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

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.

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

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.

Lean Design, Lean Manufacturing, Lean Inventory/Supply Management – A Sustainability “Trifecta”

Source (Popular Mechanics)

You’d have to be living in a mountain cave or vacationing on the south coast of France to not know that world stock markets are being whipped around these past two weeks.  The USA Today has attributed what’s been happening in the markets here in the U.S. along seven key elements, all of which is related more to external factors such as the European money woes, general investor fear and lack of policy direction from the federal government.

The general market fear and scurrying for shelter reminds me that when hikers are caught in a sudden storm, they often seek shelter in a “lean-to” or other protective cover until the skies clear.

I thought that in light of the economic body slamming that has been going on this past week, it’s worth reflecting on some efficiency-based ways that  businesses can use to overcome (or at least buffer) some of the external factors that are causing such economic uncertainty.  Like the hikers seeking shelter from the storm, there are some “lean-to”-like steps that company’s can take to exert some control and influence — and it all relates to a leaner, greener, smarter enterprise.

The Lean and Green Enterprise

Last winter I wrote about how importance a “lean and green” enterprise was in establishing a smarter, leadership position in a rapidly changing global marketplace.  I noted then that a 2009 study suggested that “lean companies are embracing green objectives and transcending to green manufacturing as a natural extension of their culture of continuous waste reduction, integral to world class Lean programs.”  Lean was more rapidly accomplished with a dedicated corporate commitment to continual improvement, and incorporating ‘triple top line’ strategies to account for environmental, social and financial capital.  I also argued by looking deep into an organizations value chain (upstream suppliers, operations and end of life product opportunities) with a ‘green’ or environmental lens, manufacturers can eliminate even more waste in the manufacturing process, and realize some potentially dramatic savings

So I was reminded this past week that Lean in design, Lean in manufacturing, and Lean in inventory can individually or collectively be key success factors in managing waste in all its many forms.  Collectively, this can have a measurably positive effect on a company’s financial, and hence, business performance.  A couple of recent articles touched on this topic this week while you were watching your 401(K) equity or stock value tank.   But first let’s touch on Lean Design.

Lean Design

I came across an older but very relevant article written in the aftermath of the Internet stock crash in the early 2000’s.  The article described product development as involving “two kinds of waste: that associated with the process of creating a new design (e.g., wasted time, resources, development money), and waste that is embodied in the design itself (e.g., excessive complexity, poor manufacturing process compatibility, many unique and custom parts).”  The article cautioned that because the design process is the cradle of creative thinking, designers needed to carefully watch what they “lean out” or risk cutting off the creative process to reduce waste.  What has happened in the ensuing years has been an incredible emphasis on “green design” that focuses on full product life cycle value, such that “end of life management” considerations have taken on a more relevant and embedded nature in manufacturing.

A Lean Manufacturer Can be a Sustainable Manufacturer

In yet another recent article by manufacturing consultant Tim McMahon (@TimALeanJourney), he notes that “Lean manufacturing practices and sustainability are conceptually similar in that both seek to maximize organizational efficiency. Where they differ is in where the boundaries are drawn, and in how waste is defined”.  He notes, as I have in my past posts, that Lean manufacturing practices, which are at the very core of sustainability, save time and money — an absolutely necessity in today’s competitive global marketplace.

The key areas to control manufacturing waste and resource use during the design and manufacturing cycle, can be broken down  and managed for waste management and efficiency in the following five ways:

Reduce Direct Material Cost – Can be achieved by use of common parts, common raw materials, parts-count reduction, design simplification, reduction   of scrap and quality defects, elimination of batch processes, etc.

Reduce Direct Labor Cost – Can be accomplished through design simplification, design for lean manufacture and assembly, parts count reduction, matching product tolerances to process capabilities, standardizing processes, etc.

Reduce Operational Overhead –  Efficiencies can be captured by minimizing impact on factory layout, capture cross-product-line synergies (e.g. a modular design/ mass-customization strategy), improve utilization of shared capital equipment, etc.

Minimize Non-Recurring Design Cost – Planners and practitioners should focus on platform design strategies to achieve efficiencies, including: parts standardization, lean QFD/voice-of-the-customer, Six-Sigma Methods, Design of Experiment, Value Engineering, Production Preparation (3P) Process, etc.

Minimize Product-Specific Capital Investment through: Production Preparation (3P) Process, matching product tolerances to process capabilities, Value Engineering / design simplification, design for one-piece flow, standardization of parts.

Can a Lean Inventory Management Drive Sustainable Resource Consumption?

Business Colleague Julie Urlaub from Taiga Company  (@TaigaCompany) summarized a post in a recent Harvard Business Review by green sage Andrew Winston (@GreenAdvantage).  The article, Excess Inventory Wastes Carbon and Energy, Not Just Money describes how the global marketplace “ is sitting on $8 trillion worth of ‘for sale’ inventory [the U.S. maintains a quarter of that  inventory].  These idle goods not only represent a tremendous financial burden but an enormous environmental footprint ” that was generated in the manufacturing of those goods.  Mr. Winston maintains that “If we could permanently reduce the amount of product sitting idle, we’d save money, energy, and material.”  The problem is predicting and managing inventory in such fickle times.   Winston went on about new predictive tools being advanced by companies that hold promise in nimbly driving inventory demand response up the supply chain.  For instance, he noted that “ using both demand sensing software and good management practices, P&G has cut 17 days and $2.1 billion out of inventory. All that production avoided saves a lot of money in manufacturing, distribution, and ongoing warehousing. It also saves a lot of carbon, material, and water.”

What Mr. Winston found shocking though (me too!) was that “even with the fastest-selling, most predictable products, the estimates are off by an average of more than 40 percent. Imagine that a CPG company believes that 1 million bottles of a fast-turning laundry detergent will sell this week. With 40 percent average error, half the time sales will actually fall between 600,000 and 1.4 million bottles. And the other half of the time sales will be even further off the mark.”  The process becomes self perpetuating and the inventory racks up along with the parallel environmental footprint, unless somehow the uncertainty can be better predicted.  While companies like to have on hand what Mr. Winston referred to as “safety stock”, I have come to know as reserve inventory driven by “just in time” ordering .  But that process was shown to have its own flaws such as when orders for goods dried up overnight in 2008 and when it came time to ramp up in early 2010, part counts were insufficient to meet the rising demand.

