Sustainability Delivered

Madeleine Pullman

• Publisher: Business Expert Press
• Year: 2012
• Print ISBN: 9781606493182
• eBook ISBN: 9781606493199
• Topic: Betriebswirtschaft
• Subtopic: Operations

If you are a supply chain manager, an executive, an entrepreneur, or a stakeholder in a sustainable business, this book will help you develop the awareness and skills needed to support sustainable supply chain management in your firm. The authors introduce the many ways that social and environmental responsibility can be integrated into supply chain management, from sustainable product and process design to programs and techniques that support product end-of-life management. The book begins with a discussion of sustainability and business strategy. It then explores product and process design, sustainable purchasing and logistics, and product end-of-life management topics. The authors include real-world examples and cases from some of the world's leading companies in sustainable supply chain management. The examples range from small local companies to large multinational players to give a broad range of ideas to the reader. With case examples, workshops, and step-by-step instructions on how to create a sustainable supply chain, Sustainability Delivered is the most practical and usable book on the market that will help you and other business leaders to authentically pursue and deliver on sustainability ideals

CHAPTER 4

Sustainable Purchasing and Logistics

With globalization, companies are increasingly seeking the parts, products, and services they need from suppliers located worldwide. For example, China accounted for more than 20% of global manufacturing in 2010, with exports valued at $1.7 trillion.1 Because most supply chains are now international in scope, supply chain managers often cope with cultural, language, and political differences, and face increased administrative and legal complexity. The lengthening of companies’ supply chains also means that today, purchasing and logistics activities frequently have the greatest impact on the sustainability profile of a firm.

For example, Wal-Mart estimates that 90% of its greenhouse gas emissions come not from its own operations, but instead from the 120,000 companies that comprise its supply chain.2 For companies that purchase and resell products and services, versus manufacturing or delivering services themselves, supply chain and consumer emissions can be as much as ten times their direct, or in-house, emissions. Moreover, longer supply chains complicate transparency. This means it is more difficult to ensure social integrity and responsibility in the supply chain, in addition to environmental practices. Thus, while many firms feel like they have a good grasp on their internal sustainability issues, monitoring and managing purchasing and logistics is equally critical.

In this chapter, we assess how a firm can move its supply chain in a more sustainable direction by making changes to its purchasing and logistics activities. We first address sustainable purchasing, explaining the concept of a supplier code of conduct. We then look at common certification programs, which help align suppliers with these codes of conduct. We examine the supplier selection process, and discuss the monitoring and auditing of suppliers. We conclude with a discussion of sustainable logistics, addressing ways to minimize resources and environmental impacts during the transportation process.

Sustainable Purchasing

In recent years, a best practices model for sustainable purchasing has emerged. This model, illustrated in Figure 4.1, has four stages of work. In the first stage, meaningful standards about supplier practices and behavior are developed. In the second stage, suppliers are selected and methods to measure and verify supplier practices and behavior are vetted. Third, implementation commences and compliance with the metrics established in stage two is monitored. Finally, the success of the supply chain is evaluated and the supply chain is improved, as needed. This final step is iterative in nature, focused on continuous improvement.3 All of these steps are detailed below.

Figure 4.1. Best practices model for sustainable purchasing.

Step One: Develop Meaningful Expectations for Suppliers

Step one, the starting point for sustainable purchasing, focuses on deciding what is important to a firm and its stakeholders with regard to sustainability. Many of the issues chosen will flow naturally from the firm’s sustainability or corporate strategy. These issues will eventually evolve into a set of standards, or a code of conduct for suppliers.

Environmental standards may dominate a company’s code of conduct if it uses sensitive resources or creates significant byproducts during manufacturing and supply chain processes. Likewise, socially responsible purchasing standards may dominate a procurer’s code if labor issues are most salient; for example, production is dependent on labor in the developing world. For example, companies like Nike and Nestlé, who faced negative media attention and consumer backlash in the past about labor issues, have adopted codes that emphasize labor concerns. Nestlé’s code of conduct for suppliers is shown in the side bar, for illustration purposes.

