Supply chain managers hold the key to a better world. They can make their supply chains more sustainable. Not so much by checking suppliers for sustainable behaviour, but rather by working with them. That is the conclusion of the SCELP meeting on sustainability held on 9 April. The long payback periods of sustainability investments are a bottleneck for many SCELP members in practice.
More and more companies are auditing their suppliers for sustainability. They use a standard or industry/sector code to do so, or have developed one themselves. They regularly measure how well their suppliers comply with that code. There is only one problem, becomes clear during an energising SCELP meeting: "Auditing doesn't work."
Safety glasses for hire
The statement comes from Marcel Jacobs, founder of Circl8. He was invited by the Supply Chain Excellence Leadership Platform (SCELP) to share his vision of sustainable supply chains. With his experiences at Philips and Office Depot, among others, he puts SCELP members on edge. "In 2004, I helped set up and implement sustainability audits at Philips suppliers. When I came back ten years later, nothing had changed substantially. Only that code had become longer."
Jacobs describes how in the Far East, among others, a new industry has emerged around sustainability audits. Specialised suppliers offer services and solutions to companies being audited. For example, they simply rent out a set of safety glasses when an auditor visits. They buy or copy a 'standard' management system manual and put the company logo on it, and they use multiple administrative systems adapted to the audit protocol so that the auditor can also tick off that item on his checklist. "An audit as such is nothing but a very high hurdle. Suppliers develop tricks to overcome those hurdles in order to secure their business continuity. Customers think they are buying security, but in practice nothing changes and so you still run a high risk of reputational damage," Jacobs argues.
Reduction of power adapters
Jacobs cites many examples of successful and less successful sustainability projects in business. He shows why Tony's Chocolonely is so successful: not because they propagate sustainability, but because they have put a good product on the market. That is crucial to actually changing something in the chocolate chain. Other companies, on the other hand, are less successful because their products lack in quality against those of the establishment.
Jacobs cites collaboration with suppliers as a key success factor in sustainability projects. As an example of how he himself came into contact with sustainability in 2004, he mentions the reduction of adapters at Philips. Initially, a new adapter was developed for each new product. "In the end, we had 100+ different adapters. In cooperation with suppliers, we were able to reduce that number to around 25. Among other things, this has led to major cost savings, is logistically more manageable and is obviously much more sustainable."
Sustainable and circular supply chain
There are more successful examples of collaboration. Think of chain cooperation where companies such as Philips and Fairphone went to selected gold mines in Africa with some of their suppliers (such as semiconductor manufacturers and a gold smelter) to make the chain transparent and increase transparency. This has made the gold chain a bit more sustainable, but also ensured continuity in the supply of gold in a specific product category. "Or think of European buyers from government organisations exploring with laptop manufacturers and their value chain partners how to set up a circular value chain to meet the 2030 (50%) or 2050 (100%) circular targets. Such initiatives make my heart beat faster."
Marcel Jacobs therefore calls on SCELP participants and other companies: start a dialogue with each other on sustainability and, above all, work together! It is important to create trust and increase transparency.
Investing in the future
SCELP's Sustainability working group will be working on new tools and concepts to help supply chain managers get started with sustainability in the coming months. To set the direction, SCELP members had discussions on motives and bottlenecks at tables after Jacobs' presentation. The most relevant motive cited by members to work on sustainability: customers and consumers are asking for it. The main bottleneck SCELP members struggle with: the often high investment costs and long payback periods associated with sustainability initiatives. What should sustainability cost? Jack van der Veen, professor of supply chain management at Nyenrode and initiator of SCELP: "Actually, that discussion is nonsense, because in the long run we are better off and cheaper. The big question is: do we dare to invest in that future?"
SCELP's next meeting is scheduled for Tuesday 14 May 2019 at Nyenrode Castle and will have digitalisation as its theme.
