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Will Apple Finally Embrace Corporate Social Responsibility & Sustainability w/ Tim Cook at Helm?

19 Jan

If you have been a frequent reader of this space, you’d know my position on Apple and the manner in which it’s conducted its supply chain sustainability programs…or hasn’t.

2011: Game On (or the Collective Karma Ran Over Your Dogma)

Last fall, I wrote about the follow up efforts by Chinese NGO Institute of Public and Environmental Affairs (IPE), who performed five more months of research and field investigations and reported that “the pollution discharge from this enormous industrial empire has been expanding and spreading throughout its supply chain, seriously encroaching on the local communities and their environment… the volume of hazardous waste produced by suspected Apple Inc. suppliers was especially large and some had failed to properly dispose of their hazardous waste.”

Six months before that (nearly a year ago), I presented my thoughts about the IPEs report that leveled complaints against the IT/Electronics industry and the overall performance of nearly 30 major manufacturers and their respective key parts suppliers.  The report focused on “the openness of IT firms and their responsiveness to reports of environmental violations at suppliers”.  Concerns were raised in the report regarding levels of environmental toxins and pollutants being discharged in rivers and streams and into air sheds.

Many people have asked me over the past half-year why Apple is being uncooperative or secretive.  Well, “secrecy” has always been part of the Apple mystique, but of course so has evolutionary and disruptive innovation. The problem as I saw it then (and this thought has now been vindicated) is when it comes to corporate social responsibility and sustainability, transparency is the name of the game, not secrecy.  I also suggested that Apples supplier network may be too big to handle and they lack the tools, systems and technologies to perform adequate supplier training and oversight.  Combined with inconsistent Chinese regulatory agency oversight on its industrial manufacturers, this presented difficult challenges to a workable, and meaningful sustainable supply chain solution. But Nike did it, so why couldn’t (or wouldn’t) Apple, I asked?

My advice last September to Apple and new CEO Tim  Cook was to step up and be as evolutionary on corporate social responsibility and sustainability matters as it is with its products.  My exact words were: “show humility, take responsibility, and act swiftly and collaboratively.”

Gladly I am happy to report that Apple has wised up and stepped voluntarily under the glare of public scrutiny.

2012: Enter Mr. Cook…the New, Improved, Socially Responsible Apple?

"Good Apple"

In its Supplier Responsibility 2012 Progress Report, the company states it is “committed to driving the highest standards for social responsibility throughout [its] supply base”. It adds: “We require that our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes wherever Apple products are made.”

The 156 companies it lists alongside the report on its Supplier Responsibility website account from more than 97 per cent of what Apple pays to suppliers to manufacture its products.  A complete picture of all the thousands of suppliers in Apples supply chain may be daunting, but at least the company has captured the suppliers where the “greatest spend” is.

Highlights from the 2012 Report

  • In 2011, we conducted 229 audits throughout our supply chain — an 80 percent increase over 2010 — including more than 100 first-time audits. We continue to expand our program to reach deeper into our supply base, and this year we added more detailed and specialized audits that focus on safety and the environment.
  • Apple-designed training programs have educated more than one million supply chain employees about local laws, their rights as workers, occupational health and safety, and Apple’s Supplier Code of Conduct.
  • Our audits have always checked for compliance with environmental standards. In 2011, in addition to our standard audits, we launched a specialized auditing program to address environmental concerns about certain suppliers in China. Third-party environmental engineering experts worked with our team to conduct detailed audits at 14 facilities. We uncovered some violations and worked with our suppliers to correct the issues. We will expand our environmental auditing program in the coming year. [violations unearthed included dumping wastewater onto a neighboring farm, using machines without safeguards, testing workers for pregnancy and falsifying pay records]
  • We have a zero-tolerance policy for underage labor, and we believe our system is the toughest in the electronics industry. In 2011, we broadened our age verification program and saw dramatic improvements in hiring practices by our suppliers. Cases of underage labor were down significantly, and our audits found no underage workers at our final assembly suppliers. [Apple said it found six active and 13 historical cases of underage labor at some component suppliers, but none at its final-assembly partners]
  • We offer continuing education opportunities at our suppliers’ facilities free of charge. More than 60,000 workers have enrolled in classes to study business and entrepreneurship, improve their computer skills, or learn English. And the curriculum continues to expand. We’ve also partnered with some local universities to offer courses that employees can apply toward an associate degree.

Apple has vowed to deal with worker abuses, hoping to deflect criticism it was turning a blind eye to cases of poor working conditions in a mostly Asian supply chain. Perhaps in a huge move, Apple will allow independent auditors from the Fair Labor Association to also be part of the future auditing process.  In an interview last Friday, Mr. Cook said Apple’s vow to double the number of supplier audits along its supply chain is “raising the bar” for the entire high technology industry, and that more change is on the way.  Cook said “All of this means that workers will be treated better and better with each passing year…It’s not something we feel like we have done what we can do, much remains to be done.”

The San Jose (California) Mercury News quoted analyst Ken Dulaney with Gartner Research who wondered why this may have taken so long to happen. “Who knows why they didn’t do this sooner? It could have been because of Steve Jobs. Maybe with Cook’s financial background he’s trying to move Apple toward less secrecy, which would be a very good thing. It’s part of their trying to be a good global citizen.”

Under Scrutiny

Either way, Apple will continue to be under watchful eyes, as environmentalist and labor activists continue to push for more reforms by American companies doing business overseas.  Apple still will need to double down its efforts to respond more proactively to the many environmental impact related issues reported in the past by its major suppliers, especially in China.  But for a company that has played its cards extremely close to the chest, it’s a major breakthrough, if time proves the intent to be true.

