Supplier Sustainability Scorecards

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What It Is

Supplier sustainability scorecards are a way for companies to systematically measure the sustainability of their various suppliers. The scorecards generally measure energy and water use, recyclable materials, waste, and greenhouse gas emissions of the entire supply chain.

 

Why It Matters

Major international companies like Wal-Mart and Procter & Gamble Co. (P&G) aim to set industry standards so that all industries will have to measure supplier sustainability. It is possible that in the future all corporations will require supplier sustainability scorecards.[1] For perspective on the impact of sustainability scorecards, P&G’s supplier sustainability scorecard will impact 75,000 businesses and $42 billion in spending per year.[2] Wal-Mart’s and P&G’s scorecard can be viewed here and here, respectively.

Supply chain processes are significant contributors to a product’s overall environmental footprint. Generally, 90% of Wal-Mart’s carbon emissions were generated from its suppliers, with only 10% generated from its own transportation, store, and staff.[3]

Analyzing your own supply chain can result in cost savings, innovation, new business opportunities, a reduction in energy use and waste streams, and enhanced brand value and reputation. It also helps account for the issue that traditional processes of measuring business success do not take into account the needs of all stakeholders.  Some stakeholders will require meaningful sustainability efforts in order for them to continue to be a part of your business.[4]

 

Getting Started

Both Wal-Mart and P&G used protocols from the World Resources Institute, the World Business Council for Sustainable Development, and the Carbon Disclosure Project to develop their supplier sustainability scorecards.[5] These are not the only sources for sustainability scorecards available, but can be used to examine a business’s own supply chains, and help set guidelines for it to complete its own sustainability scorecard.

Today, most sustainability disclosures are voluntary, but as the prevalence of carbon credits, carbon trading systems, and greenhouse gas emissions regulations increases, reporting on indicators such as carbon could become mandatory.[6] Through 2010, more than 2,600 organizations provided sustainability reports with the Global Reporting Initiative, and over 3,000 organizations voluntarily submitted greenhouse gas emissions data to the Carbon Disclosure Project.[7] These numbers reflect the growing trend of sustainability disclosures.

 

Case Studies

Businesses can use the Wal-Mart and P&G supplier sustainability scorecards as models when analyzing their own supply chains and to see what major retail centers require of their suppliers.

 

Wal-Mart

Wal-Mart’s sustainability index has been developed to create a more transparent supply chain, drive the adoption of best practices, accelerate product innovation, and to provide customers with the gathered information so that they can assess for themselves a products’ sustainability. The index has been introduced in three stages: 

  1. 1. Supplier Sustainaibilty Assessment
  2. 2. Lifecycle Analysis Database
  3. 3. A Simple Tool for Customers

 

1. Supplier Sustainability Assessment

The Supplier Sustainability Assessment includes 15 questions that assess the suppliers own sustainability and is divided into four sections:

  • Energy and Climate
  • Material Efficiency
  • Nature and Resources
  • People and Community

 

The sustainability index assessment is not mandatory, and suppliers will not be penalized for not participating, but demonstrated leaders in sustainability are rewarded by Wal-Mart.[8] Sustainable suppliers will be able to stand out among the 100,000 global Wal-Mart suppliers.[9] Please see the Resources section to view the complete Supplier Sustainability Assessment.

 

2. Lifecycle Analysis Database

Wal-Mart is partnering with the Sustainability Consortium to conduct research and create tools to develop product sustainability measurements and reporting standards. The Consortium will collaborate with suppliers, retailers, non-profit organizations, and government officials to conduct this research. A global database of data on a products’ lifecycle will be developed by the Consortium. All stages of the products’ lifecycle will be included, from raw materials to disposal of the product. 