I really pity the supply chain demand planner, who like the weatherman is subject to the fickle nature of an unpredictable force.  Winston wrapped up his article by stating that “ reducing the inventory itself could be the greenest thing [logistics executives] can do”.  I had the chance to speak and attend the 2010 Aberdeen Supply Chain Summit where demand response planning was discussed at length and where green supply chain issues were recognized as one of many key attributes in effective supply chain management.  In such a volatile economy, its vital that companies keep inventory management in mind as a way to leverage its costs and simultaneously look toward environmental improvements that can reduce waste.

Partnering for Progress

A relatively recent pilot program in the State of Wisconsin just shows how partnering to create a lean focused sustainable manufacturing cluster can have enormous dividends.  According to a recent article in BizTimes.com, the Wisconsin Profitable Sustainability Initiative (PSI) was launched in April 2010 by the Wisconsin Department of Commerce and the Wisconsin Manufacturing Extension Partnership (WMEP). The goal according to the article is “to help small and midsize manufacturers reduce costs, gain competitive advantage and minimize environmental impacts”.  Forty-five manufacturers participated in over 87 projects evaluated. These projects focused on “evaluating and implementing a wide range of improvements, including reducing raw materials, solid waste and freight miles, optimizing processes, installing new equipment and launching new products.  The initial results show that the projects with the largest impact do not come from the traditional sustainability areas such as energy or recycling. Instead, outcomes from the initial projects suggest that transportation and operational improvements are places where manufacturers can look to find big savings, quick paybacks and significant environmental benefits.”

The program is projected to generate a five-year $54 million economic impact, including: $26.9 million in savings, $23.5 million in increased/retained sales and $3.6 million in investment.

Lean design,  Lean manufacturing, Lean inventory management – a Waste Containment and Efficiency “Trifecta”

Together, lean design,  lean manufacturing  and effective, lean inventory management offer a “trifecta” approach for industry to identify, reduce or eliminate and track waste.  Effective use of these tools cannot only drive both in how the product is designed and  produced but offers opportunities all the way up the supply chain to manage effective inventory and resource consumption. As the University of Tennessee studied concluded,  the implications of lean strategies are 1)  Lean results in green; and 2) Lean is an essential part of remaining competitive and maintaining a quality image.  Put the two together and a company can virtually be unstoppable…or a least a bit more recession-proof and “shelter from the storm”.

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

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 11^th 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)

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’.

A Systems Perspective on Sustainability, Supply Chain Management- The Intelligent Choice

As we approach the mid-point in 2011, the tea leaves of the economic recovery have ‘sustainability’ in supply chain planning and management firming up as a key “rebuilding” block in company activities.  Two recent studies from two different continents bear that notion out.  First, consultancy BearingPoint Ireland has released a report which says two-thirds of companies surveyed in Europe believe that a green supply chain is a strategic priority. The report, entitled Green Supply Chain: from awareness to action, is the fourth of a series of “supply chain monitors” from the private consultancy.  The study was conducted among about 600 European decision-makers by Novamétrie between 2010 and 2011, with a position within Supply Chain, Sustainable Development or Industrial Divisions.   Key industries captured includes: consumer goods, transportation, construction, automotive, industrial goods, retail, energy and utilities, chemicals, IT/electronics and pharmaceuticals, among others.

The goal of the report, according to the authors was to summarize “the evolution over the past two years in terms of mindset, maturity and actions efficiency [and] explores the green Supply Chain practices in Europe, in order to identify the significant improvements in the most representative industries. The results clearly underline a growing interest of executive managements in developing products with a low environmental impact. What was seen as a constraint is now considered as an opportunity.”

Executive Management Mandates, Reputational Risk Management Are Key Drivers

A notable “inflexion” occurred between this survey round and prior surveys.  For instance, in 2008, findings suggested that supply chain ‘greening’ was primarily being driven by important environmental and regulatory developments (such as REACH, WEE, RoHS or the European Union Emissions Trading Scheme).  Now, with compliance programs associated with these initiatives firmly entrenched or in initial development, the drivers appear to be shifting toward meeting internal executive management commitments and addressing reputation management and/or consumer demands.  In other words, according to the report, “Environmental actions presently address new constraints and motives, which are more mature and integrated to companies’ decision processes.” Key findings from BearingPoint’s report include:

• 70% of surveyed companies declare that green Supply Chain is a true economical lever.
• For 47% of the companies, the return on investment of a green Supply Chain is reached within 3 years.
• More than half of European companies now use environmental criteria to assess their Supply Chain performance: share of recycled packaging material, CO2 emissions.
• Two-thirds of companies adopted or plan to adopt a green policy for their purchases.
• Manufacturers must be able to measure and reduce their carbon footprint if they are to succeed on export markets
• Over half of the respondents in the survey said they did not renew contracts with suppliers who did not respect their green charter.
• Buyers are preferably choosing suppliers with certified processes such as ISO 14001.

According to Bearing Points recent press release, Irish Exporters Association chief executive, John Whelan, said: “There is no question that Irish businesses which produce transparently environmentally positive products, delivered by carbon neutral logistics services will succeed on international markets.”

Sustainability Drivers Both Inside and Out the ‘Four Walls’

In yet another study, Prime Advantage, a buying consortium for midsized manufacturers, unveiled its seventh (2011) Prime Advantage Group Outlook (GO) Survey.  This survey queried small and midsized North American manufacturers, and found that more than 80 percent of North American companies surveyed indicated that they developing more sustainable or energy-efficient products largely driven by customer requirements and compliance regulations.  According to the study, “the biggest driving factors behind these changes are customer requirements (80 percent), followed by compliance regulations (53 percent) and shareholder directives (12 percent). In addition, 57 percent of respondents have also started buying more sustainable indirect products for internal consumption.”

A Systems Perspective Breeds Competitive Intelligence

The Bearing Point study made a statement that caught my eye and for which I wholeheartedly agree.  Identifying with a systems-based mindset that recognizes the intrinsic and realized value sustainability-focused business management is a critical fulcrum for green supply chain practices. I noted in a post last fall that The Fifth Discipline and The Necessary Revolution author Peter Senge argued (in the October Harvard Business Review) that to make progress on environmental issues, organizations must understand that they’re part of a larger system. Senge also makes a great point that companies will be in a better competitive position if they understand the larger system that they operate within and to work with people you haven’t worked with before.

