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With resource scarcity starting to take over from policy as the main driver of Sustainability strategies, the July Green Monday looked at the growing importance of sustainable supply chain strategies.  Our panel of experts included senior figures from ASDA, InterfaceFLOR, PUMA, and Verdantix.

Reiner Hengstmann, Global Director SAFE Supply Chain at PUMA gave us insights into PUMA’s recently unveiled Environmental P&L (EPL).  As the Green Monday survey indicated, EPLs are a tool that many are starting to use as a way of measuring their environmental impacts both in their own operations and in their supply chain. PUMA have drawn up EPLs that take into account the hidden costs of carbon and water; using realistic externally validated prices (carbon being priced at EUR66 per tonne) PUMA concluded that its hidden environmental costs for 2010 came to EUR94.4m. Whilst Reiner made a point of saying it is difficult to compare its hidden environmental costs directly with its 2010 reported net profit of Eur202m, it does give an indication of how the business would be impacted if full environmental costs are taken into account. PUMA is not looking to add environmental costs into all its decision-making; but this tool could become a valuable metric for companies to manage their resource price risks.

Julian Walker Palin, Head of Corporate Responsibility at ASDA talked about the goals that ASDA have set in relation to its supply chain; including consuming 100% renewable energy and creating zero waste. In order to deliver on these targets, Julian highlighted three key requirements; understanding the issue first, setting a framework for each target and developing a holistic strategy that extends to the supplier community; he called it “Sustainability 360”. He explained that 92% of ASDA’s carbon emissions can be found in its supply chain. Julian agreed with our survey results that supplier scorecards are one of the most important strategic tools for engaging the supply chain – something Ramon subsequently went on to challenge.

Ramon Arratia, Sustainability Director at InterfaceFLOR told us simply to ‘keep it simple’. InterfaceFLOR are undisputable leaders in Sustainability – it can sometimes feel like being Sustainable has become InterfaceFLOR’s prime corporate objective – and Ramon attributed this to five reasons. 1). Shifting from corporate Sustainability to product Sustainability. 2). Scratching mandatory supplier questionnaires – “long, boring and not radical”. It signals to your suppliers that they may not be able to do business with you, when actually an innovative solution can be reached if both sides work together. 3). Life Cycle Analysis (LCA) – understanding where your impacts are. 4). Setting targets and communicating these – InterfaceFLOR is aiming to have all raw materials supplied from recycled or bio-based materials by 2020.  5). Holding interactive supplier events and giving your suppliers the chance to innovate. He also added that companies should be thinking about their strategies at a macro level – target, vision, inspire. InterfaceFLOR’s enlightened strategy might feel a mile away from where most companies are today, but it does demonstrate what is achievable.

David Metcalfe, CEO of Verdantix told us that change is on the way. The focus is shifting to energy intensity; rising oil and commodity prices, new policies and taxes, the increasing adoption of LCA, changes in public sector procurement and the growing use of Sustainability score cards as a change agent. The direction, he said, is clear. The challenges include delivering on your vision and persuading senior management and supply chain managers to engage, involving emerging markets and securing the necessary CAPEX – i.e. the fight for internal resource.  David echoed Ramon’s fifth point regarding the need for co-innovation between companies and their suppliers.

The key points emerging from the debate included:

• The best strategies see suppliers as partners. Whilst scorecards are useful, it is more important to establish common goals and share knowledge - some companies are going further and extending finance for Sustainability investments.

• Following on from the point above, you need to have your own house in order before you can be a credible lead partner. Companies who have an impressive internal strategy have an advantage when working with their supply chain.

• A number of tools are available and can make a big difference when it comes to the implementation stage. Many find Life Cycle Analysis (LCA) valuable, and Environmental Profit and Loss (EPL) accounting may be an increasingly used tool.

We look forward to seeing you at the August Green Monday – Creative Disruption; strategies for the new paradigm. Apply for your place here.