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  1. Analysis
October 25, 2010

The just-food management briefing – how to green your supply chain – part IV

Devising and implementing sustainable programmes is one thing; measuring their progress is quite another. The fourth and final part of the just-food management briefing assesses how industry can track any advances it is making.

Devising and implementing sustainable programmes is one thing; measuring their progress is quite another. The fourth and final part of the just-food management briefing assesses how industry can track any advances it is making.

Measuring progress and the challenge ahead

As research into eco labelling for food has found, finding standardised measurable and comparable criteria for environmental impacts in complex food supply chains is a significant challenge. It also presents a challenge for companies as they seek to measure impacts along supply chains, rate products’ comparative environmental credentials and track the progress industry is making.

Measuring supply chain sustainability 

Looking again at the impact areas outlined in the Defra labelling research, the challenges in setting standards are clear. The interim findings of that research point out that the way impacts are measured and communicated may vary from area to area. For air and water quality there are plenty of potential indicators, such as the concentration of particular pollutants, but the research concludes that it is not obvious how best to combine these into a measure that relates to what people understand by ‘quality’.

The effort invested in tackling climate change means that relevant indicators, such as GHG emissions, are comparatively well developed but along a complex supply chain there are so many sources of emissions. The debate comes in deciding which sources of emissions should be included. Other sustainability measures are far more subjective, the study points out, such as landscape impacts. 

Company initiatives

Leading UK food retailer Tesco announced this year that it would broaden its climate change strategy to focus on reducing emissions in its supply chain by 30% by 2020. The retailer described this as a major task which will require “strong collaboration” with its suppliers, including sustainable sourcing of raw materials.

Carbon emissions in supply chains are also a key focus for US food giant ConAgra Foods which joined the Carbon Disclosure Project’s Supply Chain Leadership Council last year. The Leadership Council specifically fosters the extension of greenhouse gas emissions accounting and disclosure practices, emissions reduction targets and the formulation of a climate change strategy to its members’ multinational supply chain networks. 

In 2009 and 2010, ConAgra said it requested more than 70 of its top suppliers and contract manufacturers to disclose information related to their own GHG management programmes to the Carbon Disclosure Project. Approximately half of these suppliers voluntarily participated, ConAgra said.

US retail giant Wal-Mart Stores, whose supply chain extends to some 100,000 suppliers, was the first corporation to work with CDP to establish an emissions strategy for its entire supply chain.

Wal-Mart has subsequently launched its Sustainable Product Index. As part of that initiative, the company has established a Sustainability Consortium, comprising academics, suppliers, NGO representatives and retailers, which the company says will develop the science behind the Index.

For Wal-Mart’s suppliers, the first stage has been to respond to its Supplier Sustainability Assessment. The company distributed a Supplier Sustainability Assessment to its suppliers just after the index was first announced in July 2009. The assessment asked suppliers 15 questions on four areas, including energy and climate, natural resources, material efficiency, and people and community.

The company says that it will use the information gained from this assessment to identify suppliers which are “instrumental to our sustainability progress”, as well as those who need greater support in building a more sustainable business. 

Looking ahead

The scale of the challenge facing companies as they look to extend sustainable practices from their own operations into extended supply chains is underlined by a statistic in the Unilever sustainability report. The Anglo-Dutch conglomerate estimates that energy use, one of its 11 indicators that make up its approach to sustainable agriculture, is ten times greater in its supply chains than in its manufacturing operations. The challenge becomes greater the further along complex supply chains companies attempt to extend their sustainability efforts, with the eventual aim of extending the process to take in every raw material.

Nevertheless, the benefits on offer for companies addressing this challenge, and the potential penalties of not doing enough, are clear.

As the UN Global Compact guidance on supply chain sustainability points out, public scrutiny of business behaviour has resulted in the expectation that companies are responsible for the environmental, social and governance (ESG) practices of their suppliers. Failure to address suppliers’ ESG performance, the guidance continues, can give rise to significant operational and reputational risks. As a result, a company’s overall commitment to corporate citizenship can be seriously discredited if low standards of business conduct are found to persist in their supply chain.

The guidance also warns companies on the impact of driving down price. Downward pressure on cost and efficiency can force suppliers to contravene some of their own ESG standards in order to meet their buyers’ commercial requirements, the guidance states, continuing: “Today, successful supply chain managers must increasingly think beyond short-term financial considerations to building relationships that can deliver long-term value along the entire supply chain.”

On the other hand, companies can use their purchasing power to help instill good ESG practices in small and medium-sized companies across the developing world. Moreover, it can deliver a range of business benefits. The guidance summarises those business benefits of incorporating environmental, social and governance considerations into supply chain management as follows:

Risks are better anticipated and managed (risk is spread out across different players) 

Reduced operational risks such as disruption to supply, increased cost and lack of access to key raw materials 

 “Informal” or “social” licence to operate within communities, legal systems and governments that otherwise might be antagonistic 

Reduced costs and enhanced efficiency and productivity 

Improved working conditions can reduce turnover and improve quality and reliability 

Environmental responsibility improves efficiency and profitability 

Corporate brand and values, and customer and consumer confidence and loyalty are protected and enhanced 

Process and product innovation. Empowered suppliers uncover opportunities for developing sustainable products and services 

Examples from leading companies show that good supply chain management can increase shareholder value

For parts I, II and III of this just-food management briefing, click here.

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