Building Greater Sustainability in Supply Chains

Authors


Abstract

Challenges companies face and tools they use to identify and reduce their environmental footprints across their supply chains

A company's supply chain is integral to its business operations, planning, risk management, and profit level. Disruptions in a supply chain due to plant closures, shutdowns, quality issues, or shortage of key resources can significantly disrupt a company's production cycle, product sales, and employment level (Accenture, 2013; Hayward et al., 2013).

As Kiron, Kruschwitz, Haanes, Reeves, and Goh (2013) state:

As companies in many industries grapple with costs, they are turning to their supply chains to reduce energy use, simplify packaging, mitigate commodity price risks and meet customer sustainability expectations. (p. 3)

Sustainability is increasingly used by companies to evaluate their performance. It is also being used by stakeholders to evaluate companies. In addition, managers of companies are increasingly including environmental impacts from their supply chains when they are estimating their overall environmental footprints. Moreover, corporate managers are increasingly recognizing that their companies' performances and reputations can be affected by the performance of their supply chains—and stakeholders are asking companies to do more (Unilever, 2011).

Further indication of the increased importance of including supply chains in sustainability strategies can be found in the Global Reporting Initiative's (GRI) new G4 sustainability reporting guidelines, which include two supply chain indicators under its Supplier Environmental Assessment aspect. These indicators are G4-EN32, “Percentage of New Suppliers That Were Screened Using Environmental Criteria,” and G4-EN33, “Significant Actual and Potential Negative Environmental Impacts in the Supply Chain and Actions Taken” (GRI, 2013).

Reducing Supply Chain Risks and Increasing Sustainability

Several companies have described the importance of their supply chains to their business and environmental performance and strategy. Baxter made the following statement in a document discussing its supply chain:

Given the size, scope and complexity of a company's supply chain, especially for a large multinational organization like Baxter, supply chain focused sustainability initiatives can have dramatic positive contributions to a company's overall sustainability efforts…. For healthcare companies, maintaining a safe, secure and reliable supply chain is essential to ensure patient safety. Also, a significant amount of a company's overall environmental footprint is represented by its supply chain, so collaborating with suppliers to improve their performance can collectively support the company's overall performance. (Baxter, 2013a, para. 1)

Baxter also makes a clear connection between its suppliers' and the company's performance in its “Supplier Quality Standard,” stating, “Baxter is committed to developing manufacturing processes that are inherently less wasteful and hazardous, minimizing or eliminating adverse environmental impacts from the beginning” (Baxter, 2011, p. 4). In the same document, the writers go on to say, “Baxter's suppliers are responsible for the quality related activities of their suppliers, subcontractors, service providers, and/or material sources” (Baxter, 2011, p. 4). Baxter's requests for proposals and supplier agreements ask each supplier for its sustainability policy, mission statement, and information about how the supplier's sustainability initiatives will support the company's (Baxter's) sustainability goals (Baxter, 2013b).

Coca-Cola considers a healthy, secure, and sustainable agricultural supply chain to be critical to protecting the well-being of the communities in which it operates, meeting the expectations of its stakeholders, including consumers and customers, and enabling the success and growth of its business (Coca-Cola, 2013a).

In its operating context and strategy, Gap Inc. states, “We are strengthening our environmental strategy to focus more comprehensively on our supply chain to ensure that our company thrives in a rapidly evolving business environment” (Gap, 2014b, bullet 3).

Unilever set a goal in 2010 to double its sales by 2020 while reducing environmental impacts from its products by 50%, adding, “only through partnering with our suppliers will sustainable and profitable growth be achievable” (Unilever, 2011, p. 1).

Tesco expresses a similar sentiment by linking its supply chain to the company's sustainability, with the statement, “Our strong belief is that we cannot build a sustainable business on an unsustainable supply chain” (Tesco, 2013, p. 37). In addition, Coca-Cola, McDonald's, Nestle, PepsiCo, Procter & Gamble, SC Johnson, Unilever, and other companies refer to responsible and/or sustainable sourcing.

Supply Chain Impacts on Companies

A company's supply chain can represent a significant percentage of its overall environmental impact during the lifecycle of its products. For example, 96% of Timberland's carbon footprint takes place within its value chain beyond its owned operations (Timberland, 2010). McDonald's estimates that approximately two thirds of its carbon footprint is associated with its supply chain, with livestock as the biggest driver of emissions (Starr, 2013). Unilever determined that some of its biggest impacts (e.g., greenhouse emissions, waste, and water use) occur in its supply chain (Unilever, 2011).

Coca-Cola worked with the Water Footprint Network (WFN), The Nature Conservancy (TNC), and the World Wildlife Fund (WWF) to estimate the water embedded in its products. They first assessed the full water footprint of Coca-Cola's most popular product and determined that 99% was due to its supply chain, and in particular from growing sugar (i.e., 80% of the total; Coca-Cola, 2011). Similarly, Nestle recognized that its biggest water impacts and risks are from its agricultural supply chain (Nestle, 2013d).

A company's supply chain can also affect its reputation and how it is perceived by the marketplace and by its stakeholders. For example:

At McDonald's, our Core Values are integral to how we do business, and we expect our suppliers to respect and promote these values…. We recognize that our suppliers are independent businesses…. However, the actions of our business partners can be attributed to McDonald's, affecting our reputation and the level of trust we have earned from customers and others…. At a minimum, we require that all suppliers and their facilities meet the standards and promote the principles outlined in [our Supplier] Code, which are intended to advance McDonald's commitment to all aspects of sustainability (ethical, environmental, and economic). (McDonald's, 2012, p. 4)

A company's reputation can also be affected by the performance of a sister facility to one of its suppliers (Starr, 2013).

Patagonia has as its mission to:

[B]uild the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis…. Patagonia pledges to help our suppliers improve labor, health and safety and environmental conditions in the workplace, and to help our suppliers understand how to move from basic to leadership sustainability practices. (Patagonia, n.d., p. 1)

Further, the company states that it takes a collaborative approach because its:

[S]uppliers are jointly responsible for ensuring social and environmental responsibility and the integrity of [its] product content claims from the farm through the finished goods factory level. The only way to work towards this goal is to have transparency and traceability into all levels of [its] supply chain. (Patagonia, n.d., p. 4)

Writing for The Economist in a 2008 column, The Economist's Intelligence Unit asserted that companies were paying too little attention to their supply chains. The writers emphasized the importance of considering the stakeholder perspective, warning, “Inattention to supply chains shows a failure to understand how societal expectations are changing” (The Economist Intelligence Unit, 2008, p. 23).

Increasing Efforts to Build Greater Sustainability in Supply Chains

According to a survey of corporations published in 2010 by the UN Global Compact–Accenture, 81% of company chief executive officers (CEOs) believed that sustainability issues were fully embedded in their company's strategy and operations (Lacy, Cooper, Hayward, & Neuberger, 2010). However, according to the same survey:

Although 88 percent of CEOs believe that they should be integrating sustainability through their supply chain, just 54 percent believe that this is being achieved within their own company. (Lacy et al., 2010, p. 35)

This survey finding points to a disparity between the direction in which companies want to move, how much progress they believe they have made in this direction, and the difficulty in making progress. That is, many companies understand the importance of being more sustainable from a global competitiveness perspective and in a world of growing and more competitive country economies, increasing population, and constraining resources. Indeed, according to a corporate survey published in The Economist, again authored by The Economist's Intelligence Unit (2010), “87% of respondents agree that sustainability will become more important over the next three years” (p. 2). Hayward et al. (2013) referred to this as the difference between ambition and execution, and acknowledged that the recent world economic recession has had a dampening effect on company sustainability plans.

