Two items caught my eye recently. One is a new report called the State of Sustainability Initiatives (SSI) Review 2010. This review was a collaborative effort by the International Institute for Sustainable Development (IISD), the International Institute for Environment and Development, Aidenvironment, the United Nations Conference on Trade and Development, and ENTWINED–Environment and Trade in a World of Interdependence.
The focus of the SSI Review 2010 is geared specifically to agricultural commodities, specifically the forestry, coffee, cocoa, tea and banana sectors. What is interesting is that the review focuses on “voluntary sustainability initiatives” (VSI) and how they can impact overall market performance, governance, criteria coverage and implementation practices. More interesting is how the report treats supply chain dynamics and decision-making. In a nutshell (no pun intended!) the report reveals that major voluntary initiatives are altering the way supply chain decision-making is made by “providing civil society and developing country stakeholders with a more active role in setting trade rules and production practices”. Further the report underscores how increased levels of stakeholder pressure and transparency in the marketplace are reshaping collaboration across and between supply chain networks.
Embracing the Triple Bottom Line
The SSI report indicated that companies are embracing triple bottom line aspects of their products in managing inputs and outputs along the value chain, focus within the three primary sustainability spheres:
- Environmental criteria are strongest related to integrated pest management and use of restricted substances or prohibited chemicals, though less so on issues related to energy conservation and greenhouse gas management
- Social criteria revolve less around gender, employment benefits, community involvement, and humane treatment of animals and more towards around International Labour Organization (ILO) conventions, (mainly coverage of health and safety and employment conditions).
- Economic criteria are less likely to be addressed across the agricultural sectors although focus on product quality requirements and minimum wage requirements are gaining steam.
Focus on “Radical” Transparency
Growth across voluntary sustainability initiatives is also being driven by growing demands for transparency in global supply chains. There are generally three types of transparency evaluated in this report:
- Information Transparency: the act of making accurate, useable and substantial information available to stakeholders.
- Participatory Transparency: the act of selecting the information to be made available based on user needs and input (i.e., “participation”).
- Accountability Transparency: the act of presenting information that is neutral, objective and balanced, allowing stakeholders to reach their own conclusions regarding performance or evaluation.
The SSI Review reveals that “voluntary initiatives are playing an important role in improving supply chain transparency by bringing more credible systems for monitoring, enforcing and reporting on good practice.” Specifically, key findings include:
- 70 per cent of the initiatives reporting compliance with ISO 65 or application of an independent accreditation system;
- almost all of the initiatives surveyed applying an annual audit process to ensure compliance with specified criteria, although there is considerable diversity in the degree of flexibility with which such processes are implemented; and
- 70 per cent of the initiatives surveyed managing a separate Chain of Custody standard and a majority of initiatives applying some form of segregation of compliant products to allow for traceability.
This tendency toward additional transparency in the supply chain is lessening the potential for false product claims, although ‘greenwashing’ remains a constant threat to consumers looking for the “real deal” when purchasing environmentally responsible or eco-friendly food or consumer products.
The report further goes on to state that “transparency improves what we know about markets and the institutions that drive them. Improved access to information helps everyone in the market better understand the implications of their investments and dealings within the market. By enhancing information flow, transparency can promote market efficiency, social welfare and cost internalization, all core principles of sustainable development. Improved information also allows stakeholders to participate more knowledgably in the governance processes—thereby promoting participatory governance, also a core principle of sustainable development.”
Unilevers “Big, Bold” Example
Almost simultaneously to the release of this report comes a huge announcement last week of Unilevers plan to reduce its environmental footprint by 50% by the year 2020. According to the article in GreenBiz.com by @marcgunther, the Sustainable Living Plan “breaks new ground for a number of reasons.
- It is comprehensive, setting more than 50 social, economic and environmental targets.
- It is rigorous; the company says it has measured the carbon, water and waste footprints of 1,600 products, representing 70 percent of its volume.
- It’s far-reaching, taking into account the full life cycle impact of its product, from “seed to disposal,” as one executive put it.”
Unilevers plan is big, “hairy” and audacious- just what companies need to do stay ahead of the competition by implementing VSI’s that respond to consumer needs. As part of the plan, Unilever plans to source 100% of its agricultural raw materials “sustainably” by 2020. This will include aggressive supply chain outreach, monitoring and measurement (the metric will be raw or packaging material sourced from verifiable (certified and some self verified sustainable renewable sources or materials made from recycled materials (% by weight)). Tea and palm oil are already in the queue with additional materials to be added as part of a sustainability focused program in place for the past 12 years. They also began to assess their environmental impact across the supply chain from sourcing raw materials to production, distribution, consumer use, and disposal. Unilever has also implemented a Business Partner Code to ensure their suppliers meet their expectations on social and environmental impacts.
Supply Chain Value Recognition
The SSI Review and companies like Unilever are motivated by recognition that improved understanding of customer behavior, recognition of sustainable development challenges faced in a global marketplace and effective policy initiatives are vital to business success and societal vitality. Doing so in a deliberately transparent and collaborative way stimulates innovation, better design and effective flow of goods and services across and through networks, continents and communities (from resource extraction to production, to distribution, to consumer and back again if possible).
Great lessons and cues on supply chain sustainability practices can be taken from the SSI report and Unilever regardless of what market sector you operate in. You don’t have to be a coffee producer or banana company to gain an understanding as to how voluntary sustainability initiatives can improve your business and how driving these initiatives through your supply chain can gain great competitive advantage.
 J. M. Balkin, 1999, “How Mass Media Simulate Political Transparency,” Cultural Values, 3(4), 393-413.
ISO 65 is the International Standards Organisation (ISO) guideline ‘General requirements for bodies operating product certification systems’. It is a general guide for product certification and has been referenced or used as a base for most organic norms and regulations (especially in Europe, Japan, Canada etc.)