Sustainable Supply Chains: Why and how do you improve the sustainability of your supply chain

Monday, April 12, 2010

18:00 - 21:15

The green supply chain movement won't stop - April 12th talks

Wal Mart's ambitious announcements earlier this month show the growing trend towards greening the supply chain. Many companies have stressed that they want to see their whole industry drive down emissions (and related environmental impacts), they have acknowledged that they want to "outgreen" the competition. Lee Scott (CEO, Wal Mart) is very clear that he sees this as a key differentiator for his company. And for their suppliers that is already a reality.

Our panel will explain what is going on: the business case, the complexity of the challenge and how it is set to develop. Paul Kelly will explain Asda's plan to introduce Wal Mart's "Sustainability Index" in the UK. Fiona Page and Paula Widdowson will explain the "supplier" journeys that they have undertaken at Pepsi and Northern Foods respectively. And Paul Dickinson will give his insights on the back of their project to get the suppliers to the world's bigger businesses to measure and disclose their climate impact information.

 

Speakers

Paul Dickinson Carbon Disclosure Project

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Paul Kelly ASDA

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Paula Widdowson Northern Foods

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Round Tables

Built Environment

Greening the construction sector supply chain: how do we do it and who do we trust?

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The construction sector supply chain recognise they have to go ‘green’. However, a question raised was which system or accreditation does a supplier pick to demonstrate their commitment to a better environment. Businesses with large supplier base/sub-consultants/sub-contractors have formed ‘schools’ that provide courses in Environmental Management evolved through Health & Safety. Some clients dictate their systems to their suppliers. Those with multiple clients often find each client require a different method of accreditation/management.

ISO 14001 offers flexibility. BRE’s BES 6001 is quite finite but simple. As is the Green Guide to Specification, but both are very difficult to obtain detailed information.‘Building Confidence’ offered by Achilles is popular. It was agreed that openness of any system is for the greater good of the sector. A website http://www.amee.com was tabled (Avoidance of Mass Extinction Engine). This has been developed by Google and is open source. It is a source of all emission statistics and is growing everyday. It has the aspiration of being the data source. Everyone was encouraged by this tool.

Everyone agreed the industry is behind the car industry and asked what can be learned from this and other sectors, such as oil and gas. Collaboration was found to be a common theme. However, taxation of the car linked to CO₂ emission have meant consumer choice is influencing the sector. Market forces has led to a reduction in construction waste by the introduction of a land fill tax. Could the sector respond through how rent is determined by emissions or compulsory life cycle costs and not just capital cost? How can you measure durability and material in use throughout its life? This is subjective. Can suppliers offer environmental warranties?

Can a new environmental currency be created? Every item or service has a financial cost measured in currency and why not a similar environmental cost measured in a new currency?

Supply Chain

Material sourcing. What are the sustainability features and risks that need to be addressed?

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The round table was exceptionally well attended (standing room only!) as it followed the main speaker session on the same topic.

The table discussed the points raised by the main speakers, particularly:
-There is increasing demand from customers for businesses to be operating in a sustainable way. This is not a topic that’s going away
-Some major companies are using Sustainability as a focus to take a lead in improving their supply chains and their competitive position. It’s about looking at supply chains and operations through a different lens
-Key point is that individual companies cannot do it on their own, they need to collaborate with not only customers and suppliers but also industry competitors
-SME’s don’t have the resources to address Sustainability. They need more support from large suppliers and customers
-Retailers are “talking a good talk” and indeed making progress on their own Sustainability journey. The challenge is that their commercial departments and buyers are still focused on reducing cost which puts all the pressure on suppliers.
-Product labelling standards are going to be a driver but also a real challenge, especially how to come up with a common measureable definition of Sustainability and then work out what the values should be on any one product. France was going to go it alone on this in early 2011 but it appears that their labelling initiative has beginning to stall
-The “Elephant in the Room” is consumption, especially how to take account of the true cost and environmental impact of products that everyone wants to buy. Should suppliers and retailers just focus on efficiently providing products that people want to buy or should they take a more responsible view and both educate the consumer and edit the choices of what they can buy? In any case the biggest Sustainability benefit could be in reducing the amount to products sold...
-So no overall conclusion, but an agreement that Supply Chain Sustainability needs to be addressed by all responsible companies, and action taken to further reduce resource consumption, energy and carbon, and waste in the supply chain

Stakeholder Engagement

Enabling Customers

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Thanks for your input to the discussion. There were certainly lots of ideas and things to take away from the session. Below are a list of action points taken from the session and from the notes handed out during the roundtable. I hope that you find this useful and if you have any further points, ideas or suggestions to add do use the wiki function below.