This interest in making further progress in implementing, integrating, and building greater sustainability has been noted in other surveys. For example, in the UN Global Compact–Accenture survey published in 2010, which was referenced previously, authors Lacy et al. (2010) state, “while sustainability has clearly become part and parcel of how many businesses operate, it has yet to permeate all elements of core business—that is, into capabilities, processes and systems” (p. 11).

As stated in the results of another global survey by McKinsey & Company, the writers comment, “Most companies …are still struggling to factor sustainability into the 'hard' areas of their business, such as supply chain” (McKinsey & Company, 2011, p. 11).

When the accounting firm Deloitte asked companies in its own survey, which was published in 2010, to identify those areas where increasing sustainability was most important to them, the top three responses were:

  • Manufacturing process and operations (46%),
  • Brand enhancements and perception (31%), and
  • Supply chain (21%) (Deloitte, 2010).

The challenge that companies face integrating sustainability fully was emphasized in the UN Global Compact–Accenture's 2013 corporate survey, where the difficulty of implementing sustainability throughout a company's supply chains was considered to be one of the top four barriers to full integration of sustainability (Hayward et al., 2013).1

Further, in the 2010 UN Global Compact–Accenture survey, the writers stated:

Most CEOs said they were paying greater attention to the activities of their suppliers; however, an equal number of respondents expressed concerns about whether they can effectively manage sustainability issues throughout such large, complex supplier networks. (Lacy et al.,2010, p. 35)

According to a recent study published in 2013 by UL, which was conducted to better understand manufacturer and consumer concerns about products, supply chains were considered to be a significant and increasing priority. The study identified seven rising priorities, or emerging drivers, of growing importance, over half of which relate to supply chains. In fact, nearly half of the respondents from the manufacturing sector claimed that they would increase global sourcing over the next five years (UL, 2013). The study states:

For manufacturers and consumers, globalization is contributing new complexity and heightening the importance of emerging considerations such as transparency, traceability, ethical sourcing and country of origin. (UL, 2013, p. 5)

Thus, for companies, engaging with their supply chains is expected to become both more important to address consumer sustainability concerns and more challenging in the future.

Engaging Supply Chains

Companies employ a number of tools to engage with their suppliers and improve their performance (BSR & UN Global Compact, 2010). For example, Lee and Kashmanian (2013) assessed the use of supplier codes of conduct, supplier audits/monitoring, and supplier sustainability performance scorecards. Other tools include companies providing technical assistance, information, education, incentives, and awards to suppliers, and third parties sharing supplier audit findings and leading practices with companies and suppliers.

Many companies have developed supplier codes of conduct to state their expectations of suppliers (e.g., to be in compliance with laws, regulations, and standards). There has been much attention in the literature on supplier codes of conduct and their key elements (e.g., BSR & UN Global Compact, 2010; Keller, 2008; Kolk & van Tulder, 2002; Lee & Kashmanian, 2013).

BSR considers the supplier code of conduct to be a part of the initial stage that companies go through to engage with their suppliers and to raise supplier awareness of their expectations.2 It is not always clear how inclusive a company's supplier code of conduct is, i.e., whether the code applies only to the company's tier 1 suppliers or to its tier 1 and subtier 1 suppliers. In addition, suppliers that have multiple customers may also have multiple supplier codes of conduct with which they must conform.

Companies are increasingly being asked by their customers, public interest groups, and other stakeholders to be more responsible for their supply chains and to be more transparent. There are several dimensions to this increased responsibility. Given how vast, diverse, and global supply chains have become, this article focuses on the extent to which these tools are being used to reach beyond tier 1 suppliers, also referred to as subtier 1 suppliers. To address this issue, interviews were conducted of representatives from several companies—Coca-Cola, Mars, Inc., McDonald's, Staples, and VF Corporation—as well as representatives from several organizations—AIM-PROGRESS, BSR, Environmental Defense Fund (EDF), and Sustainable Apparel Coalition (SAC).

Reaching Beyond Tier 1 Suppliers

Increased responsibility for its supply chain may expand the reach of a company's supplier codes of conduct beyond tier 1 suppliers and/or require that the company supplement its supplier codes with additional tools to expand and bolster supplier engagement. There can be a cascading effect such that a company expects that each tier of its supply chain will have similar codes of conduct for its own suppliers.

For example, McDonald's states in its supplier code, “We expect suppliers to hold their supply chain, including subcontractors and third-party labor agencies, to the same standards contained in this Code” (McDonald's, 2012, p. 4). Staples states, “We strongly recommend that our other branded suppliers and subcontractors comply with our Code or similar standards” (Staples, 2011, p. 1). The Electronic Industry Citizenship Coalition® (EICC) supplier code of conduct states even more strongly, “Participants must regard the Code as a total supply chain initiative. At a minimum, Participants shall also require its next tier suppliers to acknowledge and implement the Code” (Electronic Industry Citizenship Coalition, 2012, p. 1).3

AIM-PROGRESS is a global forum for consumer goods manufacturers and their common suppliers that is designed to promote responsible sourcing practices throughout supply chains. It is based on the principle that each supply tier should pass along similar responsible sourcing expectations and mirror a similar code of conduct to its suppliers as brand manufacturers expect of their supply chain partners (Recke, 2013).

Alternatively, a company could reference all of its tiers of suppliers in its code of conduct. For example, Nestle's supplier code of conduct applies to its suppliers and their subcontractors and refers to “farming practices and agricultural production systems” as part of its supply chain and their need to be “fully aware” (Nestle, 2010, p. 1 and 3, respectively, 2013c) of the code of conduct, implying that its supplier code reaches beyond its tier 1 suppliers. Nestle states that it has “direct contact” with more than 690,000 farmers in its global agricultural supply chain (Nestle, 2012a). Coca-Cola has developed a set of Sustainable Agriculture Guiding Principles to provide guidance to the growers of its agricultural ingredients and works with its suppliers to ensure that these ingredients are sustainably sourced (Coca-Cola, 2013b).

Patagonia takes a similar approach. Its document “Working with Factories” states, “Requirements in this Code apply to the whole supply chain, including sub-suppliers, sub-contractors and farms” (Patagonia, 2013b, p. 1). VF Corporation's Global Compliance Principles “apply to all facilities that produce goods for VF Corporation, or any of its subsidiaries, divisions, or affiliates, including facilities owned and operated by VF and its contractors, agents and suppliers” (VF, n.d., p. 1). In its 2013 document on factory audit procedures, VF provides additional clarification regarding the reach of its supply chain:

This will include all cutting facilities, sewing plants, screen printers, embroiderers, laundries, and packaging locations. At [VF's] discretion, audits may also encompass raw material suppliers for knit and woven fabrics, tanneries, and branded component suppliers. (VF, 2013, p. 1)

Furthermore, the company's audit procedures document states that, “Facilities are expected to make sustainable improvements in environmental performance and require the same of their suppliers and sub-contractors” (VF, n.d., p. 3).