I’ve cited companies like Hewlett-Packard and Danisco as supply chain innovators in their product sectors.  These companies, among other innovators like Intel, P&G, IBM, GE and others, who’ve viewed supply chain in a systematic or holistic manner, organizations successfully have been applying that “big-picture thinking” needed to be truly innovative. Doing so can create leverage points that companies never realized they had before with their suppliers.

Clearly, the environmental (and often the social) footprint of a product extends beyond the four walls of the company who “brands” the product.  This footprint extends upstream and downstream, and must capture, control or influence inputs and outputs all along the way.  Some of the largest footprints (like energy and carbon) lie upstream or in the final hands of the consumers.  This is why leading companies are rethinking the global extents of their supply chains, exploring local sourcing options and implementing other operational efficiencies.

The results of the recent surveys indicate that companies in a wide number of sectors are waking up to the fact that sustainability is more than business innovation- it’s business intelligence.

“Eeny, Meeny, Miny, Moe”- Selecting Best Conflict-Free Minerals Supply Chain Sourcing Strategies (Part 3)

(Photo courtesy of Julien Harneis under a Creative Commons license)

Part 1 of this series highlighted the issues, regulatory and supply chain complexities and efforts by industry to tighten the control of precious minerals sourcing.  Part 2 of the series dove a bit deeper into efforts by key manufacturers in how they are auditing, validating and tracing the conflict minerals supply chain.  The post also presented some ideas on and what responsibilities non-governmental organizations have had in shaping the debate over conflict minerals, and the roles or responsibilities that we as consumers should take in this thorny human rights- environmental impacts meets consumer products issue.

The final part of this series highlights specific international guidance and steps that industries and consumers can and are taking to proactively address supply chain minerals sourcing and maintain a high level of corporate social responsibility.

But before I go further, a postscript to Part 2.  Following my second post, I was contacted by Suzanne Fallender of Intel with an update on the company’s efforts that I described in the second post.  In her response, for which he apologized for the delay, she provided a copy of a white paper prepared and posted in late April.  In it, the company states “we continue to work diligently to put the systems and processes in place that will enable us, with a high degree of confidence, to declare that our products are conflict-free. Our efforts on conflict minerals are  focused in three main areas: (1) driving accountability and ownership within our own supply chain through smelter reviews and validation audits; (2) partnering with key industry associations, including the Electronic Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI); and (3) working with both governmental agencies and NGOs to achieve in-region sourcing”. 

The Intel white paper concludes by stating “From the time we became aware of the potential for conflict-metals from the DRC to enter our supply chain, we have responded to this issue with a sense of urgency and resolve. We have approached this issue like we would address other significant business challenges at Intel.”  I believe Intel and their efforts to date bear that out.  They are encouraging comments on their plans and efforts, which can be submitted at http://www.intel.com/about/corporateresponsibility/contactus/index.htm.

By the way, I am still waiting on Apples reply to my inquiries.

Comparing Proposed Steps to Action

As mentioned in the second post, the OECD guidance, Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, serves as a common reference for all suppliers and other stakeholders in the mineral supply chain.  The guidance also meshes well with current industry-driven schemes like the EICC and GeSi and AIGG guidance, and clarifies expectations regarding responsible supply chain management of minerals from conflict-affected and high-risk areas.

The OECD guidance approaches minerals sourcing and supply chain management from a “risk management” and “due diligence” perspective and offers a framework to promote accountability and transparency.  A fundamental problem with the OECD guidance is that it’s voluntary.  And with any voluntary guidance, there’s reluctance or little pressure to fully commit to implementation, unless key market or financial drivers threaten or pressure companies to do so.  Also, what is challenging as mentioned before are the many steps and sometimes fragmented nature of the minerals sourcing supply chain.  The myriad of hands that minerals often pass through on the way to the smelter, and in turn on to intermediate and final product manufacturers is numerous and admittedly difficult to accurately trace. Risk levels are particularly high when minerals are derived from the artisanal mining operations (as compared to larger scale operations).  Consequently, being able to control and influence risk along the entire minerals sourcing network and assure that adequate due diligence mechanisms are in place to keep track of intermediary activities is daunting to say the least.  All the more reason to seek ways to streamline the sourcing process by limiting the number of materials exchanges, stepping up oversight, and disengaging activities with underperforming  or high risk suppliers

The OECD suggests a five step framework for risk-based due diligence in the mineral supply chain  that strongly advocates for traceability and accounting systems for both upstream and downstream supply chain organizations:

Step 1: Establish strong company management systems

Step 2: Identify and assess risks in the supply chain

Step 3: Design and implement a strategy to respond to identified risks

Step 4: Carry out independent third-party audit of smelter/refiner’s due diligence practices

Step 5: Report annually on supply chain due diligence

In some contrast to the OECD guidance, the Enough Project offers its own set of valuable ideas and frameworks for the electronics sector and others working in east Africa to follow.  Enough Project, in its recent report entitled  Certification: The Path to Conflict-Free Minerals from Congo , states that international certification efforts are vital to long-term solutions to conflict minerals issues  and on assuring revenue “transparency”.  The Enough Project offers its “five key lessons that should be incorporated into a certification scheme for conflict minerals:

• A “conductor” is needed to convene a high-level diplomatic partnership on certification and help transform words into action. A “conductor”—a leader with gravitas and political support—is needed to bring stakeholders to the table and to issue a call to action. President Bill Clinton provided a precedent for this when he called together companies and sweatshop labor campaigners in 1996, resulting in the Fair Labor Association certification process.
• Certification should be governed and funded by a multi-stakeholder body that includes companies, governments, and NGOs. The legitimacy of a process rests on a multi-stakeholder governing and funding framework that ensures accountability.
• Certification must include independent third-party auditing and monitoring. Regular independent audits assure the public that the process is credible, and on-the-ground monitoring ensures accuracy.
• Transparency of audits and data is essential to making certification work. Certification processes are moving rapidly towards full disclosure of data and audits.
• Certification must have teeth. Certification can only work if its standards have meaning on the ground and are enforced through penalties for noncompliance.”