Judy Gearhart, executive director of the International Labor Rights Forum in Washington, D.C, said that how the industry as a whole responds” depends how engaged they [Apple] are going forward. You see companies make these commitments and there’s often a lot of fanfare, but it doesn’t always pan out the way they say it will.”

Maybe Mr. Cook is the one “Good Apple” that will save the bunch.  Let’s hope so.

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Chinese NGO Claims Apple Supply Chain Sustainability is ‘Rotten to the Core’. Will Consumers Agree?

2 Sep

Photo by i.hoffman under CC License

Here we go again.  Six months ago, I presented my thoughts about a report by Chinese NGO Institute of Public and Environmental Affairs (IPE) that leveled complaints against the IT/Electronics industry and the overall performance of nearly 30 major manufacturers and their respective key parts suppliers.  The report focused on “the openness of IT firms and their responsiveness to reports of environmental violations at suppliers”.  Concerns were raised in the report regarding levels of environmental toxins and pollutants being discharged in rivers and streams and into air sheds.

Worker complaints about unsafe working conditions and acute health problems were presented.  The IPE gave opportunities to every company referenced in the report to initiate an open and two-way dialogue, and most did …except Apple Electronics.  According to the report, Apple was more secretive about its supply chain than almost every other American company operating in the China.  Apple came up among the laggards among 29 major electronics and IT firms in a transparency study drawn up by a coalition of China’s leading environmental groups.

These are the iPad and iPod guys for crying out loud!  The evolutionary wizards who have shaped and fundamentally changed the way that most consumers behave, work, interact and get on with their daily lives.  Those guys who at one point this summer became the wealthiest company in the United States…this before iconic CEO Steve Jobs retired.

Apple- Skinned Again

Following the early 2011 report, the IPE performed five more months of research and field investigations and reported that “the pollution discharge from this enormous industrial empire has been expanding and spreading throughout its supply chain, seriously encroaching on the local communities and their environment… the volume of hazardous waste produced by suspected Apple Inc. suppliers was especially large and some had failed to properly dispose of their hazardous waste.”

The IPE reported (rather colorfully I might add) that 27 suspected suppliers to Apple had known environmental problems.  The IPE noted that in Apples ‘2011 Supplier Responsibility Report’, “where core violations were discovered from the 36 audits, not a single violation was based on environmental pollution. The public has no way of knowing if Apple is even aware of these problems. Again, the public has no way of knowing if Apple has pushed their suppliers to resolve these issues. Therefore, despite Apple’s seemingly rigorous audits, pollution is still expanding and spreading along with the supply chain.”

IPE reported that “during the past year and four months, a group of NGOs made attempts to push Apple along with 28 other IT brands to face these problems and the methods with which they may be resolved. Of these 29 brands, many recognised the seriousness of the pollution problem within the IT industry, with Siemens, Vodafone, Alcatel, Philips and Nokia being amongst the first batch of brands to start utilizing the publicly available information. These companies then began to overcome the spread of pollution created by global production and sourcing, and thus turn their sourcing power into a driving force for China’s pollution control. However, Apple has become a special case. Even when faced with specific allegations regarding its suppliers, the company refuses to provide answers and continues to state that “it is our long-term policy not to disclose supplier information.

The IPE offered its opinion that “Apple has already made a choice; to stand on the wrong side, to take advantage of the loopholes in developing countries’ environmental management systems, and to be closely associated with polluting factories.”

IPE concluded that Apple needed to own up and be accountable for its supply chain for the following four reasons:

  1. “… any company that produces a large amount of hardware must bear the responsibility for the environmental and social costs incurred during the manufacturing process.
  2. Secondly, the suppliers who violate the standards for levels of pollutants emitted and who ignore environmental concerns and workers’ health do these things with the aim of cutting costs and maximizing profits.
  3. Thirdly, Apple Inc. understands that when passing the blame for social responsibility it can be difficult to pull the wool over the eyes of the general public…; and
  4. Fourthly, many people do not understand that Apple and other brands’ outsourcing of production is not the same as ordinary purchasing behavior. Various sources of information show that Apple is deeply involved in supply chain management—from the choice of materials to use to the control of clean rooms in the production process.”

So What’s Wrong With Apple?

Apples image problem appears to be getting worse before it gets better and it may be more than just a public relations problem; and it’s not just in China that Apple is facing criticisms.  Apple, like most consumer electronics manufacturers is a major user of highly sought after precious minerals, many of them associated with conflict areas (so-called ‘conflict minerals’). Apple in fact sources tin from 125 suppliers that use 43 smelters worldwide.  That’s an awful big challenge from a supply chain management perspective. But Apple was still a bit slow to step up like other key IT companies like Dell and Intel and collaborate with the Electronics Industry Citizenship Coalition in developing a framework to address conflict mineral traceability.

Further complicating the issue is the sheer size of Apples supply chain and the general difficulty that comes in managing dispersed multi-tired supply chains in other countries.  In an excellent piece published in GreenBiz this week, Environmental Defense Fund Project Manager Andrew Hutson suggested that  “If you’ve got an office in Shenzhen or Hong Kong, it’s very  hard to keep tabs on the perhaps thousands of factories you have across  China in any given moment”.  The article went on to discuss how scrutiny can sometimes  lead contractors to move factories to more remote areas, farther away  from watchdogs, suggesting that “the sheer distance from headquarters created by chasing low-cost labor  to developing countries can effectively reduce accountability”. While cheap labor in far off lands certainly has its benefits, clearly it has its disadvantages and Apple is paying the price.

Many people have asked me over the past half-year why Apple is being uncooperative or secretive.  Well, “secrecy” has always been part of the Apple mystique, but of course so has evolutionary and disruptive innovation. The problem is when it comes to corporate social responsibility and sustainability, transparency is the name of the game, not secrecy.  In this “WikiLeaks” world of ours, mystique only gets companies mired deeper into areas of suspicion and distrust.