The audit/monitoring mechanism is an important tool that companies use to determine whether their suppliers are conforming to their codes of conduct. Audits can be conducted by the company or by a third-party organization. Audits are typically conducted of tier 1 suppliers, and there are some cases where a company will also audit its tier 2 suppliers directly or through a third-party organization (VF, 2013).

Patagonia (2013a) conducted environmental and social audits of 90% of its supply chain in 2010, including audits of subcontractors of its primary cut-and-sew factories.4 Timberland, as a VF brand, has decided to have all of its tanneries audited according to both VF's Compliance Principles (VF, n.d.) and the Leather Working Group's (LWG) environmental protocols (Von Haden, 2013). Alternatively, it is also possible for a tier 1 supplier to take on the responsibility of auditing its suppliers, and so forth.

Mapping Supply Chains, Increasing Supply Chain Traceability

Information is key to knowing whether subtier 1 suppliers are conforming to a code of conduct. This includes information regarding which suppliers are part of a company's supply chain as well as information collected as part of a supplier audit. To communicate its conformance expectations to its subtier 1 suppliers, it is beneficial for a company to be able to map out its supply chain. Although mapping its supply chain can be challenging for a company, particularly if many of its suppliers are located in far away locations or if the suppliers change frequently to accommodate—for example—changing designs, requirements, etc., mapping may provide great value by helping a company understand just how sustainable its supply chain really is.

Many companies may not know who all of their tier 1 suppliers are or where they are located. They are probably even less likely to know who their subtier 1 suppliers are and where they are located. Many other companies possess this information, however. For example, HP provides a list of its top suppliers, collectively representing 95% of its procurement expenditures, to promote transparency in the electronics industry (HP, 2013b), and Patagonia identifies textile mills and factories in its supply chain (Patagonia, 2013a). In addition, the company:

[R]equires suppliers to map and continuously track and monitor all locations in all levels of their supply chain and upon request provide transparency information into the owned and/or subcontracted farms, mills, plants, factories and other sites that are involved in the production of [its] products. (Patagonia, n.d., p. 4)

“It should be easier to trace a high-value, complex product, whether manufactured or agricultural, than an interchangeable commodity because companies selling the former product likely need to have a better handle on their supply chains to ensure their product is made to specifications, such that there is minimal risk to the company, reputation, and brand value,” (Hutson, 2013). In the case of Coca-Cola, for example, about one half of what the company buys is agriculture related, so agriculture is its big focus with subtier 1 suppliers (Jordan, 2013).

Because it is a good practice for a company to know who are its tier 1 suppliers (Norton, 2013), identifying tier 1 suppliers and/or direct manufacturers may be a first step in mapping out its supply chain. A company may segment its suppliers into groups (e.g., direct and indirect). Mars considers suppliers of inputs for its products to be its direct suppliers, and suppliers of capital goods, building insulation, office supplies, furniture, electronics, etc. to be its indirect suppliers (Spitzley, 2013). When McDonald's is selecting the suppliers for its restaurants, the company considers distribution centers and final processing facilities to be its direct suppliers, and primary processing plants, production plants, farms, and ranches to be its indirect suppliers (McDonald's, 2013c). If a company groups its suppliers using methods similar to the examples just given, it may identify key or strategic suppliers as a follow-up step.

To better understand these mapping challenges, it is helpful to know that company supply chains are becoming more diverse, complex, and dispersed. As discussed previously, a company's supply chain may represent a significant part of its environmental footprint or product lifecycle impact, and the supply chain may include thousands of subtier 1 suppliers.

For example, in the case of Staples, 93% of its environmental impact takes place outside of its operations, including within its supply chain and through customer use of its purchased products. In another example, McDonald's purchases beef from millions of farmers around the globe, and each area of the world handles traceability in a different way. This is one of the challenges of agreeing to principles and criteria for sustainable beef production (Starr, 2013).

Nestle has developed a Responsible Sourcing Traceability Programme as one of three levels for its responsible sourcing.5 The Programme promotes compliance by Nestle's “extended value chains” with its Responsible Sourcing Guidelines, which provide guidance to its procurement staff and consultants and are shared with suppliers and stakeholders (Nestle, 2013b). According to its Traceability Programme, in cases in which Nestle does not “purchase direct from the farm or feedstock, [it has] a programme to establish transparent supply chains back to the origin and develop suppliers that meet its commitments and policies” (Nestle, 2012a, p. 119).

Nestle's Traceability Programme includes:

  • Defining requirements based on its commitments (e.g., no deforestation) and policies as described in these sourcing guidelines,
  • Transparency by mapping supply chains back to their primary level of production,
  • Transformation of suppliers through continuous improvement, and
  • Regular monitoring and reporting of supplier progress in improving performance (Nestle, 2012a).

Nestle's Cocoa Plan includes traceability to the farmer group level (Nestle, 2013a); the company has similar traceability efforts underway or in development for coffee, dairy, eggs, fish and seafood, hazelnuts, meat, palm oil, paper and board, poultry, soya, sugar, and natural vanilla (Nestle, 2012a). Staples is also facing a daunting challenge. The company currently has approximately 125,000 product SKUs (stock-keeping units), and at some point in the future, it may have one million product SKUs. Knowing all of its subtier 1 suppliers is very challenging for the company, and it will likely become an even greater challenge in the future (Buckley, 2013).

Safety, Security, and Prohibited Materials and Activities

As safety, security, and other concerns increase in certain sectors, such as the chemical, food, and information technology sectors, and as sector-based labor and safety issues grow, there will likely be increasing pressure for companies to map out their supply chains and increase traceability. For certain sectors, traceability is not a new issue. For example, the Lacey Act of 1900, and later amended in 2008, prohibits companies in the United States from trading in wildlife, fish, and plants that have been illegally harvested and sold. This prohibition includes illegal logging.

In addition, the US Securities and Exchange Commission (SEC) adopted a rule in 2012 that requires companies to publicly disclose the use of conflict minerals, which include tantalum, tin, gold, and tungsten, that were extracted from the Democratic Republic of the Congo or an adjacent country if the company files reports to the SEC (SEC, 2013).6, 7 Companies can extend such disclosure further. For example, Nestle requires that its suppliers not harvest conflict wood or other forest-based commodities (Nestle, 2012b).