The Enough Project report calls on the United States, through Secretary of State Hilary Clinton, to convene a senior partnership on certification with industry and the International Conference on the Great Lakes Region (ICGLR).  The report also states that “the United States must act quickly, as minerals traders in Congo are already seeking alternative, opaque markets for their minerals. An internationally accepted certification process would deter this development.”  Last week, a letter writing campaign launched encouraging U.S. Secretary of State Clinton to state a public U.S. position on this issue and convene a high-level partnership on certification with leading electronics and end-user companies, together with Congolese President Kabila and regional governments.  The goal of this summit would be “aimed at unifying the regional and industry-led initiatives and gaining consensus on a system of independent checks on the ground”.

Meantime, Conflict-Free Smelter the industry protocols proposed and under development by the EICC and GeSi are focused on two key areas targeted at what they characterize as the “pinch point” in the supply chain- the smelter:

Business Process Review: Evaluate company policies and or codes of conduct relating to conflict minerals

Material Analysis Review: 1) Conduct a complete material analysis to demonstrate that all sources of materials procured by the smelting company are conflict-free; 2) Evaluate whether source locations are consistent with known mining locations; and 3) Establish whether material identified as “recycled” meets the definition of recycled materials.

The CFS program is moving forward in spite of the delay by the SEC for final rulemaking.   CFS assessments for tantalum began in the fourth quarter, 2010 and are expected to be posted on the EICC website starting this month.  Tin, tungsten and gold are planned to commence later this year.

What Makes a Good Auditor?

In addition to “what” types of certification schemes are needed and how they should be administered or governed, there’s the matter of “who” should do the auditing and third- part certifying.  What I see as critical here is Step 4 of the OECD process and Step 3 of the Enough Projects documents, both of which the EICC and GeSi programs are attempting to fulfill.  However, key to this audit process is the “independence” and competency factor as well as what qualifications auditors have to perform these assessments.  The Enough Project gleaned through numerous frameworks in order to develop its proposed certification approach, which deserves careful consideration.  In addition, while the SEC has yet to clarify the specifics of the Dodd-Frank provision, ELM Consulting’s Lawrence Heim in a recent AgMetal Miner series, notes:

… There are a number of auditor certifications that could be considered applicable to this scope of audit, but none should be considered to automatically qualify an auditor for these engagements. These audits require a unique blend of expertise in general auditing processes/procedures, environmental knowledge, accounting basics, chemistry/industrial processes, procurement controls, contracts and supply chain fundamentals. Finally, the auditor must be able to execute the engagement in accordance with the auditor/engagement standards of the Government Auditing Standards, such as the standards for Attestation Engagements or the standards for Performance Audits (GAO–07–731G) GAO-07-731G contains standards on auditor independence.

Associations consist of multiple members who have varying degrees of business relationships with each other and the audited entities, putting the auditor in a position of serving “multiple masters” relative to influence over the audit scope, process, information, report and payment. Our research and inquiries to qualified experts in SEC auditing requirements indicates that there appears to be no precedent in any other legally-required audit in the US that has been fulfilled in this manner.

Comparisons and Contrasts

I had the chance last week to listen in on an informative webinar by STR Responsible Sourcing.  The company is an accredited monitor for numerous social certification programs, and partners with many organizations that share our mission of assuring responsible sourcing practices.  The company compared governmental, regional, industry schemes for addressing minerals mined in conflict regions.  The figure below summarizes each of the initiatives and target areas.

According to STR, there are a series of challenges lying ahead for both upstream suppliers (e.g. miners (artisanal and small-scale or large-scale producers), local traders or exporters from the country of mineral origin, international concentrate traders, mineral re-processors and smelters/refiners) and downstream users (e.g. metal traders and exchanges, component manufacturers, product manufacturers, original equipment manufacturers (OEMs) and retailers) of precious minerals.   Downstream Supply Chain parties are faced with some unique challenges, namely:

• No clearly defined requirements of “due diligence”
• No guarantees for “conflict-free”
• Limited transparency in upstream supply chain
• No traceability in downstream supply chain
• No generally accepted standard / certification

For the upstream supply chain, primary challenges include:

• Complexity of the supply chain
• Difficulty to include small and artisanal mining
• Challenges for implementation of traceability schemes in the DRC due to militarization of mines and widespread lack of formalization of small scale mining

Meanwhile, according to STR,  the downstream supply chain might consider the following approaches to start on the path of responsible sourcing of precious minerals:

• Implement a procurement policy and due diligence procedures
• Develop consistent supplier engagement processes (awareness raising, communication and training) throughout the supply chain
• Monitor downstream suppliers’ due diligence procedures and gather data on organization of supply chain (desktop or onsite)

For the upstream supply chain consider the following:

• Support certification schemes and industry efforts
• Join certified trading chains / buy certified products
• Government lobbying

Where to Start

If you are a manufacturer of electronics, jewelry, automotive parts or other goods that may be subject to sourcing through the DRC or other conflict prone areas of the world, consider (at a minimum), the following steps:

• Read the OECD and Enough Project guidance documents to understand the issues and risks associated with responsible sourcing
• Stay tuned into the progress that your industry associations are achieving to bring a better sense of responsible management to this issue
• Follow the development of the SEC conflict mineral guidelines
• Work with procurement, operations, legal, environmental and communications staff to craft a procurement policy & selection of supplier selection process (along the lines that Intel, HP, Motorola and others have)
• Request origin and chain of custody documentation for purchases to assure traceability
• Establish adequate record-keeping system
• Ensure that relevant staff is trained on procurement policies, procedures to receive material and identification of potential conflict material

If I were to look at where industry was a few short years ago on this issue compared to now, there’s no doubt that increased minerals sourcing tracing and accountability in conflict-free minerals is improved.   The system as presently planned, in pilot stages or in process certainly has some flaws as most new initiatives have.  But given the industry, region, national and international levels of cooperation that is rapidly becoming evident, I’ve no doubt that the positive outcomes will be great.

Aaron Hall, Policy Analyst at the Enough Project in a recent interview with Resource Investing News said “It’s a start. You have to take small steps forward. The fact that governments and industry are thinking about this shows concern and to a large extent they are willing to tackle the problem,” said Hall. “I think it’s remarkable that the multiple stakeholders involved in this process have been able to come together in such a short amount of time and make progress towards setting up a regional certification regime for these minerals.”