• Any communication needs to be a two way thing – start a conversation with your customers to get them engaged. Just providing information will not drive change
• Be disruptive – customers receive countless messages about sustainability and are tired of companies’ green credential. What can you do to move beyond just another message about recycling? Look for other more innovative ways to connect e.g. Pepsi Refresh or Orange Rock Corps
• Make it worthwhile by incentivising – reward and incentivise to encourage the sustainability behaviour you’re looking for. One suggestion from the session was to run a competition (e.g. Myoo create or Brickfish), or recycling points (e.g. Recycle Bank)
• Make it easy – we are creatures of habit and reluctant to make changes so it needs to be made easy for us – with all of this activity we are trying to create social norms for sustainable behaviour. How can you ‘nudge’ people to make the behaviour change you’re looking for?
• Understand the values driving behaviour – different people react to different drivers all based around their values. Understanding their values (guilt, money, the planet etc.) will ensure you choose the right mechanism for change
• Make sure you’re taking clear action (or commitment to action) yourself – without clear evidence that you are already doing something yourself, why should any of your customers change?
• Make it positive and tangible – making sustainability engaging and fun will win over even those customers that don’t really fully buy-in to the sustainability argument
• Make the brand connection – do it through your brand, not your corporate vehicle – after all this is what your customers connect with
• Start from where people are – connect with people’s aspirations by providing symbolic and effective action that touches their everyday life
• Show people they are part of something bigger – some people are willing to change, but they need to see others acting around them to feel what they are doing is worthwhile
• Help people to act together – people want reassurances that they are acting in collaboration and not in isolation
• Use the channels that work for your customers – market and communicate with your customers through the same channels that you would for any new product.

Carbon Strategies

How Carbon Management Strategies can go beyond complying with legislation.

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The group began by considering why a business would choose to go beyond complying with legislation. It was suggested that regulation is good at shifting people’s attention and helping to highlight the easy wins. The view at the table was that businesses are implementing cost reduction opportunities as they find them rather than waiting to take action. The table also considered the other benefits of going beyond legislation;

o Brand Differentiation - keeping one step ahead of competitors;
o Client demand - The view was that a additional reductions have sometimes been made as response to a pull from clients;
o Employee engagement - It’s important to employees that their organisation is behaving responsibly and enabling them to get involved in addressing Climate Change;
o Demonstrating leadership;

The table then considered how businesses can go beyond legislation, the key points were:
o The importance of the C suite ‘getting it’: As the next marginal tonne of carbon begins to cost rather than save money, support from the top will become more important; o Getting the right people on board and using client demand as a catalyst; o Having a plan in place – although the importance of this was considered to vary from organisation to organisation;
o Engaging the marketing team to highlight the threats and opportunities presented by a low carbon world;
o Using case studies from inside your business or from competitors to help secure understanding and ‘buy in’; o Use the support of the Carbon Trust and other organisations such as Forum for the Future; o Consider the use of external emissions reductions (Carbon Offsets) as part of the strategy

Finance & Corporate Sustainability

How and where can banks provide finance for a low carbon economy and also meet the financial needs of their shareholders?

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The group did not contain anyone representing a ‘bank’, although people who worked for organisations with funds to invest were in attendance. Perhaps as a result of this make up, discussions did not focus on what banks are doing already; instead they focused on what they could or should do. A number of themes emerged, and these follow in the order that they were discussed. The group started off talking about community renewable energy projects and a number of the discussions focused around this subject.

(i) Are low carbon energy projects too risky for banks to fund at an early (enough) stage? Does Government need to come in first (with grants or through a Green or Community Investment Bank) to reduce the level of risk to the banks and thus make it easier to start-up community renewable energy schemes and for banks to invest?
(ii) There was interest in Government creating the ‘conditions’ where the risk to banks in such investments are seen as worthwhile from a profitability point of view. This could include underwriting by the Government.
(iii) Proactive investment: banks can and could proactively invest in low carbon / more sustainable solutions. Such an opportunistic approach to investment would reflect a bank understanding that such investments are more likely to yield a greater return in the medium- to long-term.
(iv) Linking financial risks to reputational risks: if banks understand the reputational risks of investing in high carbon / unsustainable projects then they would be less likely to do so, and if they understand the reputational profile of low carbon / sustainable projects they may be more likely to invest.
(v) Innovation: the emergence of new technologies, new ways of working, and new ways of thinking will influence the investment structure of financial institutions.
(vi) Understanding business models: if business models for low carbon projects are developed tested and understood then it can be quite simple to get investment from a bank. For instance, it is relatively straightforward to get funding for a community wind project in Scotland, where 20% of the equity has been raised by the community, and planning permission has been granted – this is a model known to work.
(vii) The price of carbon: when the price of carbon increases and reaches a certain level this will influence investment decisions.
(viii) Corporate Responsibility policies: the policies of organisations will influence the kind of investments they get into, and the kind that they steer away from.
(ix) Leadership: it may only take one person, or a small group of individuals within the banking sector to say that, “from today we are going to invest in a different way to how we have in the past”, to change the investment landscape to a low carbon one.
(x) Consumer revolt: individuals and bank customers voting with their pounds.

