businesses must contend with and preempt changes in complex policies and laws across the world.
The business risk posed by climate change is also the subject of a new report released today by the UN and PwC, suggesting that businesses have a poor understanding and ability to manage risks in their local supply chains overseas.
Another compelling reason to act is the huge financial savings that can be made.
This is primarily because supply chain emissions (or Scope 3) account for the vast majority of a company’s overall emissions - often over 80%.
For example, the CDP’s Dexter Galvin alluded to a 2012 survey of 2,400 suppliers. While only 29% reported savings from emission reduction activities, these savings amounted to $13.9 billion, an average of $20,000 per supplier.
Multiply this across global supply chains and the total savings would be astronomical.
One of the highlights of the discussion was hearing about real-world examples of companies making their supply chains more sustainable.
For example, Chemical company AkzoNobel is not only sourcing lower carbon products such as bio-based solvents, it is challenging existing business models. So instead of focusing on incremental changes like reducing barrel thickness to reduce transport emissions, it is questioning whether the barrel suppliers themselves can take greater responsibility for minimising waste.
Another common action is implementing formal sustainability criteria in the supplier selection process. This ranges from questionnaires and scorecards to specific clauses in contracts requiring suppliers to measure and report progress on cutting carbon.
Cooperation and Mutual Learning
A key message from the discussion was that compliance-driven processes, whereby suppliers are forced to adhere to a company’s values and policies, have limited success.
More effective is to engage with suppliers and help them instigate change.
In the case of AkzoNoebel this means talking with suppliers’ senior management, such as CFOs, CTOs and CSOs, in order to understand what these suppliers need to make their products more innovative.
With its €370 million R&D budget AkzoNobel then supports its suppliers to reach these goals, whether that be building zero carbon homes, recycling raw materials, designing more fuel efficient cars, or developing lighter weight, better insulating materials.
For BT cooperation includes assisting manufacturers of ICT equipment with their CSR commitments, for example on-site visits to educate them on the latest energy efficiency technologies and management systems.
These efforts begin a “cascade process” in which suppliers then engage their own suppliers to achieve similar goals. This ensures that the entire value chain is more secure and facilitates mutual learning amongst business partners.
You can watch the full session here.