Lecture 10: Sustainable sourcing

Transcription

1 Lecture 10: Sustainable sourcing Dr. Suvituulia Taponen Drivers for sustainability Barriers for sustainability Sustainable supply management Benefits of sustainability

2 Drivers for sustainability

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4 Guardian 7 /

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7 Both internal & external forces at play Many studies point to internal drivers being more effective in driving organizational change Giunipero et al

8 Barriers for sustainability

9 Going green is tedious Without clear benefits, commitment, knowhow and a road map, sustainability not achieved 9

10 Barriers to sustainable procurement Poor understanding of targets & requirements Lack of training and guidance Taking a short term view failure to invest Unclear link between sustainability, efficiency and cost savings Practical issues & visibility in complex chains 10

11 Sustainable supply management

12 Multitude of terminology Sustainable sourcing Environmentally preferable purchasing Fairtrade vs fair trade Corporate social responsibility Green sourcing Codes of conduct Reverse logistics Supplier certification Ethical sourcing Rainforest alliance Closed loop supply chains Socially responsible purchasing Green supply chain management Triple bottom line 12

13 Corporate social responsibility Corporate social responsibility (CSR) involves responsibilities outside of making a profit and the key questions for corporations include: Does business have a social responsibility? If so, what is the extent and type of the responsibility? The impact of a company s actions on society Requires a manager to consider his acts in terms of a whole social system, and holds him responsible for the effects of his acts anywhere in that system 13

14 Sustainability: People, Planet, Profit The triple bottom line of sustainability: Natural resources Company operations (profit) Positive community/social impact Finding solutions without harming the needs of future generations Weighing purchasing decisions based on these three criteria Van Weele,

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16 Green criteria making its way to the top Environmentally Preferable Purchasing (EPP) refers to the procurement of products and services that have a lesser or reduced effect on human health and the environment when compared with competing products or services that serve the same purpose 16

17 Environmentally preferable purchasing Pollution Prevention: From the start of a process or procedure, reducing or eliminating toxicity, air and water emissions Life-Cycle Perspective: Looking beyond purchase price Consider costs and environmental impacts over the lifetime of a product or service (manufacturing, packaging, transport, energy consumption, maintenance, disposal) Natural Resource Protection: Giving preference to sustainable, reusable content, and recycled materials over virgin materials, as well as to conserving water and energy 17

18 Helping nature and the bottom line How to do it? Recycled content Energy efficiency Reduced toxics Reduced packaging Life cycle effects considered Bio-based Alternative transportation methods What can you gain? new products use less energy, generate less waste, and last longer reduces hazardous material management costs lower operating costs repair and replacement costs (e.g. light bulps) less disposal costs lower health & safety costs 18

19 Jabbour and Jabbour

20 Helping nature and the bottom line case Cadbury - 20

21 Carbon management 1/2 AT Kearney 2011 The Carbon Disclosure Project 21

22 Carbon management 2/2 Bottleneck Strategic Noncritical Leverage AT Kearney 2011 The Carbon Disclosure Project 22

23 Caps research 23

24 See for yourself how sustainable a product is! om/sustainablebusiness/nginteractive/how-ethical-isyour-smartphone 24

25 Deloitte

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27 How to ensure codes are enforced? 27

28 Portfolio approach to sustainable procurement Availability Low High Bottleneck Limited options to push for sustainability Develop & promote industry standards Non-critical Third party certification requirements Changing suppliers if current not sustainable Strategic Sustainability as a KPI Sustainable NPD Sharing best practices on sustainability Leverage Use of recyclables, material reduction Sharing best practices Considering logistics Low Volume High 28

29 External certification a typical approach Voluntary standards adopted by many External certification increases credibility - Especially popular in retail & B-2-C businesses Some go for own standards - E.g. Starbucks Café Direct 29

30 Buying Fairtrade Fairtrade (FT) is one of the fastest growing initiatives From 2004 to 2007 global Fairtrade sales have almost tripled; increasing from 832m to some 2.381m In the UK: 380 companies licensed to sell Fairtrade, 7 certified product categories, over 4000 actual products 4 main objectives behind the standards 1. To ensure that producers are paid a price covering the costs of sustainable production; the FT minimum price. 2. To ensure provision of the FT premium, which can be invested in social, economic and environmental development 3. To ensure pre-financing is available to all producers requiring it 4. Fourth, to facilitate long-term trading partnerships and sustainable production practices. 30

31 Multitude of FT products 31

32 FT can develop purchasing & SCM -case Equal Exchange - 32

33 Don t forget day-to-day ethical issues in purchasing Buyers should avoid unethical conduct, such as Accepting bribery from suppliers Misusing proprietary information Fixing bids Lying to suppliers Etc. 33

34 Sustainable sourcing at PepsiCo 34

35 Sustainable sourcing at PepsiCo 35

36 Benefits of sustainability

37 Good on the short and long term 37 Accenture: The value of a Sustainable Supply Chain

38 Green is not more expensive Green procurement doesn t mean spending more money: Life-cycle costing (LCC): Critical to consider the costs of a product/service throughout its useful life - purchase price, usage and maintenance costs, disposal costs Efficient procurement: GP involves meeting your needs with the most efficient use of resources - consider the real need to buy Providing a market for such products helps suppliers develop innovations and improve the international competitiveness of European industry In Japan & US national governments have put laws in place to foster the creativity of industry and forge a competitive advantage through compulsory public purchasing of eco-friendly products Source: European commission 38

39 Case Walmart Monetary benefits from sustainability: - Selling plastic waste to packaging suppliers for $28 million annually - Few inches off cardboard packaging for a toy truck: - saved 4,000 trees - eliminated the need for 497 shipping-container loads - saved million gallons of oil in transport => $2.4 million in savings for the retailer 39

40 How can sustainable sourcing help us all? Energy efficiency, use of renewable sources Reducing pollution Reducing deforestation Saving natural resources Healthy working conditions for staff 40

41 Discussion point

42 Background: child labour Not a simple issue Surely attempts to reduce it must continue, but not without considering the context and alternatives in each case 42

43 Background Eradicating child labour from a supply chain can be a long and complicated journey Media and consumers are quick to judge and brand image effects difficult to reverse Even if accusations proven untrue 43

44 What should a company do when conducts violated? Abandon the supplier? Even leave the country? Work to change things with the supplier With the risk that violations may reoccur at least in the short term and media is watching closely? What is in the best interest of the child? 44

45 Several issues to discuss Organization s broad corporate social responsbility with issues that don t violate local laws but impact a company s ethical standards Social and economic impact of strategic decisions in culturally different environments The balance between economic benefits of outsourcing and the risks it brings to a company s image Operational decisions related to compliance violations 45

46 Next time: Risk management