One or a number of these initiatives could change the banking environment to one where low carbon investment is simply the norm.

Communications

Champions 2.0: What makes a remarkable employee green champion programme?

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For this month’s Green Communications table, we asked the group to discuss Champions schemes: what makes a good one and what barriers Champions face. From this, we devised seven rules that all Champions schemes should abide by.

It can be a thankless task being a Champion, with some feeling like they’re expected to perform miracles with no budget, feedback or management support. Several key themes were identified as being important when running Champions schemes: - Reward - Status - Resource - Choosing the right messenger - Respect - Training - Seniority of Champions (they need to be at every level of an organisation)

One of the key things to come out of the discussion was the need for sustainability values to be embedded into everyone’s job descriptions and objectives. Champions needed to be part of wider employee engagement campaign so that they could effectively challenge social norms and be seen as high status ‘ambassador’ type figures.

We also discussed the idea that Champions schemes evolve. Champions are usually set up to deal with the ‘housekeeping’ first. This is often followed up with a period of activity followed by a slump and lack of motivation where the CSR team wonder what to do with them. The challenge is then moving the scheme on to become one that fosters innovation and initiative.

Our table wanted to see Champions that were well trained and knowledgeable, with the internal support to be able to realise their potential. To do so, they needed to be well connected, well rewarded for their time and receive feedback on their impacts and projects which meant that scheme impacts needed to be measured (no mean feat we decided).

Bearing all of this in mind, we managed to design some ground rules for those running

Champions schemes: Rules:
1. Measure impacts and celebrate their achievements
2. Respect your Champions give them the time to do their work: they are your voice and visibility
3. Create a process for driving and implementing innovative ideas
4. Embed sustainability in all internal processes so it becomes employee DNA: part of contract/objectives/induction
5. Make sure your Champions are empowered
6. Target their actions and give them a clear brief
7. Given them the training and tools they need.

CSR Reporting Best Practices

Avoiding Greenwash through Robust CSR and Sustainability Reporting

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A full table with a mix of practitioners from Industry and commerce, and UK and International perspectives.

We started the discussion with a debate as to what we see as key components of a CSR report – and this quickly took us to a debate around who the reports are for. The general conclusion from around the table was that, sadly in many ways, CSR reports are still being written for internal company consumption – intent is often good – engage and inspire the employee base – but not often focussed on clients and institutions.

To the question of how often, if ever, CSR reports are used to evaluate a business – either from a competitive standpoint or from an institutional investment perspective, the answer was almost never – at least that was the view of the table.

The table collectively felt that the issues here were around two items – the audience and the lack of standardisation. While we were clear that a CSR report cannot be used to compare businesses in different industries, the lack of standardisation was seen as a huge limitation to making practical use of the data.

Given the lack of standardisation, and the fact that reports are often written for very different reasons, with different goals it was felt that it is not surprising that misuse of reports with a strong Greenwash element, comes about.

Points for action
(i) Standardisation – content, structure and numbers
(ii) Less social – more sustainability content
(iii) More outward focus – for Investors and Clients / Customers
(iv) Director level head of CSR – get it on the Board.
(v) Transparency and Accountability are key elements
(vi) More focussed around economic sustainability of the organisation

Technology

UK Feed-In Tariffs go live!

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The REA which campaigned successfully for FITs gave an overview of how they are now working for industry. The PV Tariff rates are effective and are now stimulating investment and growth - and interest from international pv companies. However concerns remain for other technologies. Biomass was dropped with no clear explaination. Wind above 1.5MW may not have sufficient reward. The bands for hydro require attention and refurbished hydro needs to be included in the scheme. On-farm Anaerobic Digestion rates are too low to be commercially viable and the REA is pressing for an emergency review of this technology. The table discussed the opportunity for new entrants into the renewables sector that Tariffs offered. Many large companies are now looking at these technologies including major retailers, and also those already interfacing with domestic properties including broadband providers. There was also interest in community initiatives with one participant particularly interested in the potential for social housing providers.

Sustainability through ICT

Sustainable IT and your supply chain – reducing your impact by procuring greener IT products and services

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The group brought a diverse range of backgrounds into the discussion and addressed a number of issues on the theme of procuring greener ICT products and services. The scope of products and services considered within the discussion spanned business-owned hardware, software services, social media, and consumer durables.

