Large organizations with global supply chains are now paying more attention their complete value chains. It is not the clearly not the strongest who survive but the ones who are able to adapt the quickest.
The definition of sustainability is evolving. For many organizations sustainability refers either primarily to environmental product and packaging stewardship, or social responsibility. Also, the concept of sustainability has evolved from a purely inward focus for companies who are generally large organizations and identify, measure and disclose their social, economical and environmental indicators in a sustainability reporting. The reality is changing but sustainability is still perceived as a cost by many stakeholders, whereas in reality it is a unique business opportunity if well understood by key decision makers. There are substantial opportunities in sustainability that lead to cost savings through low hanging fruits.
Sustainability is becoming part of the core business strategy of many organizations as they understand the business drivers behind it, the cost savings and the huge opportunities.
With the growing importance of China and India, along with rapidly rising fuel prices, pressure on fossil fuel, scarcity of natural resources like water, global organizations’ supply chains are becoming a big part of the focus, notably for retailers and brands in the consumer product industry, since the supply chain can impact them for up to 70-80% of their activity.
Large organizations with global supply chains are adapting to it, and have shifted their focus throughout the value chain. Whether called ‘Life cycle approach to Sustainability’, ‘Greening the supply chain’, or ‘Sustainability in the value chain’, the shift aims at combining sustainability efforts in the supply chain with cost savings opportunities.
And large consumer packaged goods, the so called CPGs, such as Kraft, Unilever, Procter and Gamble, have made substantial green announcements in 2010, with radical shift in their strategy and long term goals placing sustainability at the heart. They have all in common the clear shift to reduce environmental impacts with a focus on greenhouse gases, water, waste and energy, improving health and well being by proposing innovative products and by working across the supply chain to make it happen.
Meanwhile, Nike has created an ‘Onscreen Environmental Apparel Design Tool’, in which designers plug in what materials they’re using, how much recycled or organic content they have, and other details. The tool gives the design an environmental score. Nike made the tool available for other companies to use. And Timberland announced that its Green Index, which rates the environmental footprint of its pairs of shoes, will be applied to all of its footwear by the end of 2012. Many other retailers and brands have made similar announcement.
A simple example like the reduction in Greenhouse Gases and Energy footprint in a facility, can quickly lead to cost savings. This is a clear focus of transnational organisations now, and they are looking for partners in their supply chain that are able to work with them and measure these reductions and savings as it is a win-win situation. A good example of this is the Energy Efficiency program launched in 2009 by Walmart.
Various business drivers and trends that are worth noticing:
• The increasing environmental regulatory pressure on organizations to design, meet regulations and commercialize products and packaging worldwide
• The awareness of consumers about environment, climate change and resource scarcity, still mainly in Western countries is growing
• Global retailers and brands are setting sustainability requirements and reporting indicators throughout their value chain as they need key indicators
• Sustainability is seen as a market differentiation and competitive advantage tool
• Companies are aiming for ‘zero’ waste
• Sustainable sourcing for commodities is becoming mainstream
• Metrics and Standards is becoming the rule
To implement a framework on these lines effectively, partners in the value chain need to carefully listen to their clients and understand the changing environment, and start to implement a sustainability plan as one of their big focus for the years to come.
The need to adapt quickly to the demand of sustainability as a core business offering to its clients seems comparable to the Darwin evolution theories of species, it is not the strongest who survive but the ones who are able to adapt the quickest.
So how and where to start? This always comes down to this at some point. Each business differs in the way it should address sustainability and how to implement it, but should carefully consider the three pillars of: (1) company’s internal organisation; (2) its product and packaging; and (3) its own supply chain. Some key elements to be considered during this process are notably:
• Understand the product life cycle of a company to identify the boundaries of influence and responsibilities for the business and its clients, from raw material sourcing or extraction, to manufacturing, transportation, use and end of life of the product.
• Set up a baseline assessment of current activities boundaries and identify key social, economical and environmental impacts. Set up a monitoring and reporting system that can enable this in an effective manner.
• Leverage product life cycle analysis to identify main environmental impacts of a company’s products and packaging and focus on the real issues
• Define the boundaries of a company’s supply chain, and increase traceability to help identify possible alternative, via green procurement and sustainable sourcing practices
• Communicate constantly with the clients to better anticipate the direction taken and alignment with the client’s mandate and/or expectations
Not surprisingly, the latest news is the launch of an industry-wide index to evaluate product`s environmental impact by the ‘Apparel Coalition’, a group comprising of 30 of the giant retailers and brands collectively accounting for more than 60% of global apparel sales.
This is clearly a major shift for the apparel industry and that Indian companies could be leading the way if they are able to address these impacts in their product, packaging, supply chain and their own organisation.
As Global Sustainability Services Director based in Hong-Kong, the author - Christophe Liebon supports Intertek business strategy towards the global portfolio of Intertek clients with a specific focus on consumer products. Christophe has been working in the field of Sustainability, Quality and Compliance for more than 12 years and held successive positions within Intertek where he supported client’s sustainability strategy from the design to its implementation on a global basis. He has developed Intertek Sustainability offering for consumer products and coordinates its implementation on a global basis for the Intertek Group.
This article was originally published in the our print publication Sustainability Outlook (March issue).