There are other efforts to better understand and improve supply chains. For example, the Tropical Forest Alliance (TFA) 2020 is a public-private, multicountry, partnership that has set a goal of reducing tropical deforestation by 2020 for four agricultural commodities: beef, palm oil, pulp and paper, and soy. For the private sector, this effort is largely about companies working with their supply chains. One of the private sector's roles in the partnership is to “Work with suppliers to develop tropical deforestation-free sources for the commodities which they are purchasing” (United States Agency for International Development [USAID], n.d., p. 1).8

According to Nestle:

We recognise that to achieve 'no deforestation' we must work with all agents in the supply chain, from plantation owners, processors and suppliers all the way to the consumer…. [In addition, to] ensure the palm oil we source is not associated with deforestation, we must know where it comes from. (Nestle, 2012a, p. 127–128)

In addition, GRI's (2013) G4 sustainability reporting guidelines ask organizations to describe their supply chains. As de Man and Ionescu-Somers (2013) explain, in a quote that leads us into our next section:

Sourcing from anonymous commodity markets does not provide [a] company with realistic possibilities to impact the farmers' practices, owing to the lack of traceability/transparency. A practical solution here may be to require compliance with an externally defined and independently certified sector sustainability standard. (de Man & Ionescu-Somers, 2013, p. 32)

Improving Supplier Performance

Companies and third-party organizations are working to improve the environmental performance and sustainability of supply chains. Although companies generally have more experience working with their tier 1 suppliers than working with their subtier 1 suppliers, their efforts could cascade through their supply chains and provide ideas and opportunities for their tier 1 suppliers to influence the next tier of supplier(s). Third-party organizations can play a number of key roles, some of which provide them with opportunities to engage more directly with a company's subtier 1 suppliers.

Role of Companies

For certain sectors (e.g., apparel), producers and their profit margins may become smaller the further up a company's supply chain one travels (Kibbey & Young, 2013). These attributes may create challenges for these suppliers to consistently meet their customers' sustainability expectations. In addition, a company may be reluctant, for competitive and pricing reasons, to terminate its contract with a supplier if it is in noncompliance or nonconformance with the supplier code of conduct (Kibbey & Young, 2013).

Increased expectations of suppliers may need to be matched with increased technical assistance and incentives. In this regard, a company can play a key role in collecting and sharing leading practices among its suppliers. For example, McDonald's invites its suppliers worldwide to nominate their best practices. A panel comprising McDonald's representatives and an external group of stakeholders, including nongovernmental organizations (NGOs), review hundreds of submissions and selects those that will be highlighted as sustainable supply best practices (McDonald's, 2010).

Most leading companies would likely prefer to work with their suppliers to address problems rather than “walk away” from them, but this is balanced by their need to minimize business risk from noncompliant suppliers. For example, although Mars will tell its suppliers that they must meet its code of conduct, the company retains the right to terminate the relationship to reduce its business risk. However, the company believes that it is preferable not to terminate its contract with the supplier and to instead emphasize the use of positive incentives (Spitzley, 2013).

In another case, VF has a “three strikes” phased policy, whereby the supplier needs to demonstrate improvement on poor audit findings within 18 months. If improvements are not made, VF will terminate the contract with the supplier (Von Haden, 2013).

Lack of commitment from a customer can prove to be a major impediment for a supplier that may want to improve its environmental performance, but does not know whether doing so will pay off in additional orders. Tesco addresses this issue by offering contracts for durations of at least two years to all of its suppliers who want them (Tesco, 2013). A supplier wants to make a return on its investment, and it helps the supplier to do so if the customer guarantees orders (Kibbey & Young, 2013).

Other incentives that a company could offer to suppliers to support the adoption of more sustainable practices include access to market; consistent demand; receipt of consistent and fair prices (Nestle, 2012a); longer term contracts; reduction in audit frequency of the suppliers9 (e.g., Coca-Cola's Pass-It-Back program for suppliers meeting a score and progressing with sustainability [Jordan, 2013]); technical assistance and training; and paid-for consultation to provide suppliers with training, education, or continuous improvement programs required to respond to audit findings (Nestle, 2012a; Patagonia, 2013b); low-interest loans to support capital projects (IKEA case study—[Pedersen & Andersen, 2006]); and the implicit knowledge that contracts could be extended from other businesses of the company (Von Haden, 2013).

Role of Third-Party Organizations

Supply chain issues can be bigger and more formidable than an individual company might wish to tackle on its own. Third-party organizations have been playing a valuable role by bringing companies together in noncompetitive ways, informing the marketplace, and enabling the development of learning- and sharing-networks to deal with some of these issues. In addition to the actions that companies are taking to improve the performance of their suppliers, third-party organizations also have a role to play to:

  • Increase supply chain efficiencies,
  • Expedite sharing of information on innovative practices,
  • Increase networking and learning,
  • Certify supplier performance,
  • Incentivize sustainable sourcing, and
  • Convene forums to focus on key issues.

Indeed, companies often engage with third-party organizations to assist them in advancing sustainability strategies in mutually beneficial ways (Kashmanian, Wells, & Keenan, 2011). Exhibit 1 includes examples of a number of third-party organizations that play key roles in developing more sustainable supply chains through the use of a variety of means, including:

  • Benchmarking supplier codes of conduct across companies,
  • Developing sector-based or comparable common supplier codes of conduct and/or other sustainability initiatives,
  • Conducting supplier audits or assessments,
  • Providing mutual recognition of participating company supplier codes of conduct and supplier audit or assessment reports,
  • Sharing supplier audit or monitoring reports and supplier assessments with companies that have contracts with common suppliers to reduce audit fatigue,
  • Mapping out supply chains and increasing traceability of supplies,
  • Measuring supplier sustainability performance, and
  • Certifying supplier performance or products.

Exhibit 1. Key Parts of the Supply Chain Ecosystem

The supply chain ecosystem includes companies, their supply chains, and NGO or third-party organizations that work to:

  • Harmonize practices within or across sectors,
  • Increase efficiencies for suppliers and/or companies,
  • Share leading practices,
  • Reduce burdens on suppliers and companies,
  • Certify performance by suppliers, and
  • Inform the marketplace.

Below is a list of some of these NGOs and programs. Some are environmental organizations and some are industry organizations, most of which were identified during the research performed during the writing of this article. As a result, this list is not meant to be all-inclusive but to be illustrative. These summaries are obtained directly, with some modification or editing, from the organizations' websites. Visit their websites for additional information.

AIM-PROGRESS (PROgram for RESponsible Sourcing) http://www.aim-progress.com

AIM-PROGRESS is a global forum for consumer goods manufacturers and their common suppliers to enable, promote, and advance responsible sourcing practices and sustainable production systems. AIM-PROGRESS's key objectives include:

  • Develop, assess, promote, and share responsible supply chain sourcing practices,
  • Develop and promote use of common evaluation methods to determine corporate social responsibility (CSR) performance within supply chains,
  • Create efficiencies by collecting, assessing, and sharing noncompetitive information on social compliance performance of supply chains, and
  • Reduce suppliers' “audit fatigue” by encouraging them to share audit reports with customers through mutual recognition of their compliance assessments, thereby avoiding duplicate audits—an audit for one is an audit for many.

Mutual recognition is based on four criteria:

  • Acceptable audit coverage (including environmental compliance),
  • Acceptable auditor,
  • Acceptable process, and
  • Audit integrity.

Better Cotton Initiative (BCI) http://bettercotton.org

BCI works to reduce the environmental impact of cotton production through continuously improving crop-growing and protection practices, water use, and soil fertility. BCI also works to improve labor issues as they relate to the cotton industry and the livelihoods of families and communities that depend on cotton production. BCI has created a tracking system to follow Better Cotton through the supply chain.