Photo via Michael Holden under Flikr CC License

But perhaps there is more to the issue to noodle on. Is it entirely possible that Apple isn’t ignoring the problem, but rather its supplier network is just too big to handle and they lack the tools, systems and technologies to perform adequate supplier training and oversight?  Or is it that Chinese regulatory agencies also lack the resources or institutional oversight necessary to monitor compliance over in-country industrial manufacturers that service multiple consumer brands?  Or is it possible that as consumers our insatiable appetite for Apple products is partly responsible for creating such high demand that Apple must reach out to hundreds if not thousands of suppliers to fulfill its orders and keep Apple product lovers happy?   Or is the problem a combination of rampant, unsustainable consumerism, poor regulatory oversight, a supply chain ‘gone wild’, AND a deviated moral center on the part of Apple (as the IPE suggests).  You see, its complicated and maybe, just maybe, we should all take a close look in the mirror and question our own culpability in this mess.

For any of my dedicated readers, I am by no means being an apologist for Apple.  You all know where I have stood in the past by constructively calling for Apple to step up and be as evolutionary on corporate social responsibility and sustainability matters as it is with its products.  I noted in my prior post the many key steps that Apple can and must take to effectively make a difference in its supply chain.  In addition Treehugger writer extraordinaire Jaymi Heimbuch offered some outstanding advice to new CEO Tim Cook, not the least of which was “requiring transparency in the supply chain and being more direct with suppliers about standards”.  My advice is simple Mr. Cook: show humility, take responsibility, and act swiftly and collaboratively.

Rest assured there are more activist organizations shaking Apples tree.  And what I fear (as Apple should too), is that one day all that shaking will bring that big old tree down.

Meeting Basic Health, Safety and Environmental Risk Before Sustainability- Watch Your Step

25 Aug

This week has been all about “R-I-S-K”.  Risk that my three flights around the globe to South Africa will be on time. Risk that my luggage will accompany me.  Risk that I will meet my driver.  Risk that he will be a safe driver, negotiating darkness and harrowing roads full of heavy trucks travelling between Durban and Johannesburg.  Risk that my digestive system can handle all the amazing foods I’ll sample while at the NOSA-sponsored NOSHCON 11 conference.  Risk that my talk on integrated sustainability management systems will go off without a hitch.

Risk (noun): A situation involving exposure to danger

Risk (verb): to expose to danger or loss

The Setting Tells a Story- “From Stone Age to Hard Won Democracy”

Risk.  We all live with risk and all are in position to control and influence its outcome.  This week’s conference was devoted to exploring risk in the workplace and its related effects on worker safety, health and environmental impact.  South Africa is the perfect place to explore this issue, because of all of the social, political, economic and workplace/environmental challenges that this special country has endured over the generations.  Throughout the two-day conference I have become painfully aware of the risks that exist amid the beauty of the KwaZulu Natal and Central Drakensberg region of South Africa.

View from my Guest House Looking Toward Champagne Castle

This great place of beauty has seen wars fought over land and water for thousands of years and countless generations, between indigenous tribes first, then between the Zulu and the Dutch Afrikaners, then the British and Boers and finally blacks and whites through the practice of “apartheid”.  This place has seen the likes of King Shaka, Gandhi and Mandela walking its ground.  This is historic ground where people took incredible risks to protect what they believed in, and suffered enormous costs and joyous victories.  I won’t use this space to opine on that matter just to say that issues run deep and wounds take generations to heal.  But all citizens of the Rainbow Nation are trying their very best to level the playing field.  But all along the way, all the players in this real life drama have had to manage risk.

Snakes!!

To illustrate how risk is all around us in the workplace and at home, NOSHCON brought out the snakes…yes, snakes.  Not the safe variety…I mean the pythons and puff adders.    Through a safety company called Unplugged Communications, the idea of “Snakes for Safety” was presented to a fascinated, but somewhat skittish audience of 600.  The analogy is that puff adders are like accidents waiting to happen…they hide, camouflaged in the bush and only strike when you are right on top of them.  By then the damage has been done, injury’s result (and it the case of the puff adder, you have seven minutes to call a loved one and say goodbye!).  Cobras on the other hand represent a hazard that is harmless when small, but if left unchecked, the hazards can grow to an unmanageable point when great harm can occur. Snakes.  Risk.  Managing the basics of health, safety and the environment (HSE) in developing economies like South Africa is foremost in businesses minds and correctly so.

Risk Management and Meeting Basic HSE Needs First

“There are risks and costs to every program of action.  But they are far less than the risk and costs of comfortable inaction”- John F Kennedy

Last year I wrote a two piece series on risk management and accountability in the aftermath of the BP gulf oil spill and Massey coal mining disaster.  In the second post on risk, I noted that a continuous risk management process helps organizations understand, manage, and communicate risk and avoid potential catastrophic conditions that can lead to loss of life, property and the environment. Briefly, risk management helps organizations:

  • Identify critical and non-critical risks
  • Document each risk in-depth
  • Log all risks and notify management of their severity
  • Take action to reduce the likelihood of risks occurring
  • Reduce the impact on  business, life, and the environment

In this post I laid out a typical six-step process to achieve effective risk management and failure mode control.  I also noted ”What will be … fascinating will be the lessons learned and if businesses truly embrace risk management planning and implementation as a central function of business, take it seriously and hold themselves accountable.”

