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Concerns about the business value of sustainability initiatives are reminiscent of where we were when the environmental movement started. In the late '60s and early '70s, many businesses developed extensive rationales as to why efforts and expenditures on environmental concerns like clean air and clean water were not part of a company's priorities. There was no specific corporate responsibility to these "public goods" or any social contract. The responsibility of the corporation was solely to its shareholders and that responsibility was primarily to provide sufficient return on their investment.
Fast forward 40 years, substitute "sustainability" for "environment" and the arguments have changed little.
We have previously written about GE, IBM and WalMart as proponents of corporate sustainability and supply chain requirements. They are not the only ones. Several hundred major companies including Ford, Dell and Proctor & Gamble (P&G) have similar programs and requirements. The message from these companies appears clear: We are willing to help you continue as our supplier, but only if you commit to helping us meet our goals and some of those goals go well beyond environmental compliance efforts.
P&G recently issued a press release entitled P&G First Year Supplier Sustainability Scorecard Results in Collaboration and Innovation. In this press release P&G's message to suppliers is: "P&G improves the environmental quality of our operations and our products. We strive to do business with suppliers who share our concerns for and commitment to preserving the environment."
As detailed in the release, P&G initiated their "scorecard" to measure and improve the environmental performance of the Company's key suppliers and business partners with three expressed goals:
- Enhance supply chain collaboration;
- Improve key environmental indicators; and
- Encourage the sharing of ideas and capabilities to deliver more sustainable products and services for our consumers.
The P&G Supplier scorecard assesses the total environmental footprint of external business partners and encourages continued improvement by measuring energy use, water use, waste disposal, and greenhouse gas emissions on a year-by-year basis. This tool is sufficiently flexible and user-friendly, so any supplier from manufacturing to advertising can track key indicators in a way that works for them and P&G. In this way, the scorecard drives collaboration and creates opportunities for innovation. P&G, and the other companies mentioned, are encouraging a collaborative effort, but the underlying message of the scorecard is: "If you cannot or will not improve, then we will find another supplier."
According to the press release, their scorecard system has now been in place for over a year. The scorecard asks suppliers about their resource use and emissions, and also seeks ideas related to sustainability. The initial scorecard was sent to 383 of P&G's biggest suppliers and intended to make sure the company could get clear data and feedback.
With over 300 companies responding and many reporting on energy use, direct and indirect emissions, and waste, P&G says it will send out an updated version to around 600 suppliers and for the first time use the scores to calculate suppliers' ratings, which are also influenced by costs, quality and other factors. Suppliers get scored based on their year-by-year results, and P&G will publicly reward "exceptional performance," according to Chief Purchasing Officer Rick Hughes. Rewards will also go to those that bring in innovative ideas. When suppliers score poorly, P&G will develop improvement plans to get them on track. If they won't get with the program, they will be dropped.
Out of the suppliers that completed the scorecard, 94% reported on their energy use, and the metric that the fewest (63%) reported on was Scope 2 greenhouse gas emissions. Almost 40% also submitted sustainability-related ideas and input. P&G is all for these suppliers getting on board and encourages them to get the help they need. They are looking for accuracy and integrity, and help in improving P&G's own scorecard.
What does P&G gain? They say: "The growing expectation of our consumers, customers and stakeholders is a further catalyst to extend this practice throughout our supply chain." It is a long-term attitude that positions P&G to hold on to customers, while responding to consumers and stakeholders. It shifts "environmental" from being a "cost center" to being a key "profit center" in their strategic planning process.
Pushing sustainability down the supply chain and sharing information with suppliers will also help P&G achieve its own environmental goals, such as its plan to eventually use 100% renewable or recycled material in all products and packaging, something possible only with materials and packaging providers on board.
GEC has maintained that whether you call it a scorecard or something else, the deliberate iterative process of plan, do, check, act implicit in the environmental management system results in improved environmental compliance and improved performance. Acquisition and consideration of environmental performance metrics will lead to cost savings, liability avoidance and accident prevention. In a real sense, this is an opportunity for growth, if you can position your company to take advantage of it. If you sense that you company's future will be dependent on your customer's procurement requirement, GEC can enhance your agility and help you develop the programs and procedures that will assure continued success.
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