Bonsucro http://www.bonsucro.com

Bonsucro fosters the sustainability of the sugarcane sector through a metric-based certification system and support for continuous improvement by its members. Bonsucro works to define performance-based principles, criteria, indicators, and standards for sugarcane production that take into account local conditions and circumstances, and that are based on a credible and transparent process focused on key sustainability drivers in sugarcane production. Bonsucro has developed a certification system that enables producers, buyers, and others involved in sugar and ethanol businesses to obtain products derived from sugarcane that have been produced according to agreed, credible, transparent, and measurable criteria.

BSR https://www.bsr.org

BSR helps companies develop internal approaches, engage with suppliers, and build meaningful collaborations to improve the labor, environmental, and economic performances of their supply chains. BSR is also requested by its industry members to convene groups and focus on key issues. This convening role led to the formation of the Center for Sustainable Procurement, Mills and Sundries Working Group, and the Pharmaceutical Supply Chain Initiative. In addition, BSR works with companies to:

  • Develop and review sustainable procurement strategies and policies,
  • Identify opportunities to integrate sustainability into procurement and implement changes by working with senior management and purchasing teams, and
  • Design and execute supplier engagement and training programs.

Carbon Disclosure Project (CDP) https://www.cdproject.net

CDP uses measurement and information disclosure to improve the management of environmental risk. CDP leverages market forces, including shareholders, customers, and governments, to incentivize companies and cities to manage, measure, and report their environmental information. CDP's supply chain program provides opportunities for companies to engage with their suppliers to, for example, reduce risks due to greenhouse gas emissions and water use.

Center for Sustainable Procurement (CSP) http://www.bsr.org/en/our-work/working-groups/center-for-sustainable-procurement

CSP helps procurement professionals make informed purchasing decisions based on the best available sustainability data and information. CSP conducts research and works with companies to integrate sustainability data into their product procurement processes.

Consumer Goods Forum (CGF) http://www.theconsumergoodsforum.com

CGF brings together CEOs and senior management from major retailers, consumer goods manufacturers, service providers, and other stakeholders across 70 countries. CGF provides a global platform for knowledge exchange and initiatives around five strategic priorities that are central to the advancement of the consumer goods industry:

  • Emerging trends,
  • Sustainability,
  • Safety and health,
  • Operational excellence, and
  • Knowledge sharing and people development.

CGF members develop and lead the implementation of leading practices along their value chains.

EcoVadis http://www.ecovadis.com

EcoVadis partners with procurement organizations to implement sustainable supply management practices. EcoVadis works to improve environmental and social practices of companies by leveraging the influence of their global supply chains. EcoVadis works to help procurement organizations improve their performance and to reduce the costs associated with performance monitoring of supplier CSR.

Electronic Industry Citizenship Coalition (EICC) http://www.eicc.info

EICC is a coalition of electronics companies working together to improve efficiency and social, ethical, and environmental responsibility in their supply chains. EICC developed a supplier code of conduct in order to establish a common supplier code that provides guidelines for performance and compliance with critical CSR policies. EICC also provides tools and practices for companies to audit compliance with the supplier code and helps companies report on their progress. It established a Validated Audit Process as a collaborative approach to auditing to the EICC supplier code of conduct and as a means to share supplier audits with multiple customers, thereby reducing audit fatigue and duplication of effort.

Fair Factories Clearinghouse (FFC) http://www.fairfactories.org

FFC facilitates continuous improvement in social, environmental, and security standards, and the establishment of safe and humane working conditions for workers making consumer goods. FFC collects data from its members, which it enters into a database and shares with its participants to increase their compliance capability. This Information Clearinghouse improves accessibility, availability, transparency, comprehensiveness, and standardization of information among its participants, in accordance with antitrust rules, regarding factory workplace conditions.

Sharing this information and expertise advances knowledge about workplace conditions and the steps companies are taking to address them, and therefore advances global efforts to improve factory conditions. Industry-wide collaboration becomes more commonplace and results in greater efficiency and cost savings, risk mitigation, and assurance in factory monitoring for all participants.

Forest Stewardship Council (FSC) https://ic.fsc.org

FSC promotes responsible forest management by enabling businesses and consumers to make informed choices about the forest products that they buy. FSC works with stakeholders to define best forestry practices that address social, environmental, and economic issues.

Global Apparel, Footwear and Textile Initiative (GAFTI) http://www.gafti.org

GAFTI brings retailers, consumer brand manufacturers, mills, and factories together to improve efficiencies and set uniform global standards. Its goal is to reduce complexity, remove costs from common industry practices, and improve performance.

Global Forest & Trade Network (GFTN) http://gftn.panda.org/about_gftn

The World Wildlife Fund's (WWF's) GFTN is driven to eliminate illegal logging and increase responsible forest management and trade to save the world's valuable and threatened forests. GFTN works with companies to assess the risks in their forest industry supply chain, provide training and technical support, share best practices, achieve responsible wood sourcing and credible chain-of-custody certification, and facilitate trade between companies supporting responsible forestry.

Global Roundtable for Sustainable Beef (GRSB) http://grsbeef.org

GRSB works within the beef industry and with environmental groups, retailers, and others to continuously improve sustainability in the global beef value chain. These organizations share their knowledge of leadership and science and collectively engage and collaborate. GRSB's efforts include identifying, evaluating, and enabling increased adoption of leading production and supply chain practices and technologies.

Global Social Compliance Programme (GSCP) http://www.gscpnet.com

GSCP was created by and for global companies that want to work collaboratively and improve the sustainability (labor/social and environmental) of their often-shared supply base. Using consensus and best practices, GSCP focuses on:

  • Developing consistent supplier codes of conduct,
  • Creating a uniform and clear message to suppliers,
  • Reducing supplier audit duplication,
  • Providing mutual recognition of supplier codes and audit monitoring,
  • Simplifying buying, and
  • Identifying causes of noncompliance and opportunities for continuous improvement of working and environmental conditions in supply chains.

As part of these activities, GSCP developed an environmental framework and scoring methodology to assess factory environmental performance across supply chains with regard to reducing each of its environmental impact areas. Factories can achieve GSCP Level 1—“Compliance and Awareness”; Level 2—“Proactive Management and Performance Improvement”; or Level 3—“Leading Practice.”

Green Chemistry & Commerce Council (GC3) http://www.greenchemistryandcommerce.org

GC3 advances the application of green chemistry, green engineering, and design for the environment by sharing case study information and experiences across supply chains and across sectors, encouraging dialogue to overcome barriers, and helping to increase consumer demand.

International Trade Centre (ITC) Standards Map http://www.standardsmap.org

The ITC's Standards Map provides users with information enabling them to analyze and compare information on 120 voluntary standards, eco-labels, supplier codes of conduct, and audit protocols operating in more than 200 countries, and certifying products and services in more than 80 economic sectors, including agriculture, forestry, fisheries, mining, textiles, and manufactured products. This evaluation can help companies identify prospects for adopting private standards and assess costs and benefits for developing or expanding related product or market opportunities.

