For most retailers, the sustainability journey begins on the operations side of the business – with a focus on what they can directly control - the environmental footprint of stores, distribution centers, and logistics – and covering a range of eco-efficiency issues including energy, waste and water. And this makes perfect sense as the place to start. However, for most retailers the footprint of their operations is a relatively small slice of the overall footprint – 10-20 percent. The lion’s share of the impact of retail is in what goes on the shelf – the products and the impacts along the supply chain of extracting or harvesting raw materials, processing and manufacturing, transport and packaging, and consumer use and end of life. And having an impact on that 80-90% of the retail footprint very quickly demands collaboration with suppliers to understand impacts all along the value chain and to identify and pursue innovation opportunities to reduce that footprint.
In working with a number of retailers in this kind of innovation, we find a set of practices that are the ‘building blocks’ of supplier engagement for product and supply chain sustainability:
Strategy: Understanding overall risks and opportunities in the supply chain and prioritizing areas for action, setting goals and making commitments for improvement and innovation.
Factory Audits: Assessments of environmental and social performance at the facility level in the supply chain to highlight conformance to standards and/or performance relative to peers.
Purchasing/Sourcing Policies: Integrating sustainability criteria into product specifications and sourcing practices to drive sustainable sourcing. Example: Whole Foods’ animal welfare ratings.
Footprinting: A variety of techniques that take a high-level life-cycle approach to products and help identify product sustainability ‘hot spots’ where disproportionate impacts indicate areas ripe for innovation.
Supplier Scorecarding: Establishing standard measures of sustainability performance at the company level for suppliers, often in the same areas where the retailer has focused in its operations (e.g., energy, waste, water). These sustainability metrics are often integrated into existing supplier scorecards on financial, quality, and operational performance. Example: Walmart’s Supplier Sustainability Assessment.
Innovation Projects: Focused initiatives, in collaboration with one or more suppliers, that drive improvement against a particular sustainability outcome. Example: collaborative programs to improve energy efficiency in supplier factories.
Merchant Engagement: Mobilizing buyers and other merchandising professionals through education, metrics, and incentives related to sustainability issues in product design and manufacture, and supporting productive dialogue between merchants and suppliers around innovation opportunities. Example: Nike’s Considered Design program.
Consumer Engagement: Creating demand for more sustainable products through communication, education, and interaction with consumers through a variety of channels, and using consumer feedback to drive innovation with suppliers. Example: Patagonia’s Footprint Chronicles.
Industry Collaboration: Joining with supply chain partners and often with competitors to address systemic sustainability challenges that individual companies can’t address on their own. Example: The Better Cotton Initiative, or the Sustainable Apparel Coalition.
Retailers asking what their next step should be in supplier collaboration can usually find answers in these building blocks. With the right strategic perspective, these building blocks can create a roadmap that charts a journey from compliance and risk mitigation to innovation and value creation. And If managed as part of a cohesive approach to supply chain sustainability, they can unlock substantial value for both retailers and their suppliers.
-----
By John Whalen and Glen Low
Reposted from the RILA Report: Sustainability - Volume 4, Issue 5