Takeaways from Far Away- Sustainability May Have to Wait

The author with a less venomous snake

My talk focused on integrated management systems and how they can leverage risk and liability and support sustainability in the business marketplace.  The audience was attentive to be sure, and I listened and observed NOSHCON delegates listen to several other fantastic presentations on corporate social responsibility, carbon management and sustainability.  My impression however is that while there are pockets of excellence in sustainability focused companies, South African businesses are just beginning to think about sustainability as a value-added aspect of their businesses. Perhaps rightly so, many companies in the mining, agricultural and heavy industry sectors continue (especially the majority small to medium-sized and under-resource companies) are focusing on the basic critical issues of life safety in the workplace, education and meeting basic environmental compliance operations first.  To meet this pressing need, organizations like NOSA have developed world-class frameworks of occupational, health, safety and environmental  risk management.  And despite rampant complaints of lax enforcement of labor and environmental protection laws, the South African government has implemented its King III corporate governance policies (similar to the U.S Sarbanes-Oxley provisions) that recognize CSR and reporting obligations.

I am firmly of the belief that companies must take care of these basic HSE issues and lay a firm foundational framework for continual improvement first before they can progress along the sustainability journey.  The central themes I heard about how this can be accomplished are through increasing monitoring, education, awareness building, management accountability and trust.  Regarding sustainability, it makes little sense force feeding a business approach that has little immediate bearing on managing organizations immediate risks.  One must be able to manage the snakes; you know….one by one and step by cautious step.

Be patient South Africa.  You have such great resources, professionals hungry to learn, and have fantastic opportunities to excel in the sustainability space in the years ahead.  I have been truly blessed and humbled to have been able to participate at NOSHCON and hope to be able to hear of great things coming out of South Africa in the coming years.

“Baie Dankie”. “Ngiyabonga kakhulu”. Thanks very much!

This One’s for Ray- Reflections on the Passing of a Sustainability Giant & Radical Industrialist, Ray Anderson

8 Aug

Ray Anderson died this week.  Most of us in the business just called him “Ray”, because he really was such an approachable guy.  I saw him speak in San Diego three years ago, and even to a business green business veteran like me, he was sage-like.  To most outside the world of sustainability in business, the name hardly rang a bell.  But to those of us within its three concentric circles, Ray was an icon.  As many know, Ray Anderson ran InterfaceFLOR.  As the leader of a major global carpeting brand, which at that time relied on heavy use of industrial chemicals, hydrocarbon based products, energy and water use, InterFaceFLOR, like other carpet manufacturers was enduring a major challenge to rethink how its products were being made.

By the mid 1990’s when Ray had become the company’s CEO, more customers were asking questions about the company’s sustainability efforts.   In 1994, Ray had an awakening of sorts (his so-called  “point of a spear into my chest” moment), when after having a number of meetings and discussions with his staff and reading Paul Hawkens the Ecology of Commerce,  he became an enlightened, radical industrialist. He had come to the  conclusion that the environment was at risk and a lot of that was caused by industry and companies such InterfaceFLOR  that were based on petrochemicals and energy.

I, myself, was amazed to learn just how much stuff the earth has to produce through our extraction process to produce a dollar of revenue for our company. When I learned, I was flabbergasted. We are leaving a terrible legacy of poison and diminishment of the environment for our grandchildren’s grandchildren, generations not yet born. Some people have called that intergeneration tyranny, a form of taxation without representation, levied by us on generations yet to be. It’s the wrong thing to do.-Ray Anderson

The Radical Industrialist Takes on the Supply Chain

Ray was simply on a mission- for InterfaceFLOR to not only cut waste, but to be a leading, responsible business.  He became the face of the “radical industrialist” (the title of his last autobiographical  book which I received signed by him just two months ago is called Confessions of a Radical Industrialist) and in 1994 launched InterfaceFLOR into a first mover role to reduce its environmental and social footprint.  The data is quite extraordinary in the 17 years since the company launched its many environmental initiatives. Of course, Ray started with a plan- one that by necessity started small- but was across the board, an overhaul affecting every link of the supply chain.  Ray also smartly knew that go get his shareholders on board, he needed “obliterate costs/footprint associated with waste; silencing the shareholders that were uncomfortable with the risk involved with completely revolutionizing your company”.

We began to tackle the face of mountain we identified as waste. We defined waste, by the way, as any cost that we incurred that does not add value to our customer and that translates to doing everything right the first time, every time. It’s not just waste material, scrapped and low quality and so forth. If you send something to the wrong destination and have to get it back and reship it — that’s waste. If you incur a bad debt — that’s waste. So we defined waste very broadly and over time we actually said that any energy that comes from fossil fuel by our definition is waste and we need to eliminate it. We really began to think in different ways about our business in terms of climbing this mountain and it became very clear very quickly this was the smart thing to do. Not only did we start to generate answers for those customers, they embraced us for what we were trying to do. The goodwill in the market place has just been stunning. The rest of the business case is pretty simple. I cost it down not up. – Ray Anderson

According to Lindsay Parnell, InterFaceFLOR’s CEO for Europe, the Middle East, Africa, and Asia, the company has “reduced waste to landfill by 80 per cent since 1996, curbed water use by the same amount, reduced energy use per unit of production by 43 per cent, and cut greenhouse gases 44 per cent, partly by generating 30 per cent of its energy from renewable.  But what also stands out (and what made Ray such a business visionary) was that there was a phenomenal financial payback that could be realized from “going green”.  According to Parnell, “We could see that the millions of dollars were stacking up.  Between 1995 and 2010 we have saved $433m – that is a huge amount for a company with revenues of around $1bn. There is no way we have invested $433m in this, but that is what it has saved.”

It’s not just the right thing to do, it’s the smart thing to do. – Ray Anderson

Climbing Mount Sustainability

Rays efforts were noticed for sure.  Time Magazine featured him in an article this past spring and Fortune Magazine called him “America’s greenest CEO”.  He went out and “evangelized” over 150 times a year, until his fight with cancer started to finally slow him down.  The awards and honors bestowed on Ray and the companies over the past two decades are too many to mention here. Recently, Interface ranked 11th worldwide in the 2010 Sustainability & Innovation Global Executive Study & Research Project by MIT Sloan Management Review and The Boston Consulting Group.  They ranked second behind Unilever in the 2011 Global Sustainability Leaders Survey from GlobeScan Inc. and SustainAbility Ltd.  Suffice it to say though that InterfaceFLORs efforts disruptively changed the way the carpet, building materials and textile industry operate today as compared to 20 years ago.