Conflict Minerals- Can Consumers, Manufacturers & Policy-Makers Rise to the Challenge? – Part 2

Part 1 of this series highlighted the issues, regulatory and supply chain complexities and efforts by industry to tighten the control of precious minerals sourcing.  This is especially critical in developing nations, where human trafficking, regional conflict and lack of environmental laws and basic human rights are the rule rather than the exception.  This post will look into a few examples of key manufacturers and efforts to date audit, validate and trace the precious minerals supply chain and what roles non-governmental organizations and we consumers have played so far in addressing this prickly issue.

“Conflict Areas” 101

The Organisation for Economic Co-operation and Development (OECD) issued a comprehensive guidance document in 2010 entitled Due Diligence Guidance for Responsible Supply Chains of Minerals From Conflict-Affected and High-Risk Areas.  In this document, the OECD defined conflict-affected and high-risk areas as identified by the presence of armed conflict, widespread violence or other risks of harm to people.

“Armed conflict may take a variety of forms, such as a conflict of international or non-international character, which may involve two or more states, or may consist of wars of liberation, or insurgencies, civil wars, etc. High-risk areas may include areas of political instability or repression, institutional weakness, insecurity, collapse of civil infrastructure and widespread violence. Such areas are often characterised by widespread human rights abuses and violations of national or international law.”

Recent efforts by global industry associations and grassroots efforts by non-governmental organizations such as the Enough Project and its Raise Hope for Congo initiative have shed a good deal of light on a previously ignored issue. Unlike other countries, ore extraction in the Congo is both cheap and lucrative for the militias that control many of the artisanal mines. There has been widespread reporting about how child laborers are kidnapped from neighboring nations to work under forced conditions in the mines, (where miners often work for an average of $1 to $5 per day). An excellent article that describes the political and institutional issues that affect conflict affected areas, see the article Behind the Problem of Conflict Minerals in DR Congo: Governance by the International Crisis Group.  This analysis places a lack of governance  within the Congo squarely as a cause of the rampant growth of the conflict minerals trade and diversion of proceeds from sale to armed militias.  Despite the “technical assistance” the author says the country receives from outside organizations, this “is not enough to compensate for the notorious lack of administrative capacity”.

Industry Under the Microscope

Courtesy David Lieberman/Flickr (Creative Commons license)

The intensity of recent news reports and discerning lack of detail in publicly reported data to date begs the question- have Intel and Apple really completely taken the “conflict” out their precious minerals sourcing, as recent headlines suggested?  Or has their recent announcement been taken out of context and only another (positive) phase in their supply chain sourcing strategy.   And if neither actually procures these materials from the Congo, are they merely shifting the issues to Asia?

Intel

To start answering these questions, I looked more deeply into the efforts to date by Intel to “get the DRC out” of the sustainable sourcing question.  According to Suzanne Fallender of Intel on their corporate social responsibility blog, the company has made significant strides since 2009 to stay ahead of this issue.  Specifically, according to Ms. Fallender (who I attempted to reach out to but had not yet returned my inquiries), Intel initiated a series of efforts in 2009 (prior to the CFS program), including: 

• Posted its Conflict-Free Statement about metals on its Supplier Site
• Requested that its suppliers verify the sources of metals used in the products they sell us
• Increased the level of internal management review and oversight, as well as  transparency and disclosure on this topic in this report
• Engaged with leading NGOs and other stakeholders to seek their input and recommendations.
• Hosted an industry working session at its offices in Chandler, Arizona in September 2009 with more than 30 representatives from mining companies, traders, smelters, purchasers, and users of tantalum to address the issue of conflict minerals from the DRC.
• Funded a study with EICC members on defining metals used in the supply chain, and continues working on a similar project to increase supply chain transparency for cobalt, tantalum, and tin.

Important to note is that Intel was the first company in the electronics supply chain to conduct on-site smelter reviews. Since the end of 2010, Intel has visited more than 30 smelters to assess if any of its suppliers were sourcing metal from conflict zones in the.   According to Ted Jeffries, Director of Fab Services and Consumables at Intel (who I also attempted to reach for this article), he recently stated “I don’t know that we have a complete handle on the whole supply chain, but we at least have a better handle on the nuances”.   Despite a letter campaign to its suppliers, Intel elected to visit each site and see for themselves to verify what was being self reported. “For the most part, for the Intel supply chain, the smelters that we’ve visited have been very truthful. There have been little caveats here and there, but for the most part, we can trace all of their sources to plants in Australia, South America and other parts of the world,” Jeffries said at the Strategic Metals for National Security and Clean Energy Conference in Washington D.C. in mid March.

“It really takes someone stepping up to the plate and taking a leadership role and taking a risk on a strategy. We can sit around and debate these things until the cows come home and nothing will change. At the end of the day, if we want to move forward on this debate, someone needs to make a strategic decision and start moving in that direction”. -Ted Jeffries (Intel)

Apple and Hewlett-Packard

As I’ve reported in Part 1 of this series, the multitude of supply chain layers and sourcing channels developed over the years may be a difficult weave to untangle (often 5-10 layers between the mine and the end product).  Take Apple, who (according to its recently released 2011 Supplier Responsibility Progress report ) has 142 suppliers using tin; these suppliers source from 109 smelters around the world. As a key participant in the EICC/GeSi CFS initiative, smelter audits are in process.  Additional efforts to contact Apple supply chain and sustainable sourcing staff have been unanswered.  Unlike Apples sub-par sustainability efforts with its Chinese electronics supply chain, it’s heartening that the company is taking some leading action in this area.

Hewlett-Packard says, “[T]hese issues are far removed from HP, typically five or more tiers from our direct suppliers.”  But they have gone a long way in developing an aggressive auditing, tracking and reporting mechanism. HP and Intel have published the names of their leading suppliers for the 3T metals, as well as some smelters.  On April 8^th, HP issued its revised Supply Chain Social and Environmental Responsibility Policy as part of list supplier compliance program (which HP began developing ten years ago). HP’s suppliers are expected to “ensure that parts and products supplied to HP are DRC conflict-free”. Moreover suppliers are to establish policies, due diligence frameworks, and management systems, consistent with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.

Confronting Our Electronics Addiction

“I’m a Mac and I’ve got a Dirty Little Secret”.  That was the title of parody of the Apple ad campaign, issued last year by the Enough Project.  While the video took a soft-handed approach to helping consumers make a visceral connection with conflict minerals, it also suggested that consumers’ purchasing power can influence corporate sourcing behaviors…and they can.

