Measurements and standards put supply chains in the spotlight
In the last installment of this department, I discussed the increasing importance businesses are placing on addressing sustainability and how identifying and eliminating waste should be recognized as the number-one sustainability objective for supply chains. Now, we will consider the importance of measurements, collaboration, and the most recent trends in this area.
According to the Carbon Disclosure Project 2011 “Global 500 Report,” low carbon growth is widely accepted as fundamental to generating long-term shareholder value, helping to avoid dangerous climate change, and assisting the global economy with its recovery. In its ninth year, the “Global 500 Report” provides hard data and thorough analysis of 500 of the world’s largest companies and their internal efforts to reduce greenhouse gas emissions and curb climate change. The account establishes a clear link between those efforts and increased returns on shareholder investment.
The investment community today is focusing on not only growth potential and performance, but also a company’s effectiveness at managing risks, such as regulatory compliance, dependence on resources, and reputation. It’s clear that, while most businesses today comply with existing regulations, they’re still struggling to get ahead of what they anticipate will be tighter regulations in the future.
Guaranteeing access to critical resources also is a major risk. Imagine, for example, what it would be like for companies such as PepsiCo and Coca- Cola to be without access to adequate supplies of water. It’s no wonder that the issue tops their corporate agendas. The same logic applies to rare earths, a group of 17 chemical elements that are essential components of new technologies, such as wind turbine generators, electric car motors, and fuel cells. Most of these elements are found only in China. Thus, businesses in other countries depend on China’s willingness to export them.
In light of the exponential growth in social networking, organizations also are acutely aware of the potential damage to their reputations that can result from the failure to meet environmental responsibilities. Consumers now have the tools they need to punish brands quickly. As a result, business leaders understand that, to be successful, it’s necessary to walk the sustainability talk.
In this context, company decision makers increasingly are awakening to the important role measurements play in operating more sustainably and profitably. The website corporateregister.com has been tracking the number of corporate responsibility reports issued worldwide since 1992. In the first year, that number was just 26; by 2010, it had climbed to 5,722. The quality of the reports also improved in terms of measures being reported. Today, typically, the data cited in the reports are validated by independent third-party auditors, as well.
New and better metrics associated with the total life cycle of products—from raw materials to disposition—will force collaboration among companies. The corporate supply chain, or Scope 3, standard enables companies to assess the impact of their entire supply chain emissions and to identify the most effective ways to reduce those emissions. In other words, Scope 3 measures a much broader range of activities than those covered by other standards. From the supply chain perspective, this opens up a wide array of opportunities, as it brings focus to the task of minimizing waste in suppliers’ operations, as well as its own.
Supply chain professionals have a chance to play a key role in this process by enhancing efficiencies and reducing waste. While that’s what supply chains customarily do, the efforts will be more visible than ever before and, as a result, will receive greater support from every level in the organization.
Antonio Galvao, CSCP, is vice president supply chain—global I&L at Diversey, now part of Sealed Air. He may be contacted at email@example.com.