Meanwhile, in the last couple of years the company launched its highly ambitious  Mission Zero ™  sustainability strategy, which aims to turn InterfaceFLOR into a zero-impact organization.  Ray often spoke about how climbing the sustainability mountain in business was akin to climbing Mount Everest and that there were seven paths or fronts to get there:

  • Eliminate Waste: Eliminating all forms of waste in every area of business;
  • Benign Emissions: Eliminating toxic substances from products, vehicles and facilities;
  • Renewable Electricity: Operating facilities with renewable electricity sources – solar, wind, landfill gas, biomass, geothermal, tidal and low impact/small scale hydroelectric or non-petroleum-based hydrogen;
  • Closing the Loop: Redesigning processes and products to close the technical loop using recovered and bio-based materials;
  • Resource-Efficient Transportation: Transporting people and products efficiently to reduce waste and emissions;
  • Sensitizing Stakeholders: Creating a culture that integrates sustainability principles and improves people’s lives and livelihoods;
  • Redesign Commerce: Creating a new business model that demonstrates and supports the value of sustainability-based commerce;

Making the Business Case

When you are being asked to make the business case for sustainability – perhaps ask them to make the business case for being un-sustainable. – Ray Anderson

You see, for the past 30 years I’ve been evangelizing like Ray for organizations to make “the business case” on behalf of reducing waste of any kind (be it over-consumption, generation of waste, human productivity waste, etc) so the bottom line is optimized and employees, communities and the environment are protected.  To me it’s a “no brainer” and for folks like Ray it took an epiphany to make that realization.  Since Ray’s awakening in 1994, and especially in the past half decade or so, more CEO’s and manufacturers with local to global reach are coming to their own realizations and drawing their own conclusions.

Ray stepped out of his comfort zone to challenge the status quo.  He forged a new business normal that called for a respect of the land, responsible use of resources, smart design and innovative end of life (cradle to cradle) management of products.  Mission Zero will continue for the many thousands of employees of InterFaceFLOR around the world- all because of one man’s vision. All because of Ray.

As Ray said back in 2008 when I saw him, “There are noble fortunes to be made in the transition to sustainability.” That inspirational quote stands right up there with my son’s from back in 1991 when he introduced me to his pre-school class as the Dad who “saves the planet”.   Sometimes, being radical is not such a bad thing.

Mr. Anderson…er, Ray, thanks for all the inspiration- this one’s for you.

‘Green’ Procurement: Getting its ‘Value Creation’ Game On to Drive Supply Chain Sustainability (Part 2)

27 Jul

In Part 1 of this series on sustainable procurement, I laid out my vision of the heart of a sustainable, green supply chain that runs through its procurement function.  It’s simple to show how every product has a hidden human health, environmental and social impact along the entire supply chain.  However, it’s been challenging to bring sustainable procurement into a central decision making role in line with organizational business goals.  The results to date have been a mixed bag, as I alluded to when I mentioned Aribas new Vision 2020 report and companion dialoguing process, now underway.

Sustainable Procurement: back to management!

On the heels of the Ariba effort comes a promising benchmark report recently released by HEC-Paris and Ecovadis. Entitled Sustainable Procurement: back to management! this study (available for download on Ecovadis’ site) has risen to rescue and tempered my fears of devolving sustainable procurement.  In fact, the report may suggest a positive “tipping point” in favor of sustainable procurement.  The efforts behind the 2011 edition of the HEC/EcoVadis Sustainable Procurement Benchmark were carried out between the fall of 2010 and early 2011.  This benchmarking process started in 2003 and the 5th conducted since that time.

The objective of the benchmark is to provide a snapshot on what’s trending in the area of Sustainable Procurement practices.  According to the authors, the following overarching questions were explored:

  • How has the vision of the Chief Procurement Officers (CPOs) evolved?
  • What tools and initiatives seem to be the most effective over time to drive changes?
  • How is Sustainable Procurement progress measured?
  • What are the remaining challenges faced by most Procurement organizations?

The study identified three main drivers behind Sustainable Procurement initiatives: Risk Management, Value Creation, and Cost Reduction.  These findings mirror some of the trending areas and critical issues identified in the Ariba report.  HEC and Ecovadis suggested that these three drivers’ shows that many organizations are now facing new expectations in terms of Corporate Social Responsibility and Sustainability from the Procurement Departments of their clients and, suggest that having a sustainable procurement program in place can become a competitive advantage.

 Sustainable Procurement Remains High on Executives Agenda

  1. 92% of the surveyed Companies consider Sustainable Procurement a “critical” or “important” initiative, even though for the 1st time this year, “Risk Management” took over as a priority initiative.
  2. The major progress made in 2011 is on the support from the Top Management (+24%) thus demonstrating that Sustainable Procurement is attracting more and more interest from Executive Committees, and significant progress was made in implementation of tools and organizational changes.
  3.  Significant organizational changes have been implemented: 45% of companies already have “dedicated teams” and 57% report having trained a majority of procurement staff on Sustainability.
  4. Whereas in 2007 only 1/3 of companies were using formalized methodologies for assessing their suppliers’ sustainability performance, in 2011 two-thirds of them are now implementing dedicated tools (either internal or leveraging 3rd parties).
  5. Finally 92% companies have increased (56%) or maintained (36%) their budgets related to Sustainable Procurement, which should yield more changes in the future years.