Marine Stewardship Council (MSC) http://www.msc.org

MSC works with retailers, brands, seafood businesses, and consumers to promote sustainable fishing practices and increase availability and purchase of certified sustainable seafood to incentivize other fisheries to improve their practices. MSC develops standards for sustainable fishing and seafood traceability based on best practices.

Outdoor Industry Association Sustainability Working Group (OIA SWG) http://www.outdoorindustry.org

OIA SWG explores issues of corporate environmental and social responsibility in the outdoor industry. The SWG works on the most pressing supply chain challenges that large and small outdoor industry companies face and that are key to their business survival. One of the outdoor industry's most notable accomplishments is the development of the OIA Eco Index, a product sustainability indexing tool that can chart a company's progress toward sustainability. OIA SWG is currently focusing on four key work areas:

  • Index development—building sustainability indexes for outdoor apparel, footwear, and equipment,
  • Responsible chemicals management,
  • Materials traceability in the supply chain, and
  • Social responsibility and fair labor.

Pharmaceutical Supply Chain Initiative (PSCI) http://www.pharmaceuticalsupplychain.org

PSCI is a group of major pharmaceutical companies that share a vision of better social, economic, and environmental outcomes for those involved in the pharmaceutical supply chain. PSCI created the Pharmaceutical Industry Principles for Responsible Supply Chain Management to address key areas of responsible business practices and to support suppliers operating in a manner consistent with industry expectations in ethics, labor, health and safety, environment, and management systems.

Programme for the Endorsement of Forest Certification (PEFC) http://www.pefc.org

PEFC is a forest certification system developed to transform how forests are managed and to consider their environmental, social, and economic benefits. PEFC is also an umbrella organization that endorses national forest certification systems developed through multistakeholder processes and that focuses on local priorities and conditions.

Rainforest Alliance http://www.rainforest-alliance.org

The Rainforest Alliance works to conserve biodiversity, protect rainforests, and ensure sustainable livelihoods by transforming land-use practices, business practices, and consumer behavior and ensuring profitability to businesses and communities. The Rainforest Alliance developed the SmartWood program in 1989 and is a cofounder and certifier for FSC (see above). In addition, the Rainforest Alliance's SmartSource Sustainable Sourcing Program helps businesses:

  • Analyze their supply chains,
  • Improve understanding of their sourcing risks,
  • Determine whether responsible sourcing practices have been used,
  • Improve forest product purchasing practices,
  • Establish legal, traceable, and sustainable supply chains, and
  • Develop solutions to address challenges.

The Rainforest Alliance also helps farmers, forest managers, and tourism businesses receive greater economic benefits by ensuring that ecosystems within and around their operations are protected. Once businesses meet certain environmental and social standards, the Rainforest Alliance works to help them receive marketplace support and increased demand for their goods or services.

Round Table on Responsible Soy Association (RTRS) http://www.responsiblesoy.org

RTRS is a multistakeholder initiative that has developed a standard for responsible soy production. The standard includes five principles (including environmental responsibility and good agricultural practices), 27 criteria, and 98 indicators.

Roundtable on Sustainable Palm Oil (RSPO) http://www.rspo.org

RSPO works to transform markets such that sustainable palm oil becomes the norm by:

  • Advancing production, procurement, finance, and use of sustainable palm oil products,
  • Developing, implementing, verifying, assuring, and reviewing global standards for the supply chain of sustainable palm oil,
  • Monitoring and evaluating economic, environmental, and social impacts from increasing market availability of sustainable palm oil, and
  • Engaging and committing stakeholders throughout the palm oil supply chain, including governments and consumers.

RSPO has endorsed GreenPalm (http://www.greenpalm.org) to manage the sustainable palm oil certificate trading program.

Supplier Ethical Data Exchange (Sedex) http://www.sedexglobal.com

Sedex works to help companies reduce risk, protect their reputation, and improve global supply chain practices. Sedex offers an online database to help company members manage ethical and responsible practices in company supply chains by sharing supplier audit reports to reduce the burden on suppliers facing multiple audits, questionnaires and certifications, and driving improvements in the ethical performance of global supply chains.

Sustainable Apparel Coalition (SAC) http://www.apparelcoalition.org

SAC is an industry-wide organization of apparel and footwear brands, retailers, and suppliers, as well as nonprofits and NGOs, working to reduce the environmental and social impacts of apparel and footwear products. Through a multistakeholder process, SAC works toward a shared industry vision of sustainability that is built upon an approach to measure and evaluate apparel and footwear product sustainability performance.

Sustainable Fisheries Partnership (SFP) http://www.sustainablefish.org

SFP is a business-focused NGO that has created a database of fisheries, accessible to all, which contains assessments of sustainability and improvement needs. These information tools allow companies and their procurement officials to directly engage with their fishery supply chains and implement sustainability policies. SFP does not campaign or provide eco-labels, but works to reduce the barriers to action by industry by providing access to reliable and detailed information related to improving fishery practices and creating more sustainable fisheries, and developing fishery improvement projects with multiple local stakeholders.

Sustainable Forestry Initiative (SFI) http://www.sfiprogram.org

SFI focuses on responsible forest management and fiber sourcing requirements and considers environmental, social, and economic concerns. SFI's chain-of-custody certification tracks the percentage of fiber from SFI-certified forests.

The Common Code of the Coffee Community (4C) http://www.4c-coffeeassociation.org

The 4C Association includes coffee farmers, traders, industry players, and civil society working together to increase sustainability in the coffee sector. The association developed the 4C Code of Conduct, which includes social, environmental, and economic principles related to increasing sustainability of production, processing, and trading of green coffee. To illustrate continuous improvement, the 4C Code of Conduct includes a “traffic light system,” marked by red, yellow, and green colors, to identify practices that need to be discontinued, improved, or continued, respectively.

The Forest Trust (TFT) http://www.tft-forests.org

TFT works with companies and communities to provide solutions to deforestation, create “responsible supply chains,” and deliver “responsible products.” Its supply chain model provides technical support to the extraction and production stages and communication support to the distribution and consumption stages; however, its main focus is on the extraction stage, where environmental impacts during the product life cycle may be at their greatest. TFT also focuses on traceability systems; although it originally focused on wood, it has expanded its focus to also include leather and shoe, cotton, palm oil, and paper.

The Leather Working Group (LWG) http://www.leatherworkinggroup.com

LWG works to develop and maintain a protocol that assesses the compliance and environmental performance of tanners and promotes sustainable and appropriate environmental practices within the leather industry. LWG also works to align sector environmental priorities, identify and share leading practices, and provide guidelines for continual improvement.

The Sustainability Consortium® (TSC®) http://www.sustainabilityconsortium.org

TSC® is an organization that works collaboratively with stakeholders to build a scientific basis for driving innovation to improve consumer product sustainability. These innovations are focused on the development of methodologies, tools, and strategies to create products and supply networks that address environmental, social, and economic needs.

