Supply Sustainability Roadmap

Do the Right Things

A Roadmap to Supply Chain Sustainability

Agenda

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What Is Sustainability?

Why Pursue Sustainability?

Sustainability and Profitability

Why Extend to Suppliers?

The Supply Chain Sustainability Roadmap

Information Resources

What is Sustainability?

• Balancing short and long term interests

• The “Triple Bottom Line”

– Social

– Environment

– Economic

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“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” - Brundtland Commission

Sustainability programs seek to establish and maintain priorities for social and environmental impacts on par with economic or financial performance

What Is Sustainability? • Social

– Human Rights – Labor Practices – Fair Operating Practices – Consumer Issues – Community Involvement and

Development

• Environment – Regulatory Compliance – Pollution Prevention

• Greenhouse Gas Emissions • Waste Generation • Incident Prevention &

Mitigation

– Biodiversity

• Economic – Profitability – Financial Risk Management – Sustainable Resource Use

“Natural Capital” • Water Usage • Energy usage • Raw Materials

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Diagram by: Johann Dréo

Also described at People, Planet and Profit

What is Sustainability?

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Upstream (Supply)

Suppliers & Distributors

Contract Manufacturers

Inbound Transportation

Raw Materials – selection and utilization

Supplier operations

Freight optimization

Internal (Production)

Manufacturing/Assembly

Warehousing

Facilities & Equipment

Employees

Energy Efficiency

Pollution Prevention

Waste Reduction

Downstream (Sales)

Customers

Outbound Distribution

Product/Customer Support

Product Usage and Lifecycle

Reverse Logistics

Re-use, Recycling & Disposal

Supply Chain Scope

Sustain-ability

Impacts

This presentation focuses on the upstream segment with emphasis on environmental aspects

Agenda

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Why Pursue Sustainability? It’s the right thing to do for the environment • Scientific data shows a strong historical relation between GHG levels & surface temperatures • As the global economy grows, especially in developing countries, CO2 emissions grow rapidly • CO2 levels are already believed to be the highest in 450,000 years • Scientists anticipate rising:

– Surface temperatures - as much as 3.6 ⁰C (6.5 ⁰ F) global average – Sea levels – Extreme weather episodes

• Even if you are unsure about the science, consider the potential impacts

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“No-one can predict the consequences of climate change with complete certainty; but we now know enough to understand the risks... Our actions over the coming few decades could create risks of major disruption to economic and social activity” – Sir Nicholas Stern, “Review on

the Economics of Climate Change”

Source: NOAA “Keeling Curve”

High in previous warm periods was

300 ppm

Why Pursue Sustainability? Perception is important • U.S. news stories about major weather events frequently include commentary

about global warming or climate change • It’s no wonder, since according to a September 2012 study by Yale and George

Mason University…

and

• Therefore, it’s understandable that a March 2012 Accenture survey of 250 global

executives finds:

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“A large and growing majority of Americans (74%, up 5 points since our last national survey in March 2012) say ‘global warming is affecting weather in the United States’.”

“Americans increasingly say weather in the U.S. has been getting worse over the past several years (61%, up 9 percentage points since March).”

“Just over half think that customers are not currently demanding sustainable products as much as they will in the future” and “over a third say they can’t keep up with demand for sustainable products”


It’s the right thing to do for your business

• Improve company image/branding – Customer loyalty – Community support – Attract and retain top talent

• Accelerate product and process innovation

• Meet customer requirements

– Consumer demands for sustainable products – “Trickle down” requirements - large, visible companies pushing requirements upstream

• Reduce likelihood or impact of new regulatory requirements

– Sustainability leader status may provide opportunities to influence regulations – Better preparation for compliance under a controlled, lower cost implementation effort

• Increase competitiveness and profitability - many sustainability initiatives also improve

efficiency and reduce costs

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“getting an A-plus from the Global Reporting Initiative, the only company in our sector, being ranked the No. 3 greenest company in America by Newsweek, being the only telecom company selected

to the Dow Jones Sustainability Index -- these are the kinds of things we try to assign a brand value to.” – Dan Hesse, Sprint CEO

“I’m proud to announce a series of steps and commitments that will make Walmart’s supply chain, in the United States, here in

China, and around the world, more sustainable,” Mike Duke, President and

CEO, Wal-Mart Stores, Inc.

“GE’s healthymagination and ecomagination strategies are aimed at developing and highlighting new

solutions; this thinking is extending throughout our product development pipeline.” –

www.gecitizenship.com

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Agenda

Sustainability and Profitability • Financial viability is a critical element to make sustainability

programs sustainable themselves

• If done well, business and sustainability gains go hand in hand

• According to MIT Sloan Management Review in their 2012 research report “Sustainability Nears a Tipping Point”: – 67% say sustainability related strategies are necessary to be

competitive

– 31% say that sustainability-related actions and decisions added to their profitability (the “Harvesters”)

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“Harvesters are looking at sustainability as a source of innovation, increased market share and improved profitability.” - MIT SMR

Sustainability and Profitability Dual Gains are Achievable

• Walmart announced it will add $150 million to it’s bottom line in FY13 due to sustainability initiatives, additive to $231 million saved in FY12

• GE’s ecomagination program

is generating major revenues

through product innovation

• The Container Store cut transportation costs by 20% on average, reduced fuel surcharges by half and carbon footprint by 40% by switching from truck to rail – Wall Street Journal article

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With 34 new products and services generating $21 billion –ecomagination revenue continues to grow at twice the

rate of total company revenues.