Tools for Sustainable Procurement on the Rise

The HEC/Ecovadis study found that basic tools such as “Suppliers Code of Conduct” ,  “CSR contract clauses” and “Suppliers self-assessment“ were now the rule rather than the exception among companies surveyed by a ratio of 2 to 1,  but interestingly were still found to  limited value in terms of risk management.  What I found encouraging was that the study found maturation in the types of tools used, including “Supplier Audits” and “Supplier CSR information databases“.  This type of work has clearly been evident in what I have reported in the past, especially among multi-national companies with contractor manufacturing operations in developing economies (like China, India and Brazil).  These advanced tools offered more opportunities for suppliers to engage directly with buyers, allow for data verification, and offer direct recommendations for supplier CSR and sustainability improvement.  Over half of the companies surveyed had advanced to this next level.  Finally, when asked what the most effective uses of resources were in developing a Sustainable Procurement Program, respondents mentioned 1) top level support, 2) creation of cross functional teams and 3) training, as key success ingredients.   All three of these success factors had shown substantial improvement over the past several benchmark cycles, according to the study.

Sustainable Procurement Creates Value

This is not the first study that has come along that demonstrates value and return on investment from sustainable procurement.  I wrote earlier of a joint study by Ecovadis, INSEAD and PriceWaterhouseCoopers that demonstrated similar results.  In that study, payback from most green procurement activities was huge. Companies surveyed were able to benefit quickly from risk management reduction and potential revenue growth opportunities, due in part to sustainable procurement.  The study also found that there were additional ‘value creation’ opportunities that could be realized if procurement departments collaborated more closely with the marketing and R&D departments upstream on the projects.

Also, a study in 2009 by a company named BrainNet (Green and Sustainable Procurement: Drivers and Approaches”)  looked at sustainable procurement and value creation and found that “… procurement with an ecological and social conscience is not a cost factor, but a value factor…Companies that pursue a consistent approach to green and sustainable procurement receive an above-average return on capital deployed.”  The study produced what they describe as an “evolution curve for sustainable procurement” that describes the maturity of various approaches of sustainable procurement.  This curve compares well with the most recent EcoVadis/HEC findings and suggests that there may be a widening gap between leaders and laggards.

Sustainable ‘green’ procurement embraces a holistic approach, one that encompasses organization, people, process, and technology to create greater product value along the entire supply chain.  This type of value creation can managed by establishing firm triple bottom line based metrics from upstream suppliers to downstream users and using the procurement function to support product and process innovation and accounting for total cost of ownership (TCO).

What’s Next?

According to the most recent HEC/EcoVadis benchmark report, it is clear that new green and social business models depend upon innovation, and a gap still among many organizations to implement a truly Sustainable Procurement vision.  This was clearly in evidence by the lack of mentions by Chief Procurement Officers that I discussed last week in the Ariba study.

The HEC/Ecovadis report suggests that when implementing Sustainable Procurement practices, a three phase process can get the ball rolling, starting first by orienting and energizing the procurement function through:

“1. Communication activities: Building awareness among employees regarding the approaching change, the benefits and the steps to be implemented.

2. Training and Performance support: ensuring that the initiative is being understood among those who are to execute the change or be part of it, and leading to buy-in of the key stakeholders.

3. Rewards and recognition: ensuring that employees – and suppliers – who embrace change are properly recognized and rewarded. This final step is when implementation is not only measured, but also celebrated.”

I’m going to say it again…and again. All sustainable business roads lead through the procurement function.  The procurement function is the perfect nexus and a critical organizational player that touches product designers, engineers, multiple tiers of suppliers and subcontractors, manufacturing operations, logistical warehousing and distribution and the end users.  Yes indeed, things are looking up for sustainable procurement…it’s ‘game on’.

Greenpeace Takes Global Clothing Brands and Chinese Textile Supply Chain to the Cleaners. Who’s Responsible?

15 Jul

“I make my living off the evening news

Just give me somethin’, somethin’ I can use

People love it when you lose

they love dirty laundry”(Don Henley)

(from Greenpeace Report, "Dirty Laundry")

I was reminded of that Don Henley (The Eagles) solo hit from back in the 1980’s when I read about Greenpeaces latest initiative and report…aptly titled…you guessed it, “Dirty Laundry”.  The report focuses on the high levels of industrial pollutants being released into China’s major rivers like the Yangtze and the Pearl and commercial ties between a number of international brands such as Adidas, Nike and Li-Ning with two Chinese manufacturers responsible for releases of those hazardous chemicals.  Greenpeace has also launched the challenge ‘Detox’ Campaign, calling “brands, especially Adidas and Nike, to take the initiative and use their influence on its supply chain.”  The organization unfurled its characteristic banners at Adidas’s main retail store in Beijing this week.

There are several nuances to this story that are important to pass on and collaborative opportunities (rather than the finger-pointing that has plastered Twitter and other media the past 24 hours) to explore.

Supply Chain Challenges …Again!

This latest supply chain environmental wrinkle underscores the challenges multi-national organizations (MNC) are facing daily in oversight and enforcement of first tier, second tier or lower contract manufacturers.  If it’s not Apple under the radar, its Nike, or Adidas, or GE…who’s next?  Recent events concerning Apple Computers alleged lax supplier oversight and reported supplier human rights and environmental violations only shows a microcosm of the depth of the challenges that suppliers face in managing or influencing these issues on the ground.

To be fair, although the pollution is real and the threat of toxics contamination very real, it’s possible that Greenpeace may be sensationalizing Nikes and Adidas’s culpability.  In fact, neither company directly is involved with the key manufacturers labeled in the Greenpeace report.  The two manufacturers are the Youngor Textile Complex in Ningbo, an area near Shanghai along the Yangtze River Delta, and Well Dyeing Factory Ltd. in Zhongshan, China, along the Pearl River.  The Younger Group is China’s biggest integrated textile firm.

