Leading manufacturers are pushing their sustainability efforts upstream, using incentives, business leverage, training programs and progress monitoring to improve their suppliers’ performance.
The road to creating user-friendly, science-backed, technology-enabled supply chains is paved with good sustainability intentions that get foiled by today’s dynamic, global complexities. Achieving sustainability of scale requires involvement of the entire supply chain. To meet the needs of customers and markets, manufacturers need up-to-date and accurate information about their suppliers’ materials and components.
The news is filled with stories that demonstrate just how costly a lack of supply chain intelligence can be:
- Mattel had to recall almost 1 million toys in 2007 because they contained lead-tainted paint from a supplier in China.
- Nintendo found there was nothing amusing about getting a zero on its conflict minerals report card in 2012.
- Apple’s iPhone lost some of its glitter in 2012 when unfair and unsafe labor practices by suppliers in China were exposed.
These manufacturers had one thing in common: Supply chains are only as sustainable as their worst participants, and at least one supplier in the all-too-real examples above delivered materials or engaged in practices that were deemed dangerous or otherwise unacceptable.
The Supply Chain Sustainability Conundrum
Global manufacturers are well into sustainability initiatives, and many have hit a major roadblock: They only have direct control over a fraction of the sourcing and make-up of their final products. As much as 70% of product sustainability comes from suppliers, who can lag significantly behind the curve.
Manufacturers on the leading edge are pushing their sustainability efforts upstream, using incentives, business leverage, training programs and progress monitoring to improve their suppliers’ performance. (See the United Nations Global Compact’s Supply Chain Sustainability: A Practical Guide for Continuous Improvement for detailed examples.)
To get started, a manufacturer needs to inventory its supply chains and eliminate the worst participants. The remaining suppliers have an opportunity to fill current sourcing needs; to do so they must attain and maintain compliance with the individual manufacturer’s sustainability requirements.
So, how does a manufacturer rank the universe of available suppliers on their sustainability metrics, and choose the right ones to focus on and nurture?
Traditional supply chain management methodologies struggle to identify or measure the sustainability performance of potential suppliers. With the globalization of supplier markets and increasingly complex products, the amount of information manufacturers need to sift through and evaluate has expanded exponentially. Supply chains are riddled with information gaps and data silos that may end up obscuring sustainability performance—both good and bad.
Suppliers, for their part, are suffering from assessment and audit fatigue as they answer the same questions and provide the same proofs over and over again to individual manufacturers. Perhaps the biggest challenge to supply chain sustainability is a widespread perception among suppliers that sustainability and business goals are at odds. Adding redundant surveys and inspections to supplier overhead is no way to convince them that sustainability is actually good business.
In this situation, the most efficient route between the universe of manufacturers and the universe of suppliers is not a direct line but a neutral, trusted information exchange. The exchange should include a consistent set of baseline questions with a limited number of responses that can be used to address a variety of specific information requests. This information can then be collected, retrieved and distributed from a secure, centrally located, trusted place.
Pioneering information exchanges include Fair Factories Clearinghouse and Supplier Ethical Data Exchange (Sedex). Such information-sharing communities may focus variously on certain aspects of sustainability, or on specific industries. Manufacturers can use information clearinghouses to check safety data, examine properties and performance characteristics, search for materials that meet certain specifications, verify certifications, and even get starter formulas, white papers and third-party research.
This information aggregation enables the kind of preventative intelligence that can keep manufacturers from ending up in the headlines for all the wrong reasons. Longer term, it streamlines product development, letting engineers focus on innovation while simultaneously creating healthier, safer, more sustainable products.
The amount and granularity of available data will continue to build. Manufacturers need customizable views that will filter out unproductive noise and enable smarter supply chain decisions. Better to have the intelligence to know about a given issue now, rather than learning a difficult lesson later.
Such views can be obtained from a comprehensive decision-support platform that lets manufacturers apply customized parameters to data collection across the supplier universe, and then analyze and evaluate the results. Filters might include regulatory requirements and specific sustainability attributes.
Supply Chain Sustainability Best Practices
To build a sustainable supply chain, manufacturers can only pick the best suppliers when they are available. For some materials, there may not be any truly sustainable options right now.
Supply chain sustainability is a goal achieved through a process of continuous improvement. We must start and work together toward this goal. Some best practices include the following:
- Start with intelligence, choosing a neutral, trusted source of aggregated supplier information.
- Turn data into decision-making information, with a customizable decision-support platform.
- Use preventative intelligence to eliminate the worst suppliers.
- Select the best suppliers, factoring in their sustainability potential.
- Build sustainability improvement requirements and incentives into supplier contracts.
- Monitor sustainability performance, eliminating non-compliant suppliers and rewarding the best achievements.
Simply put, sustainable products start with sustainable supply chains. Most suppliers lag well behind the sustainability curve, so manufacturers must proactively implement their sustainability initiatives upstream. The starting point is “intelligent” information they can trust that enables them to make highly informed supply chain decisions.
Sara A. Greenstein is the president of UL Supply Chain & Sustainability.