Why a sustainable supply chain is good business

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Sidebar 1 | Nestlé RISE-ing: Engaging with suppliers to share sustainability best practices
Driven by a desire to gain a better knowledge and understanding of its “farm to fork” supply chain, Nestlé, the Switzerland-based global food company, has developed a procurement procedure that has helped deepen relationships with suppliers on issues ranging from water management and nutrition, right through to using sustainable procurement for rural development.

The Nestlé Supplier Code covers all of the company’s suppliers, worldwide and forms an integral part of all purchase orders and supply contracts across every market and business, including the supply of agricultural raw materials—a critical area of any food company’s supply chain. By applying the code, Nestlé has encouraged best practices in sourcing and has thus helped ensure the long-term supply of safe, quality-assured and regulatory-compliant agricultural materials for its business.

In the dairy sector, for instance, the company has worked with the Swiss College of Agriculture to help develop the Response-Inducing Sustainability Evaluation (RISE), which assesses sustainability holistically across multiple ecological, economic and social dimensions, including energy consumption. The evaluation is based on data collected at the farm level, using a comprehensive questionnaire. Ten key, computer-generated indicators identify potential strengths and weaknesses with regard to sustainability, and Nestlé discusses intervention points for improvement with the farmers themselves.

RISE has not only helped identify opportunities to reduce greenhouse-gas emissions. By simultaneously providing assessment analysis feedback to farmers as the data is collected, the company also stimulates other improvements. Indeed, Nestlé’s engagement with its farmers has helped them innovate to enhance the quality of their own lives—just the sort of mutually beneficial outcome that is key to success in the quest for a truly sustainable supply chain.

In China, for example, the company’s specialists have trained farmers to handle and store animal manure safely by using biogas digesters, or waste management solutions that trap methane as it is produced. The technology clearly helps reduce greenhouse-gas emissions—but it also makes methane readily available for cooking or even for electricity generation in farming communities.

Thanks to education and outreach programs that have stimulated demand, this technology has been replicated in other countries whose farmers supply Nestlé—Indonesia and Mexico among them. In Mexico, for example, 16 industrial biogas digesters have been built in regions that provide more than 35 percent of the milk bought by Nestlé Mexico.

Sidebar 2 | Collaborating for better information management
Learning from others by sharing information can help any organization. And when it comes to developing a sustainable supply chain, such a strategy can be critical—especially as research shows that companies still struggle to persuade their suppliers that sustainability makes sound business sense.

Many companies are joining forces with their suppliers in a variety of information management initiatives designed to encourage collaboration and the effective exchange of relevant sustainability information. As a result, the participating parties are not only eliminating redundancy—multiple stakeholders requesting the same information—reducing costs and managing risk better. Suppliers are also gaining strategic advantages—preferred vendor status among them.

Take, for example, the Carbon Disclosure Project supply chain program, an initiative launched in 2007 as part of the independent, nonprofit CDP’s program to collect data on corporate greenhouse-gas emissions. The project provides a global process for disclosing carbon emissions along the supply chain by enabling its 50 members to engage better with suppliers on the measurement and management of their emissions. Among the participants is Anglo-Dutch consumer packaged goods giant Reckitt Benckiser, which in 2012 exceeded its goal of reducing carbon emissions by 20 percent—by a full percentage point and eight years ahead of time.

Meanwhile, the Supplier Ethical Data Exchange, known as Sedex, provides the secure exchange of sustainability information for more than 25,000 suppliers and their customers worldwide via an online database that allows members to store, share and report on sustainability information, including self-assessed and third-party social audit results.

And Paris-based EcoVadis is used by several thousand global companies to assess the environmental and social performance of their suppliers by using simple and reliable suppliers’ scorecards, covering 150 purchasing categories and 21 corporate social responsibility criteria.

Some of these exchange platforms are industry-specific. The New York-based Fair Factories Clearinghouse, for example, provides its members with the technology to share ideas about how to improve conditions in their plants and factories globally. It was set up in the United States by the National Retail Federation, and Reebok International in particular, as well as the Retail Council of Canada and World Monitors, a New York-based consulting group committed to aligning business practices with human rights.

Brussels-based COCIR, meanwhile, brings together the constituent companies of Europe’s healthcare IT, electromedical and radiological industry, and helps them develop responses to evolving sustainability standards. Case in point: The European Commission’s Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) directive, which came into force in 2007 and aims to minimize the risk chemicals pose to human health and the environment.

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