“Game on, Nike and Adidas.  Greenpeace is calling you out to see which one of you is stronger on the flats, quicker on the breaks, turns faster and plays harder at a game we’re calling ‘Detox’,” “Whether you’re ‘All in’ with Adidas or believe in the Nike motto to ‘Just do it,’ you can challenge the brand you wear to win the race to a clean finish.” -Greenpeace DeTox campaign’s website.

(from Greenpeace Report, "Dirty Laundry")

Both Nike and Adidas admitted jointly that said their work at Youngor is limited to cut-and-sew production — not “wet processing” such as dyeing and fabric finishing that Greenpeace says is the cause of the chemical discharge.  Greenpeace did not hide behind that fact but made the point (perhaps rightly so) that “As brand owners, they are in the best position to influence the environmental impacts of production and to work together with their suppliers to eliminate the releases of all hazardous chemicals from the production process and their products”.  I agree on the grounds that effective supply chain sustainability practices and corporate governance must be driven by the originating manufacturers that rely on deep tiers of suppliers and vendors for their products.

That being said, I think that to call out Nike and Adidas specifically (along with other companies like Puma) is to suggest that they are not doing the right thing as regards sustainability in the apparel industry.  For instance, Nike has learned from its mistakes if the past (especially on the labor/human rights side of social responsibility) and implemented aggressive governance frameworks and on the ground oversight programs.  Also, the  Nike Considered Index evaluates solvents, waste, materials, garment treatments and innovation, and the company has an internal working group constantly evaluating Restricted Materials lists.

Kick ’em when they’re up

Kick ’em when they’re down

Kick ’em when they’re up

Kick ’em all around- (Don Henley)

Chinese Laws and Regulatory Oversight- Not in Sync

As I noted recently, China is still in the “ramp-up” phases of economic development.  Plus it’s been evident for some years that enforcement of environmental laws and regulations by government agencies has not been on par with the intent of the laws.  According to the report, samples taken from the facilities contained heavy metals and alkylphenols and perfluorinated chemicals, which are restricted in the United States and across the European Union.  These chemicals have reproductive and hormone disruptive effects Therein lies another institutional problem…the laws in the home countries of the MNC’s are not in sync with those in the host manufacturing country- in this case, China.

Writing yesterday in China Hearsay, Beijing based lawyer Stan Abrams offered this up.  “This is a classic law versus CSR problem. The law here in China allows for this activity, yet the allegation is that this is a harmful activity. Should the companies in question merely follow the law or “do the right thing” and either sever ties with the polluter or pressure it to change its behavior?”

It’s likely that (for the foreseeable future) Chinese political and economic systems will remain focused on rapid development at all costs. So it’s critical that local/in-country government policies be aligned as well to support capacity-building for companies to self-evaluate, learn effective auditing and root- cause evaluation, institute effective corrective and preventive action programs and proactively implement systems based environmental management systems.

Multi-Sector Collaboration is the Answer

The apparel industry as a whole has taken a very proactive stance in looking at ways to redesign sustainably, produce its goods taking a cradle-to cradle perspective, and manage toxic chemical use and waste streams so that human and environmental exposures are minimized.  The multi-stakeholder Sustainable Apparel Coalition ironically includes Nike, the Gap Inc, H&M, Levi Strauss, Marks & Spencer, and Patagonia (some of whom are also being targeted by Greenpeace).  Over 30 companies have committed to collaborating in an open source way to drive the apparel industry in developing improved sustainability strategies and tools to measure and evaluate sustainability performance.  In addition over 200 outdoor products companies from around the world have been working together on sustainability best practices and standards, called the Eco-Index, led by the Outdoor Industry Association and European Outdoor Group.

The most successful greening efforts in supply chains in “tiger economies” are based on value creation, sharing of intelligence and technological know-how, and support in developing environmental regulatory frameworks that have the force of law. MNC’s and contract manufacturers can collaboratively strengthen each other’s performance, share cost of ownership and social license to operate and create “reciprocal value”.  Greenpeace wants MNC’s to establish “  clear company and supplier policies that commit their entire supply chain to the shift from hazardous to safer chemicals, accompanied by a plan of action that is matched with clear and realistic timelimes”.  Agreed with that sentiment, but many hurdles remain to cross.

Youngor Textiles, Adidas and others cited in the report have not hidden from the findings, and Youngor has committed to working jointly with Greenpeace to find a workable solution to remove potentially harmful toxics from the apparel manufacturing supply chain.  Solving this problem on the ground will take a multi-stakeholder effort to 1) balance contractual arrangements among many parties, 2) craft good law and enforceable regulations, 3) drive clean chemistry, 4) redesign production processes and use advanced manufacturing technology, and, 5) develop, implement and maintain robust contactor monitoring.

I will be watching carefully to see how this collaborative effort with an NGO giant and big business unfolds…er, should I say “unfurls”.

What’s Consumer and Business Responsibility Got to Do with Economic Prosperity & Sustainability?

7 Jun

The past few weeks I have been wrapped up in some circle of life issues involving my aunt and mother, so writing has taken a back seat.  During this time,  I have been observing the dissolution and redistribution of my 91-year-old aunts’ household and supported the challenge of deciding which belongings should go temporarily with my 86-year-old mother to assisted living.   My current role as a duly appointed member of the ”sandwich generation” is fulfilled too when my teenage daughter asks to go on yet another trip to the mall to view the latest fashions.  All these events have brought to mind the material possessions that we accumulate over the course of our lives, the ingrained value we place on “things” and how they somehow give us more pleasure or worth.