Tropical Forest Alliance 2020 (TFA 2020) http://www.tfa2020.com

TFA 2020 is a public–private partnership with the goal of reducing (and eventually eliminating) tropical deforestation by 2020 for beef, palm oil, pulp and paper, and soy production. The private sector is represented by the Consumer Goods Forum. The governments of the United States, the Netherlands, Norway, and the United Kingdom are also members of the partnership, as are the following NGOs:

  • Carbon Disclosure Project,
  • Conservation International,
  • Forest Trends,
  • National Wildlife Federation,
  • Rainforest Alliance,
  • SNV (http://www.snvworld.org),
  • Solidaridad Network,
  • Sustainable Trade Initiative,
  • The Nature Conservancy,
  • Wildlife Conservation Society,
  • World Resources Institute, and
  • World Wildlife Fund.

TFA 2020 partners will work together to accomplish the following:

  • Improve planning and management related to tropical forest conservation, agricultural land use, and land tenure,
  • Share best practices for tropical forest and ecosystem conservation and commodity production, including working with smallholder farmers and other producers on sustainable agricultural intensification, promoting the use of degraded lands, and reforestation,
  • Provide expertise and knowledge in order to assist with the development of commodity and processed commodity markets that promote the conservation of tropical forests, and
  • Improve monitoring of tropical deforestation and forest degradation to measure progress.

To understand how its suppliers are performing, a company may audit or monitor them or work with a third-party organization to do so. Companies can also encourage their suppliers to be certified by a third-party organization, have their suppliers evaluated based on a sustainability performance scorecard, report their sustainability progress publicly, etc.

Audits are typically focused on conformance to a supplier code of conduct, whereas a scorecard can be used to measure and track supplier sustainability performance over time. A certifying organization benchmarks and certifies the supplier or its product with respect to a standard. Alternatively, a company could encourage its suppliers to publicly report progress toward a publicly stated goal (e.g., reducing and reporting greenhouse gas releases to the Carbon Disclosure Project). PepsiCo (PepsiCo, 2013), Unilever (Unilever, 2013a), and Walmart (Cremmins, 2013) are but a few of the companies that embrace this approach.

Examples of Companies Using Supplier Audits, Scorecards, and Certification Programs

A company's choice between relying on a supplier sustainability performance scorecard or product supply certification (in some cases, companies rely on both) may be based on which metrics matter most to the company or which metrics it will use to portray and measure its sustainability. In addition, the company may consider to what extent it should incorporate supply chain improvements or certifications into its corporate goals. As an example, to meet its commitment to buy only responsibly sourced wood, more than 90% of B&Q's products containing wood or paper are produced from chain-of-custody certified sources (B&Q, 2013a, 2013b, 2013c). Coca-Cola's 2020 goals include sustainably sourcing key agricultural ingredients, such as cane sugar, beet sugar, corn, tea, coffee, palm oil, soy, pulp and paper fiber, and oranges (Coca-Cola, 2013a; Moye, 2013).

Unilever also has a goal to sustainably source 100% of its agricultural raw materials by 2020, and has set interim milestones:

  • 10% by 2010,
  • 30% by 2012 (note: the company achieved 36% by the end of 2012), and
  • 50% by 2015 (Unilever, 2013b).

IKEA has a sustainability product scorecard and a goal that by fiscal year 2017, the majority of its renewable materials, such as cotton and wood, will come from preferred and/or certified sources (IKEA, 2010). The company also has a goal to reduce carbon emissions by 20% by 2015 and a 2020 goal for its suppliers to increase energy efficiency by 20% (IKEA, 2013). McDonald's uses its Environmental Scorecard to encourage suppliers to measure and reduce energy, waste, and water, normalized to production, and to submit these data into a software database system (McDonald's, 2013a). Gap is partnering with ZDHC (Zero Discharge of Hazardous Chemicals) on its goal of zero discharge of hazardous chemicals in its supply chain by 2020 (Gap Inc., 2014a). HP has set a goal for its tier 1 manufacturing suppliers and product transportation providers to reduce their greenhouse gas intensity by 20% by 2020 compared with 2010 figures (HP, 2013a).

The SAC developed a tool for understanding and measuring the environmental and social performance of apparel and footwear products called the Higg index. Although the current version of the index primarily evaluates performance using qualitative indicators, SAC's goal is to develop additional quantitative indicators (e.g., actual energy use). Apparel and footwear companies can use the Higg index as a standard for comparison rather than create separate scorecards. Other sectors can also use this index. The use of common scorecards provides a common means to communicate with stakeholders regarding sustainability (SAC, 2012).

Mapping and Materials Traceability with Third-Party Organizations

As discussed previously, it can be important for a company to better understand its supply chains, including where and how its supplies are being sourced. To aid in mapping its supply chain, Staples works with the Rainforest Alliance and its SmartSource 360 tool to trace its paper supply and better understand where it is coming from (e.g., tiers 2, 3, and 4; Buckley, 2013; Rainforest Alliance, 2013). McDonald's has a policy that states that no beef raw material will be sourced from the Amazon biome (McDonald's, 2013b).

If a product is certified, it becomes easier to trace. According to the LWG:

Understanding where the material that makes our footwear or leather products has come from is now a concern for many consumers. This became an important issue for the LWG when the connection between cattle ranching and deforestation was identified by Greenpeace and other NGOs as a major problem in Brazil.

As a result of this situation the LWG has introduced an assessment of traceability into the environmental stewardship audit process. This will ultimately ensure that the leather manufacturers within the LWG program have a clear understanding of where their raw material is originating from. With this information and in co-operation with NGOs, the LWG aims to reduce the impact cattle ranching has on deforestation in Brazil and potentially in other areas of the world if necessary. (LWG, 2010, para. 1–2)

In addition, The Leather Working Group's Auditing Protocol recognizes the need to:

Have visibility through the supply chain of their raw material…. Those sourcing material in Brazil will need to demonstrate traceability to the slaughterhouse…. Suppliers sourcing from Brazil will need to ensure [that] …[t]he farms [were not] involved in any form of deforestation in the Amazon biome since October 05, 2009. (LWG, 2012, p. 6)

Third-party organizations can provide another valuable role in certifying the performance of suppliers. McDonald's has set (and has met) a goal that requires all of its palm oil suppliers to become members of the Roundtable on Sustainable Palm Oil (McDonald's, 2013c). In addition, Mars has made the following statement:

Mars has pledged to certify 100% of its cocoa as sustainably produced by 2020…. Because we can't have a direct relationship with every farmer, we use certification to implement change on a larger scale than we could achieve on our own. Certification creates a set of standards against which cocoa farming can be measured and enables us to verify through a third party organization that those standards are being met. This means we know that the cocoa we use is produced in a way that is good for farmers and good for the environment. (Mars, 2012 para. 1–2)

Further, according to de Man and Ionescu-Somers (2013):

The more the raw material has a ‘commodity’ character, the more uniform the raw material is and the less direct influence the company has on farmers. In such ‘commodity’ supply chains, it may make sense to rely on external standards and the related certification systems. In supply chains where a company is sourcing directly and, as a result, has more direct contact with suppliers and farmers, it may be less obvious to rely on external standards and systems. (de Man & Ionescu-Somers, 2013, p. 23)

Considering the Costs and Benefits of Certification

Cost versus benefit is one factor a company may consider when determining whether certification affects the price paid to the supplier and/or the price paid by the end consumer. Questions that a company may face when considering whether to encourage its suppliers to be certified include whether it is sufficient for suppliers to perform as if they meet a certification standard, but not go through actual certification, or whether it is more important that suppliers actually be certified—and for this to be communicated to consumers and other stakeholders. Other important questions a company needs to consider include who should pay the certification fee, and the marketplace value that the company will derive from having its suppliers certified (based on—for example—robustness of the criteria, method of verification to the standard, and marketplace acceptance and support for the certification) (de Man & Ionescu-Somers, 2013).