Agenda

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• Increase leverage for greater environmental benefits – Multiply your beneficial impacts

• Business gains can be realized through better management – Collaboration with suppliers to accelerate product innovation – Focus and discipline yield direct and indirect benefits - similar to

quality management – Product lifecycle improvements increase reliability and reduce costs – Supplier efficiency gains may yield cost reductions

• Win * Win * Win – suppliers, your company and the environment

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“If you’re going to focus your strategy on carbon reduction or environmental impact or social impact you need to engage your

suppliers. Without them you cannot succeed.” - Edgar Blanco , MIT Sloan

“We want to stimulate innovation over the whole lifecycle of our products. And clearly, if our suppliers can bring innovation into the supply chain, that will help us on a lifecycle basis improve

the performance of our products.” – Peter White, Proctor & Gamble

Agenda

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• The Critical Foundation

• Planning and Strategy

• Supply Implementation Framework



The Critical Foundation Practicing Sustainability

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Senior Management Commitment/

Promotion

Impact Assessment

(Scopes 1 & 2)

Business Case

Measurement & Trending

Goals and Initiatives

Initial Impact Reduction

Environmental Management

System

Public Reporting &

Goals ISO 14001

Product Lifecycle Analysis

Design for Sustainability

Sustainability Leadership

Significant Impact

Reduction

A solid internal sustainability program is essential for: 1) Credibility to encourage and influence supplier sustainability

2) Readiness to assess & support supplier-initiated changes

Sugg

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The Critical Foundation Why is the Business Case Important?

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Identify all costs and benefits

• Necessary to get and keep support for the program effort and costs

Guide areas of focus

• Product innovation, market share, brand image, cost reduction, risk mitigation, compliance

Drive value capture

• “Companies realizing profits from sustainability activites are three times more likely to have a business case than others” – MIT SMR

Executive Leadership

Committed People

Capable Processes

Goals & Objectives

Resource Allocation

Measurement & Review

Corrective Action /

Continuous Improvement

Individual Improvements Are Valuable…

But it takes a systematic approach to optimize and maintain performance

Planning & Strategy

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Individual Initiatives

Sustainable Change

Planning & Strategy

Confirm status of internal program and assess supply base

Understand your intended scope and leverage

Decide what you expect suppliers to do

Update the business case

Decide how hard you will push

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Supply Implementation Framework

Phase 1

Getting Started

Phase 2

Progress

Phase 3

Maturity

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Focus=Supplier Communication, Engagement &Initiative Kickoff

Organization=Single Coordinator or Small Team

Approach=Promotional Supplier Participation=Voluntary

Key Developments= Program Documentation, Investigation &

Learning, Initial Successes

Focus=Information & Org/Process Development

Organization=Business Unit Staffing Approach=Persistence

Supplier Participation=Necessary Key Developments=Expansion, Refinement,

Growing Benefits

Focus=Institutionalization & Leadership Organization=Chief Sustainability Officer

Approach=Sourcing Impacts Supplier Participation=Required

Key Developments=Organization, Integration, Performance Leadership

Internal Sustainability Foundation

Conclusions

You don’t have to be a huge international corporation

• Smaller organizations can have significant impact by leveraging the supply chain

Progress is feasible without committing major resources

• You don’t have to take on the whole challenge at once

You can and should get started

• Then decide how fast and how far to progress

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References • World Resources Institute – www.wri.org • Global Reporting Initiative – www.globalreporting.org • United Nations Global Compact - www.unglobalcompact.org • US EPA - www.epa.gov/sustainability • GHG Protocol – www.ghgprotocol.org • International Standards Organization – www.iso.org (26000 & 14000 standards) • National Oceanic and Atmospheric Administration – www.noaa.gov, www.climate.gov • Iternational Panel on Climate Change – www.ipcc.ch • International Energy Agency - www.iea.org • MIT Sloan Management Review – “Sustainability Nears a Tipping Point” sloanreview.mit.edu/reports/sustainability • Dow Jones Sustainability Index - www.sustainability-index.com • Carbon Disclosure Project - www.cdproject.net • The Climate Registry - www.theclimateregistry.org • World Business Council for Sustainable Development - www.wbcsd.org • C2ES Center for Climate and Energy Solutions (former Pew Center on Global Climate Change) - www.c2es.org • The Sustainability Consortium - www.sustainabilityconsortium.org • Green Suppliers Network - www.greensuppliers.gov • “Long-Term Growth, Short-Term Differentiation and Profits from Sustainable Products and Services” – March 2012,

Accenture • “Extreme weather and climate change in the american mind” – September 2012, Yale Project on Climate Change

Communication & George Mason University Center for Climate Change Communication

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Contact Us For More Information

Supply Chain Consulting

Assess – Decide - Deliver

www.transcelerate.com

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This presentation is based on a TransCelerate project to develop a supply sustainability program roadmap for a nationally recognized

sustainability leader and Climate Leadership Award winner

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