Last year, Newsweek magazine looked at this issue square in the eye.   The article stated “It takes a lot to snap people out of apathy about Africa’s problems. But in the wake of Live Aid and Save Darfur, a new cause stands on the cusp of going mainstream. It’s the push to make major electronics companies (manufacturers of cell phones, laptops, portable music players, and cameras) disclose whether they use “conflict minerals… Congo raises especially disturbing issues for famous tech brand names that fancy themselves responsible corporate citizens. As Newsweek also reported, the Enough Project and its allies “believe awareness drives better policy. So as we lovingly thumb our latest high-tech device, perhaps some self-reflection: after all, the final point in the supply chain is us.”

As an effort to raise consumer awareness of efforts that companies are (or are not) taking, the Enough Project[1] surveyed the 21 largest electronics companies to characterize progress made toward establishing documented and verifiable conflict-free supply chains in Congo.  The project ranked electronics companies in and four other product sectors on actions in five categories that have significant impact on the conflict minerals trade: tracing, auditing, certification, legislative support, and stakeholder engagement.  Four levels of progress (ranging from Gold Star to Red) were established based on efforts to date and suggestions to shore up perceived weaknesses.  The user-friendly ranking can be used by consumers to support purchasing decisions and offers a way to get in contact with each company to communicate calls to action. 

Enough Projects analysis (as shown in the graphic) indicates that six electronics companies are leading industry efforts to address conflict minerals, while two-thirds of the appeared to be taking limited action.  This graph also suggests that the bottom -third are way behind the industry curve.

Meanwhile, the auto, jewelry, industrial machinery, medical devices, and aerospace industries are well behind the electronics sector and only now beginning to address the role that conflict minerals may play their respective supply chains.  I’ll be watching with interest what the Automotive Industry Action Group does.  So the opportunity for direct end-consumer advocacy to influence corporate social responsibility in sourcing is bountiful.

Evidently, the biggest challenges to grabbing the conflict minerals issue by the reins is in untangling the convoluted supplier network, building a robust product traceability and independent verification process, and enacting sound policy that drives accountability and transparency among all stakeholders.  Not an easy task, but compared to years past, a vast improvement for sure.  The final part of this series will highlight specific international guidance and steps that industries and consumers can continue taking (while we wait for the SEC rules to get finalized) to proactively address supply chain minerals sourcing and maintain a high level of corporate social responsibility.

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[1]  The Enough Projects focus is on conducting field research, consumer and issues advocacy, and communications to support a grassroots consumer movement.

Conflict Minerals- The “Perfect Storm” of CSR, Sustainability, Politics and Supply Chain Management- Part 1

Photo Courtesy of Sasha Lezhnev/Enough Project (under Creative Commons License)

Last week, it was widely reported that both Intel Corporations and Apple Computers had pulled the plug on sourcing of precious minerals typically used in the manufacturing of its high-tech products from the Democratic Republic of the Congo (DRC).  These basic building blocks of our cell phones, computers and other consumer electronics are widely known as “conflict minerals”, mainly because of the large spread connection the “artisanal” and industrial mines that produce the materials and the flow of money to supply arms to rebels fighting in the DRC.  Conflict minerals are to the 21st Century high-tech world what “blood” diamonds were to the 19th and 20th centuries.

Apple, Intel and other U.S. based corporations have signed onto the Conflict-Free Smelter (CFS) program, which applies to shipments of tin ore, tungsten, gold and coltan from Congo and its neighbors.  The CFS program demands mineral processors prove purchases don’t contribute to conflict in eastern Congo[1]. The regulations were developed by the Washington-based Electronic Industry Citizenship Coalition  (EICC) and Global E-Sustainability Initiative (GeSI) in Brussels (Belgium), representing electronics companies including Intel and Apple, Dell etc.  The program is being marshaled by the GeSI Extractives Work Group, and summarized on the EICC website.

Regulatory Framework

The CFS initiative was established in response to the conflict minerals provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010), signed into law last July (page 838 of the 848 page Act  to be exact). Section 1502 requires companies to make an annual disclosure to the Securities and Exchange Commission regarding whether potential conflict minerals used in their products or in their manufactur­ing processes originated in the DRC or an adjoining country. If the minerals were sourced from these countries, companies must report on the due diligence measures used to track the sources of the minerals if they were derived from the DRC or neighboring nations. In addition, the Act will require a 3^rd party audit to verify the accuracy of the company’s disclosure. Finally, a declaration of “DRC conflict-free” must be provided to support that goods containing minerals were not obtained in a manner that could “directly or indirectly … finance armed groups in the DRC or an adjoining country”.

The U.S. Securities and Exchange Commission was to have issued regulations to stem purchases of conflict minerals this week.  However, on Monday the SEC delayed issuance of the specific rules to the August-December timeframe.  Ultimately, U.S. companies will be required to audit mineral supplies next year to identify purchases that may be tainted by the Congo fighting, according to draft SEC regulations.

Two groups of companies will be directly impacted by the Conflict Minerals Law: companies that are directly regulated by the SEC, and companies that are not SEC-regulated, but are suppliers to impacted companies. Starting April 1, the CFS scheme began requiring due diligence and full traceability on all material from the Congo and other neighboring conflict zones.  Then, these audits, or at least their summaries, are to be incorporated into SEC regulatory findings (in some manner, as yet to be defined by the SEC).

California Steps Up

Meanwhile, this past Tuesday, committee of the California State Senate passed a Senate Bill 861 Tuesday that will curb the use of conflict minerals from Congo.  The 9-1 vote in the Governmental Organization Committee was a first step to making California the first “conflict-free state”.   If it passes the full assembly, the bill would prohibit the state government from contracting with companies that fail to comply with federal regulations on conflict minerals.

According to D.C. attorney Sarah Altshuller (@saltshuller) “The California legislation, even if passed, is unlikely to impact many companies: it would apply only to companies against which the SEC has filed a civil or administrative enforcement action. That said, California’s legislative activity reflects significant stakeholder concern, as well as advocacy activity, regarding the ways in which the sourcing of specific minerals may be contributing to the ongoing conflict in the DRC.”  Many engaged in the initial debate were concerned too that the state was too early to move forward in the absence of final SEC rules.