Ironically, last week I also had the chance to participate in a number of one on one and group discussions revolving around the role(s) that we as consumers have in managing resources, waste generation and sustainable development.  I weighed in on the responsibility that consumers have in the 21st century supply chain (related to conflict minerals), just as I had mentioned in a keynote speech to the European Petrochemical Association this March.  Other participants reflected on how individuals bear a high degree of responsibility for the explosive growth in electronic and other consumer product waste.

What is abundantly clear is that we (as consumers) are all accountable for our own individuals actions in deciding what we buy, how much, how long we keep and maintain what we do have, and what we replace it with.  From cell phones, to cars, to clothes and home products, Western society has lost the passion for “thrift”.  I believe, like my parents generation did, that thrift is one of the key principles that built this great nation, but it has seemed to have gotten shoved aside in the name of consumerism and  growth,  which by the way is different than prosperity.  Of course Keynesian economists will take me to the woodshed about the meaning of  thrift in growing an economy. According to an article by the CATO Institute, ” The paradox of thrift refers to how–in the Keynesian model of the economy–an increase in saving reduces production and employment. This supposedly occurs because a decrease in spending leads to a decrease in employment, which leads to a further decrease in spending, which leads to a further decrease in employment, which leads to a yet further decrease in spending, and so on. Thus, if people try to increase their saving, there will supposedly be a decrease in spending, and a fall in employment and production.”

Prosperity versus Growth?

“Economic growth is supposed to deliver prosperity. Higher incomes should mean better choices, richer lives, an improved quality of life for us all. That at least is the conventional wisdom. But things haven’t always turned out that way.” 

So states Professor Tim Jackson (Director of the Research group on Lifestyles, Values and Environment (RESOLVE) at the University of Surrey) in a very important and compelling work, Prosperity without Growth.  The research was commissioned in 2009 by the U.K. Sustainable Development Commission and puts in focus the rather serious nature of what “progress” really is in society and the norms on which its measured.

Courtesy Christian Science Monitor

The economic slump of the last three years has also sharpened this debate over whether more is better, whether growth in consumer goods and spending really supports a sustainable economy and whether the environment and human rights are placed in harm’s way in the name of economic growth.  As Jackson notes, “The profit motive stimulates a continual search by producers for newer, better or cheaper products and services. This process of ‘creative destruction’, according to the economist Joseph Schumpeter, is what drives economic growth forwards.”   The past several years have prompted a series of key questions that I’ll throw out here for thought:

  1. Has quantity in life trumped quality in life?
  2. Does producing more and having more truly lead to a prosperous economy and long-term sustainability?
  3. Does producing more and having more truly lead to a prosperous economy and long-term sustainability? Can we still flourish?
  4.  Does having more truly make us happier, lead more productive lives and allows us as a society to be the better social animals that we are wired to be?

All tough questions, and way more to ponder in the limits of this one post for sure.  But Professor Jackson’s commission report and follow-up book on the subject mirrored what was reflected the conversations that participated in last week.   Jackson himself admits that “Prosperity has undeniable material dimensions.  It’s perverse to talk about things going well where there is inadequate food and shelter (as is the case for billions in the developing world). But it is also plain to see that the simple equation of quantity with quality, of more with better, is false in general.”

I’ve no doubt that economic growth is vital for stimulating an economy that appears to be headed toward a dreaded “double dip” recession.  However, what is critical for policy makers, economists, the financial community and electorate to grapple with is what types of investments are best to lead us out of this morass and into a future that is stable and prosperous.  Jackson, among others has argued that “targeting that investment carefully towards energy security, low-carbon infrastructures and ecological protection offers multiple benefits [in other words a more sustainable, green economy]. These benefits include:

• freeing up resources for household spending and productive investment by reducing energy and material costs

• reducing our reliance on imports and our exposure to the fragile geopolitics of energy supply

• providing a much-needed boost to employment in the expanding ‘environmental industries’ sector

• making progress towards demanding global carbon reduction targets

• protecting valuable ecological assets and improving the quality of our living environment for generations to come.”

Producers vs. Consumers- Who Holds the Key?

So am I arguing in favor of a reaching a “steady state economy” with no growth?  To be honest, I’m not sure at this point.  There have been debates over this concept for generations, and I am no economist.  Jackson himself admits that no clear model exists for achieving economic stability without at least some measure of consumptive growth.  While goods producers have control over what they make, where they source their goods to make the things we buy, the “making” side of the economy is but one side of the debate that is in play here.  There is also the “using” side of the debate that drives deep in the social fabric and psyche of the consuming public. We as consumers can shape the debate around and effects that can have on the products that are made, mass-produced, sold and consumed.   This is perhaps the toughest nut to crack, because it’s the consumer that drives the demand that in turn drives production, which then drives consumption of resources, which of course determines the stresses on the environment.  You see, we hold the key…as the old Pogo cartoon says, “We have met the enemy and it’s us”.

In a recent article in the Guardian Sustainable Business Blog, Tim Jackson again weighs in on the strong psychological attachment that humans by nature have to material things and their feelings about the environment.  “People do indeed hold deeply felt motivations to protect the environment. Occasionally they can even save money by doing so. But powerful psychological forces still hold them in thrall. The creeping evolution of social norms and the sheer force of habit conspire to lock us into expanding material aspirations.”

You see, letting go of things that make us feel good is hard.  But the instant gratification that comes with these choices has undoubtedly led us all down a slippery slope, which only we can muster the power to crawl back up.  But only if we make sound, greener choices that recognize a balance between consumption, thrift and ecological limits.

These questions and issues, among others will be reflected upon to some degree this week at Sustainable Brands ’11 in Monterey CA.  I’ll be there also with over 750 other sustainability, corporate social responsibility, consumer marketing/ branding and industry professionals to learn, communicate and exchange ideas.  Look for my occasional tweets (@DRMeyer1) and observations as the event rolls along.