Nestlé Code of Supplier Conduct: Labour Standard

Prison and forced labour

The Supplier must under no circumstances use or in any other way benefit from forced or compulsory labour. Likewise, the use of labour under any form of indentured servitude is prohibited, as is the use of physical punishment, confinement, threats of violence or other forms of harassment or abuse as a method of discipline or control. The Supplier shall not utilize factories or production facilities that force work to be performed by unpaid or indentured labourers, nor shall the Supplier contract for the manufacture of products with subcontractors that engage in such practices or utilize such facilities. Where a Supplier is using labourers who are in an official prison rehabilitation scheme, such an arrangement is not considered a breach of the Code.

Child labour

The use of child labour by the Supplier is strictly prohibited. Child labour refers to work that is mentally, physically, socially, or morally dangerous or harmful for children, or improperly interferes with their schooling needs.

Working hours

The Supplier must ensure that its employees work in compliance with all applicable laws and mandatory industry standards pertaining to the number of hours and days worked. In the event of conflict between a statute and a mandatory industry standard, the Supplier must comply with the one taking precedence under national law.

Compensation

The Supplier’s employees must be provided with wages and benefits that comply with applicable laws and binding collective agreements, including those pertaining to overtime work and other premium pay arrangements.

Nondiscrimination

The Supplier shall not discriminate in hiring and employment practices on the grounds of criteria such as of race, colour, religion, sex, age, physical ability, national origin, or sexual orientation.

Freedom of association and collective bargaining

Unless prevented by governmental policies or norms, Suppliers should grant their employees the right to Freedom of Association and Collective Bargaining.

Source: Nestlé (2010).

To ascertain the most salient environmental and social concerns that should be present in a company’s code of conduct, the company should assign an individual or team the task of answering the questions below. Note that these questions may also have been asked during recent strategic planning sessions that focused on sustainability; if so, the information gathered during that process may be of value in answering these questions.

• What are the relevant issues for our industry?
• Who are the experts on the different issues that could assist in standards development?
• Who are the suppliers that should be engaged in the process?
• What are the location-specific issues for our suppliers?
• What are the new issues cropping up for those suppliers?
• How relevant are those issues to our company?

Often, identifying sustainability concerns is not difficult to do, although crafting ways to authentically address those concerns may be complicated. For example, two recent explosions at Apple supplier factories in China have been widely reported in the media, and make clear that company’s need to address issues related to worker safety; four workers were killed, and 77 were injured in these explosions due to inadequate ventilation of aluminum dust created during iPad polishing operations. While the explosions occurred at two different suppliers, one of these, Foxconn, had already been cited by critics as due to poor working conditions, in part because of recent worker suicides. In response to public criticism that Apple was inadequately addressing its most salient sustainability concerns—social issues—the company recently asked a third party reviewer, the Fair Labor Association, to audit several of its supplier factories in China. These audits are currently ongoing, however if significant issues are found and Apple takes a strong position on the problem, it could set a new social standard for the consumer electronics industry.4

As a company begins the process of identifying its most salient sustainability concerns, stakeholders should be engaged. Stakeholders can include consumer groups, NGOs, and current or potential suppliers who will eventually need to comply with the standards. If stakeholders are engaged from the beginning, they will tend to be more open to complying with any standards developed that are outside of their normal scope, rather than looking at these standards as obstacles. In addition, this multi-stakeholder method for developing standards creates an opportunity to address culturally sensitive issues, so that involved parties have a greater understanding of one another’s perspectives; encourages the setting of reasonable targets, which further enhances buy in from affected parties; reduces barriers to implementation; and improves the overall sustainability of the supply chain...

Table of contents

• Cover
• Sustainability Delivered
• Chapter 01: Sustainable Supply Chain Management
• Chapter 02: Planning for Sustainability in the Supply Chain
• Chapter 03: Sustainable Product and Process Design
• Chapter 04: Sustainable Purchasing and Logistics
• Chapter 05: Sustainable Product End-of-Life Management
• Chapter 06: Emerging Trends
• List of Acronyms
• Glossary
• Notes
• References
• Index
• Last page of book
• Back Cover