There was general agreement that good progress towards greener procurement absolutely requires improvements in comparable reporting of how ‘green’ a product or service is. Decision makers in the procurement cycle need appropriate information to make greener choices; information the group did not feel was available today. The group recognised that there had been recent well-publicised accusations of greenwash and that the complex supply chains of ICT products and services made the sector a sold candidate for transparent and reliable reporting mechanisms on environmental impact. A laptop with bamboo a casing was held up as an example that purchasing professionals and consumers needed more complete information on what constitutes a green product.

Concern was raised over the apparent shortening product life cycles for consumer electronics and a need for clarity on whether environmental benefits of product durability was adequately considered in the move to sell more product. The group felt the industry must be responsible and understand for itself the impact of disposable electronics. Replacement of inefficient, energy-hungry devices with more efficient products is an area where short life cycle may be beneficial.

The measured growth in ICT sector GHG emissions was raised – along with concerns over the water footprint and other impacts. The group felt there was a risk of a significant rebound effect in the ICT sector, whereby reductions in product costs, improvements in device performance – and potential increases in reliability - were at risk of being swamped by proliferation of features and increasing access to products, leading to a net rise in overall environmental impact.

Finally, the group reminded themselves that whilst ICT is accountable for environmental burdens the sector had a crucial role to play in helping reduce the environmental burdens of other sectors through innovative products and services.

Energy Effeciency

Can the CRC help you to choose better suppliers?

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The table was mix between Industry professionals, academics and legal representatives which led to a wide ranging and varied discussion.

The discussion started around CRC and how organisations are now preparing to tackle the legislation post April start date. It was very interesting to understand the varying different stages people are currently at in CRC reporting, however a shared feeling of complexity in the scheme structure and organisation could be felt.

This element of confusion in the scheme seemed the primary hurdle in tackling CRC, with people on the table commenting how understanding the scheme was often led to identifying solutions to doing well in the scheme.

The table collectively felt that post year one of the scheme – how the scheme will operate in the coming years was up for debate, with no-one particularly understanding the workings of elements such as Carbon Trading and benefiting year on year performance in the scheme.

Points for action:
1. Simplification of the scheme
2. Setting a strategy for managing the CRC
3. Full transparency of your parent organisation

Changing  transport behaviours. Who needs to change, and by how much?

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Sustainable transport is not popular. Excuses for not choosing a less-polluting alternative to, say, single occupancy car travel range from personal discomfort to unacceptable cost to loss of time or productivity to the lack of a viable alternative.

We recognise the complexity of decision making, involving as it does not just individual travellers but at a more strategic level their employing companies (where relevant), infrastructure and service providers and government. Leadership from government and business is necessary with integrated planning to establish the conditions for more sustainable behaviour by travellers.

Many of the reasons cited for using transport unsustainably stem from personal preference, which can often be ill-informed. So who needs to change their behaviour, and by how much, to make the transition to more sustainable transport realistic?

A number of key themes emerged from our round table discussions:
1.Enabling the transition – corporate investment and clear policy setting are required to support sustainable employee travel choices
•Recognising the personal health benefits and community benefits of lower carbon transport
•Providing viable alternatives to higher-carbon transport, bus routes, cycles sheds, showers, etc •Minimising the impact of higher-carbon transport through efficient operation, recognising that in some cases a car/ taxi is the only safe and effective form of transport
•Establishing clear rules for employees eg. using only low carbon vehicles, where necessary hired for need
•Incentivising or conditioning lower carbon choices including minimising travel eg through approval to travel, budget setting, lower mileage allowances, extra allowances for car sharing, extra holiday etc •Putting the responsibility on individual employees to justify travel choices

2.Engaging with employees to develop sustainable transport solutions
•Challenging the need to travel, eg. changing work patterns to work at home and demand/ make use of video conferencing
•Developing sustainable travel plans

3.Setting a personal example
•Avoiding short haul flights
•Using video conferencing wherever possible

4.Planning ahead
•Being well informed about the economic and environmental costs of transport options
•Booking well in advance to minimise otherwise exorbitant train fares

ACTIONS
•Finance Directors – recognising the business value of investing in sustainable transport solutions
•HR Directors – collaborating with employees for better solutions
•Leaders – setting a clear example
•Individuals, especially ourselves as employees – challenging and demanding improvement

Venue Detail

Bank of America Merrill Lynch: King Edward Hall

King Edward Hall | 2 King Edward Street | London | EC1A 1HQ

Directions

Bank of America's offices are a very short walk from St Paul's tube station (Central Line). Exit the station at Cheapside/Newgate Street. Go past the BT centre, with it on your right-hand side and take the first available right down Edward Street. Continue down this road for 80m and the entrance to the venue is on your left-hand side.

Do not go to the main reception desk at their offices when you arrive. You are looking for an entrance that leads you directly into the King Edward Hall.