Conclusion

The supplier code of conduct focuses on compliance, and, as such, it is an important tool in the toolbox for building greater sustainability in supply chains. Companies should make clear to which parts of their supply chains (e.g., tier 1 suppliers, tier 1 and subtier 1 suppliers) its supplier code of conduct applies. It is also important that a company clearly communicates its expectations for each tier of its chain, how it will support supplier conformance with the code of conduct, and the possible consequences of nonconformance. This can increase the effectiveness of the supplier code of conduct. Other tools, such as those discussed in this paper, can help support suppliers in their efforts to continuously improve along their sustainability paths, as well.

Company supply chains are expected to grow and/or expand over the foreseeable future. As companies focus more on the sustainability of their supply chains and are asked to assume greater accountability for their suppliers, it is expected that managers will devote greater attention to mapping out at least key segments of their supply chains, monitoring and assessing the performances of their suppliers, and improving the traceability of the materials through their supply chains.

There are numerous steps along a company's sustainability path. There are also numerous steps along a company's path to build greater sustainability in its supply chain, but it is important for a company to get started. If a company chooses to move along its own sustainability path and engage more closely with its supply chain, it will find opportunities to learn and adjust its efforts and it will likely advance forward in a stepwise manner. The company will be able to partner with others (including third-party organizations and perhaps other companies) to help it share leading practices, increase efficiency, and advance along its sustainability path.

Acknowledgments and Disclaimer

The authors would like to thank the company and organization representatives who agreed to be interviewed, shared their valuable time, and provided important perspectives and insights. In addition, the authors would also like to thank the following individuals for their review and helpful comments on an earlier draft of this article: Mark Buckley, Staples; Andrew Hutson, Environmental Defense Fund; Mitch Kidwell, US EPA; Jason Kibbey, SAC; Ben Jordan, Coca-Cola; Terry Lee, Graduate of Columbia, School of International and Public Affairs; Harry Lewis, US EPA; Tara Norton, BSR; Katrin Recke, AIM-PROGRESS; David Spitzley, Mars, Inc.; Rona Starr, McDonald's; Colleen Von Haden, Timberland/VF; and Ryan Young, SAC.

The companies and organizations mentioned in this article do not constitute an all-inclusive list of companies using supplier codes of conduct or supplier sustainability performance scorecards, or those that engage with subtier 1 suppliers, or third-party organizations involved with supply chain engagement or product certification related to sustainability. The purpose of this article is to share information about these supplier codes of conduct, performance scorecards, supply chain engagement, and certifications, and to provide examples of what is in play. The mention of a company, organization, certification, or product does not imply endorsement of use or verification/testing of the company, organization, or product claims, nor the company's overall practices or past compliance history, by the US Environmental Protection Agency. Any views expressed represent the authors' assessments and do not necessarily reflect those of the Agency or the Administration.

NOTES

  1. 1

    Following lack of financial resources (51%), competing strategic priorities (44%), and no clear link to business value (37%), extending strategy throughout the supply chain was identified by 33% of respondents (respondents could identify up to three choices).

  2. 2

    The stages identified by BSR are: (1) Setting expectations; (2) Monitoring and evaluation; (3) Remediation and capability building; and (4) Partnership. Coca-Cola has a five-tier supplier engagement model, which assumes compliance with its supplier guiding principles: (1) Dialogue on sustainability opportunities; (2) Supplier operational improvements; (3) B2B supply chain efficiencies; (4) Accelerating signature programs; and (5) Emerging opportunities/innovations (Jordan, 2011).

  3. 3

    EICC members include Advanced Micro Devices, Apple, Best Buy, Blackberry, Cisco, Dell, EMC, Hewlett-Packard, IBM, Intel, LG, Microsoft, Motorola, Philips, Oracle, Samsung, Sony, Texas Instruments, Toshiba, and Xerox.

  4. 4

    Patagonia (2013b) conducts environmental and social audits either itself, through a third-party organization, or in collaboration with another company, or receives audit reports of its suppliers from an organization like Fair Factories Clearinghouse.

  5. 5

    The other two Responsible Sourcing Programmes include its Audit Programme of its tier 1 suppliers and its Farmer Connect Programme (Nestle, 2012a).

  6. 6

    In light of the US Court of Appeals ruling on April 14, 2014, the SEC staff issued guidance stating that during the pendency of the litigation, companies would not be required to identify their products as “not been found to be ‘DRC conflict free'” in their conflict minerals report. See SEC statement from April 29, 2014, which is available at http://www.sec.gov/News/PublicStmt/Detail/PublicStmt/1370541681994#.U4NHTsbmZX0

  7. 7

    Intel's White Paper on a “Conflict-Free” supply chain describes its effort to achieve a conflict-free supply chain, including its goals to manufacture a microprocessor that is conflict-free for these four metals by the end of 2013 (Intel, 2013).

  8. 8

    US Agency for International Development (AID), n.d., p. 1. The private sector is represented by the Consumer Goods Forum, whose members include Ahold, Campbell's, Carrefour, Coca-Cola, Colgate, Danone, General Mills, IBM, Johnson & Johnson, Kellogg's, Kimberly-Clark, Kroger, Nestle, Nike, Oracle, PepsiCo, Procter & Gamble, SC Johnson, Tesco, Unilever, Walgreens, Walmart, and Wegmans.

  9. 9

    Audits are typically paid for in part or in total, and therefore owned by the supplier and are therefore an expense for it.

Biographies

  • Richard M. Kashmanian is a senior economist with the US Environmental Protection Agency's Office of Policy, Office of Strategic Environmental Management, in Washington, DC. During his nearly 30-year tenure in the policy office, he has undertaken and managed numerous projects related to environmental stewardship, sustainability, innovations, and incentives. He has written more than 40 papers on these and related topics. He led the development of and managed US EPA's Performance Track Corporate Leader Program. He holds an MS and a PhD in resource economics from the University of Rhode Island. He can be reached by email at Kashmanian.Richard@epa.gov

  • Justin R. Moore holds a Master of Public Administration from the University of Pittsburgh's Graduate School of Public and International Affairs, concentrating on international energy and environmental planning. In particular, his research has focused on the linkages between environmental planning and sustainable development both nationally and internationally. He has conducted interviews with Japanese officials on nuclear energy planning, engaged in environmental and social impact assessments in Mexico, and currently studies the reclamation of vacant lots as urban green spaces. He can be reached by email at jrm187@pitt.edu