Each and every business is different. Their structures are different as are their brand positioning, products and services and personnel, to name but a few.
Even organisations that appear to be very similar (I’m thinking large banks, councils, schools etc.) can behave quite differently once you get behind the closed doors. And one large way that organisations differ is in their management of procurement and supply chain. Whether organisations managed their supply chains in a sustainable way, was the subject of a national study in 2014.
‘The Sustainability and Supply Chain Divide: insights into the gaps, challenges and opportunities for Australian companies’ was undertaken to shed light on how ‘green’ supply chains are in Australia. This research was funded by the NSW Office of Environment and Heritage and used a randomly selected set of companies across a broad spectrum of industries. The in-depth interviews with sustainability managers and procurement/supply chain managers clearly highlighted that often sustainability was low on their priority list for many.
The research also clearly identified that there were four distinct categories of organisations when it came to sustainable supply chain management. The four distinct groups of organisations that emerged were:
Walking the talk: those committed to best practice sustainable supply chains and often first-movers in an product or industry category – who also used this attribute to differentiate themselves in the market
Stalking the Walkers: the classic ‘follow the leader’ organisation that follows the ‘Walkers’ in their industry.
Chalking up the wins: those on the path picking off specific ad hoc projects.
Talking the talk: the laggards.
This week, in Part 1 we will look at the first two.
- Walking the talk
“We are a sustainable business, not just a brand.” Sustainability Supply Chain Manager
Organisations that ‘walk the talk’ have been addressing sustainability within their supply chains for a number of years and encompass a range of commonalities.
First and foremost, they are likely to be part of an international supply chain that has driven the initial change, or part of an international company that is recognised for its sustainability performance; sustainability is their competitive edge. They are more likely to be a company that has limited exposure to international manufacturing practices (with property development being the exception), or a product manufacturer that is viewed as a global sustainable organisation and brand, with a fully integrated sustainable philosophy across the organisation and supply chain. They are also more than likely to be a first-mover in their product category or industry.
Critical to the ‘Walkers’ success, is that they are likely to have a sustainable supply chain specialist working within the procurement team who also has a line connection to the sustainability manager. This was the practice in a number of high profile, internationally recognised sustainable companies. The sustainability manager and the sustainable supply chain specialist were more likely to be part of the executive team themselves. Having a sustainable supply chain specialist working within the team enables collaboration and cooperation among teams and ensures a focus on sustainability is part of the overall decision-making process. This group is also likely to have high levels of engagement and may assist in the up-skilling of their suppliers.
These organisations are likely to have sophisticated systems in place including: automated and efficient data collection practices; stringent codes of conducts, policies and assessment practices; and sustainability integrated into internal procurement practices. And they more than likely feature on international sustainability best-practice lists, such as Global Reporting Initiative (GRI) or Dow Jones Sustainability Indices.
They are also likely to conduct audits within Australia and internationally plus international desktop validation, and comply with an international or national ‘best practice’ voluntary environmental accreditation scheme such as Green Star, LEED or BREEAM.
“For us to remain in the property sector, all of our jobs need to comply with Green Star and LEED accreditation – that affords us total control over our suppliers and their behaviour,” said one sustainability manager from the building sector.
These reporting schemes and accreditation systems have successfully driven behaviour change and transparency down to all levels of the supply chain. Supply chain partners understand that non-compliance may mean no further business relationship. These companies have moved beyond sustainability compliance, risk management and there is evidence that they see a sustainable supply chain as a competitive advantage and, in very rare cases, a philosophical approach to business.
Most ‘Walkers’ interviewed were able to identify other ‘Walkers’ by their profile, awards received and reputation. Very few organisations are able to articulate their philosophy as well as Patagonia. In ‘The Responsible Company, Patagonia’s founder, Yvon Chouinard, writes: “what is done in our name must not remain invisible to us. We are responsible for all the workers who make our goods and services for all that goes into a piece of clothing that bears a Patagonia label.”
2. Stalking the Walkers
“We see what requirements are being made of the suppliers by our competitors and we pretty much follow that. It’s almost like we are improving the standards via some self-regulation and process improvement driven by competition.” Sustainability Manager
These organisations implement the classic ‘follow the leader’ strategy. They see what the market leaders do and do that. They may also purchase from the same pool of suppliers and then implement (or slightly modify) the supply chain requirements of the ‘Walkers’.
These organisations may not be first-movers but are still recognised as implementing strong sustainability policies and may even have received external recognition for their results. This strategy displays two success factors: it learns from the ‘Walkers’ mistakes; and it nullifies sustainability as a competitive edge. Typical ‘Stalker’ organisations are nimble and flexible enough to react quickly and also may be smaller that the larger ‘Walkers’. The ‘Stalker’ behaviour, to some degree, negates superficial sustainability as a competitive advantage, and drives a stronger commitment from the ‘Walkers’ to drive more complex and comprehensive sustainability strategies.
The typical organisation might be from the service sector, retail, some areas of government, transport and logistics and education. “Everyone in our industry is engaged in sustainable practices, therefore customers ‘expect’ us to behave ethically and responsibly. It comes down to who can market their sustainability credentials best,” stated a sustainability manager.