Supply Chain Ripples?

Courtesy of rasberrah (Creative Commons Licence)

Leon Kaye (@leonkaye), reporting last week in Triple Pundit, “The CFS identifies smelters through independent third-party auditors who can assess that raw materials did not originate from sources that profit off the conflict in the Democratic Republic of Congo.  Now Intel and Apple have stopped purchasing minerals from this region, which has transformed a voluntary program to what the president of an exporter association in Congo called “an embargo.”

Also, as  reported also last week by Bloomberg, “There is a de-facto embargo, it’s very clear,” said John Kanyoni, president of the mineral exporters association of North Kivu, in the Democratic Republic of Congo. “We’re committed to continue with all these programs. But at the same time we’re traveling soon to Asia to find alternatives.”

Defacto or preemptive, this move is long overdue and is bound to bring to light an elephant in the room that manufacturers and consumers alike have been quick to run from and avoid.   I’ve reported in recent posts my dismay over the approach that Apple has taken in addressing its supply chain sustainability issues, especially in Asia.  The fact that Apple has electively chosen, along with Intel to be a first mover to shake the supply chain up and seek to right some corporate social responsibility wrongs is encouraging.  However as my colleague Mr. Kaye correctly notes, neither may have had a choice.

As noted in an article by Future 500’s Juliette Terzieff  this week, “buyers for Chinese, Indian and other countries’ manufacturers who are not part of the CFS program or subject to U.S. legislative requirements coming in effect in early 2012 face no regulatory requirements to ensuring their purchases are conflict-free. This could prove particularly valuable for those seeking to sidestep controls given that Chinese demand for minerals like copper are predicted to rise 7% every year between 2010 and 2014.”

How Many Companies are affected?

In an excellent analysis by ELM Consulting and reported in a series on AgMetal Miner last fall, the amount of companies falling into the two previously mentioned categories is unclear.  According to the analysis:

For the first category, the SEC estimated that 1,199 companies will require a full Conflict Minerals Report. The methodology for determining this number is worthy of mention. The SEC began by finding the amount of tantalum produced by the DRC in comparison to global production (15% – 20%). The Commission selected the higher figure of 20% and multiplied that by the total number of affected issuers, which they stated is 6,000. (75 Fed. Reg. 80966.)  Clearly, this methodology does not consider many additional factors and the actual number of companies that will require the full audit is certain to be higher. For the second category – the suppliers – no estimate has been made.  But if one anticipates 10 suppliers (we have data indicating that the number of suppliers ranges from one to well over 100 for a single directly-regulated company; an average of 10 suppliers may be conservative, especially given the wide range of conflict mineral-containing products) for each company directly regulated, the number of additional companies impacted would be 12,000.

Verifying Mineral Sources Is Tough Work

Photo Courtesy of The Enough Project

As I noted in a past post on “materiality”, surveys taken from manufacturers suggest a lack of confidence in being able to confidently trace conflict minerals to the source (excluding the likelihood that illegal extracted minerals are also blending into the marketplace).  So you could see the difficulty in companies demonstrating due diligence in tracing the chain of materials flows from point of origin.

According to Treehugger ace writer Jami Heimbuch , plugging the supply chain to assure the at all minerals come from conflict free zones is no easy task.  Ms. Heimbuch reported that even Apple has noted how it is nearly impossible to know the exact source.

The proposed SEC rules do attempt to take on suppliers who have “influence” over contract manufacturers who provide name brand products for larger companies.  The proposed rules also apply to retailers of private-brand products and generic brands.   Finally there is some ambiguity around how scrap electronic waste is to be treated.   The SEC has not defined what is recycled or scrap material and manufacturers have a fair degree of latitude in their disclosure reports as to how they will treat scrap/recycled material.

The BBC reports that Rick Goss, of the Information Technology Industry Council (ITIC), whose members include Apple, Dell, Hewlett Packard, Nokia, states that “it will be impossible to make sure that not one single illicit shipment entered the supply chain….It is too complicated in terms of corruption – illegal taxation – to absolutely guarantee that an illegal shipment did not enter the supply chain, regardless of all private and public sector efforts,’ he warns. The minerals could go elsewhere. Asian smelters are sourcing from any number of countries.”

Summary

If it is impossible to track the source of all the minerals going into the stream, then the big question is what countries and companies will do to fix inadequate governance and systems.   And if U.S. companies shift their sourcing to other nations, will this be enough?  Is global manufacturing merely playing “kick the can”?

The conflict minerals issue just may be the “perfect storm” that combines elements of resource consumption, consumerism, corporate social responsibility, supply chain management, politics and product stewardship.

The next post in the series will dive a bit deeper into efforts by key manufacturers in how they are auditing, validating and tracing the conflict minerals supply chain and what responsibilities we as consumers have in lessening the impacts of this perfect storm.

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[1] As part of the Conflict-Free Smelter program, participating tech companies must provide third-party verification that their processors don’t contain commonly used minerals that fund armed conflicts in Central Africa, specifically the Democratic Republic of Congo. Minerals from Central Africa commonly sourced for tech components include gold, titanium, tungsten and tin; the DRC provides 5 percent of the world’s tin supply, as well as 14 percent of tantalum.

Navigating Sustainable Supply Chain Management in China Takes a Keen Eye & Business Sense

2010 marked a watershed moment in supply chain sourcing among worldwide manufacturers and retailers. Sustainability observers and practitioners read nearly weekly announcements of yet another major manufacturer or retailer setting the bar for greener supply chain management.  With a much greater focus on monitoring, measurement and verification, retailers and manufacturers Wal-Mart, Marks and Spencer, IBM, Proctor and Gamble, Kaiser Permanente, Puma, Ford, Intel, Pepsi, Kimberly-Clark, Unilever, Johnson & Johnson, Herman Miller among many others made major announcements concerning efforts to engage, collaborate and track supplier/vendor sustainability efforts, especially those involving overseas operations.  Central to each of these organizations is how suppliers and vendors impact the large companies’ carbon footprint, in addition to other major value chain concerns such as material and water resource use, waste management and labor/human rights issues.Meanwhile, efforts from China’s manufacturing sector regarding sustainable sourcing and procurement, was at best, mixed with regard to proactive sustainability.  From my perspective as a U.S. based sustainability practitioner (with a passion in supply chain management), the challenges that foreign businesses with manufacturing relationships in China can be daunting.  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.  Apple recently did the right thing by transparently releasing its Apple Supplier Responsibility 2011 Progress Report, which underscored just how challenging and difficult multi-tiered supply chain management can be.  But all is certainly not lost and many companies have in recent years begun to navigate the green supply chain waters in China. 

According to a World Resources Institute White Paper issued in the fall of 2010, China faces a number of supply chain challenges.  First, the recent spate of reports alleging employee labor and environmental violations can place manufacturing partnerships with global corporations at risk.  According to the report, Chinese suppliers that are unable to meet the environmental performance standards of green supply chain companies may not be able to continue to do business with such firms. Wal-Mart has already gone on record, announcing that it will no longer purchase from Chinese suppliers with poor environmental performance records. In order to be a supplier to Wal-Mart, Chinese companies must now provide certification of their compliance with China’s environmental laws and regulations.

Photo Courtesy of http://www.flickr.com/photos/scobleizer/ under Creative Commons license

Wal-Mart, like many other IT and apparel manufacturers also conducts audits on a factory’s performance against specific environmental and sustainability performance criteria, such as air emissions, water discharge, management of toxic substances and hazardous waste disposal. These actions are extremely significant as Wal-Mart procures from over 10,000 Chinese suppliers.  This increased scrutiny on environmental and corporate social responsibility through supplier scoring and sustainability indexing, says the WRI report may trump price, quality, and delivery time as a decisive factor in a supplier’s success in winning a purchasing contract.

Chinese Government Stepping Up Enforcement

Finally, what good news I hear about the depth of environmental regulations on the books in China is buffered by the apparent lax enforcement of the rules and regulations.  That is however appearing to change.  The WRI report indicated that the Chinese State Council is directing key government agencies, including the National Development and Reform Commission, the Ministry of Finance, and the Ministry of Environmental Protection to prohibit tax incentives, restrict exports and raise fees for energy intensive and polluting industries, such as steel, cement, and minerals extraction.   Also, it’s been reported in the past years that the People’s Bank of China and the Ministry of Environmental Protection are also working with local Chinese banks to implement the ‘Green Credit’ program, which prevents loans to Chinese firms with poor environmental performance records. In addition, the National Development and Reform Commission and the Ministry of Finance have issued a notice to all Chinese central and local governments to purchase goods from suppliers that are ‘energy efficient’. Finally, on a local level, governments have developed preferred supplier lists for companies producing environmental-friendly products for their purchasing needs.

Supplier Challenges Are Not Just Environmental

A China Supply Chain Council survey conducted in 2009 identified a huge gap in knowledge between (1) clear understanding of which environmental issues posed the greatest risk (2) what to do to manage significant environmental risks.  Also, nearly 40% of the company’s surveyed thought sustainability to be cost prohibitive, too complicated or where particular expertise was lacking don’t have the expertise (on the other hand 60% did!).  Two- thirds of respondents did consider sustainability to be a supply chain priority, although many were not confident of the return on investment.  However, more than half of the respondents reported that they had begun collaborating with their larger supply chain partners.    In fact, according to the World Resources Institute White Paper, despite increasing pressures to improve their environmental performance, Chinese suppliers face many financial challenges to operating in a more sustainable manner

World Resources Institute White paper notes increasing  non-environmental pressures, including: “Extended green investment “payback”: While improving resource consumption, such as energy and water, provides long-term cost savings, the payback for making such environmental investments may be as long as three years, which is financially impossible  for many Chinese suppliers. Lack of financial incentives from green supply chain buyers: Multinational buyers are often unwilling to change purchasing commitments and long-term     purchasing contracts to Chinese suppliers that make the investments to improve their environmental performance. Rising operational costs: Chinese suppliers face  rising resource and labor costs. For example, factory wages have increased  at an average annual rate of 25 percent during 2007 to 2010. Rising costs dissuade suppliers from making environmental investments which may raise  operating costs. Limited access to finance: The majority of Chinese suppliers are small and medium-scale enterprises (SMEs) with limited access to formal financing channels such as bank loans.  Chinese SMEs account for less than 10 percent of all bank lending in China,  and as a result, Chinese suppliers frequently do not have the capital to     make the necessary environmental investments. Intense domestic and global competition: Chinese suppliers face intense competition from thousands of firms, both  domestic and international, within their industries. This intense competition puts constant pressure on suppliers to cut costs, which can  include environmental protections, in an effort to stay in business.

Leveraging the Supply Chain to Gain “Reciprocal Value”

Leading edge, sustainability –minded and innovative companies have found “reciprocal value” through enhanced product differentiation, reputation management and customer loyalty.  I recently highlighted the model efforts that GE has implemented with its China based suppliers to implant responsible and environmentally proactive manufacturing into their operations.  GE’s comprehensive supplier assessment program evaluates suppliers in China and other developing economies for environment, health and safety, labor, security and human rights issues. GE has leaned on its thousands of suppliers to obtain the appropriate environmental and labor permits, improve their environmental compliance and overall performance.   In addition, GE and other multi-national companies (including Wal-Mart, Honeywell, Citibank and SABIC Innovative Plastics) have partnered to create the EHS Academy in Guangdong province.  The objective of this no-profit venture is to create a more well-trained and capable workforce of environmental, health and safety professionals.

Summary

Many of my prior posts have highlighted the critical needs for increased supply chain collaboration among the world’s largest manufacturers in order to effectively operationalize sustainability in Chinese manufacturing plants. This is especially evident for large worldwide manufacturers operating subcontractor arrangements in developing nations and “tiger economies”, such as India, Mexico and China (and the rest of Southeast Asia). Global manufacturer efforts underscore how successful greening efforts in supply chains can be based on value creation through the sharing of intelligence and know-how about environmental and emerging regulatory issues and emerging technologies.

Suppliers and customers stand so much to gain from collaboratively strengthening each other’s performance and sharing cost of ownership and social license to operate.  But as I have stated before, supply chain sustainability and corporate governance must first be driven by the originating product designers and manufacturers that rely on deep tiers of suppliers and vendors in far-away places for their products.

Note: This piece is adapted from a recent article that I wrote, “Navigating China’s Green Road” that appears in China Sourcing Magazine