 

3. A Simple Tool for Customers

For the products that Wal-Mart customers prefer, Wal-Mart will improve those products’ sustainability performance by using the sustainability index as a baseline. Ultimately, simple, easy to understand information will be provided to customers so that they can make purchase decisions with the sustainability of a product in mind.[10]

 

Procter & Gamble

P&G’s Environmental Sustainability Supplier Scorecard, which now includes about 600 suppliers, was developed to track and encourage improvement on key sustainability measures along their supply chain. The scorecard was developed in collaboration with 20 global leading supplier representatives. The scorecard has the unique feature of encouraging the sharing of innovative ideas among P&G’s partners.  An estimated 40% of received scorecards offered at least one innovation idea to be shared. The scorecard has three goals:

  • 1. Enhance supply chain collaboration
  • 2. Improve key environmental indicators
  • 3. Encourage the sharing of ideas and capabilities to deliver more sustainable products and services to customers

 

1. Enhance  supply chain collaboration

Suppliers and external business partners will collaborate to identify best practices and reapply them across the supply chain.

 

2. Improve key environmental indicators

P&G uses existing standard approaches and scientific data, and their measures of sustainability include the full life cycle of the product. The key environmental indicators can be approved upon by suppliers of all size 

 

3. Encourage the sharing of ideas and capabilities to deliver more sustainable products and services to customers [11]

External business partners are connected to deliver unique sustainability improvements. A shared library was also created to build tracking capabilities and share success stories. 

From its implementation in 2010, a supplier has one year to prepare its data before it has to report back.[12] Starting in 2011, the results of the scorecard can affect the performance ratings of suppliers, which can then impact a supplier’s opportunities for future business opportunities. Suppliers who show excellent sustainability performance will be publicly rewarded.[13]

 

Resources

 

Conclusion

Even if businesses are not yet required to report their supply chain sustainability, collecting data and analyzing their supply chain can have beneficial results. Additionally, more and more businesses expect that they will receive requests to make their carbon footprint from the use of their products known available to the public.[14] 

 

[1] Anne Marie Mohan, “P&G launches Supplier Environmental Sustainability Scorecard,” Greener Package, 15 June 2010, http://www.greenerpackage.com/metrics_standards_and_lca/pg_launches_supplier_environmental_sustainability_scorecard, accessed 8 August 2013.

[2] Anne Marie Mohan, “P&G launches Supplier Environmental Sustainability Scorecard,” Greener Package, 15 June 2010, http://www.greenerpackage.com/metrics_standards_and_lca/pg_launches_supplier_environmental_sustainability_scorecard, accessed 8 August 2013.

[3] “Wal-Mart’s Sustainability Index Driving 60,000 Suppliers to Be More HIP,” HIP Investor, 31 July 2009, http://hipinvestor.com/news/walmarts-sustainability-index-driving-60000-suppliers-to-be-more-hip/, accessed 8 August 2013.

[4] “Sustainability Matters: Why – and how – business is widening its focus to consider the needs of all stakeholders,” Oracle, March 2011, http://www.oracle.com/us/solutions/business-intelligence/057079.pdf, accessed 8 August 2013.

[5] Anne Marie Mohan, “P&G launches Supplier Environmental Sustainability Scorecard,” Greener Package, 15 June 2010, http://www.greenerpackage.com/metrics_standards_and_lca/pg_launches_supplier_environmental_sustainability_scorecard, accessed 8 August 2013.

[6] “CFO insights: Sustainability: developing key performance indicators,” Deloitte, http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_cfo_kpis%20for%20sustainability_Nov202009.pdf, accessed 8 August 2013.

[7] “Sustainability Matters: Why – and how – business is widening its focus to consider the needs of all stakeholders,” Oracle, March 2011, http://www.oracle.com/us/solutions/business-intelligence/057079.pdf, accessed 8 August 2013.

[8] “Sustainability Index,” Wal-Mart, http://corporate.walmart.com/global-responsibility/environment-sustainability/sustainability-index, accessed 8 August 2013.

[9] “Wal-Mart’s Sustainability Index Driving 60,000 Suppliers to Be More HIP,” HIP Investor, 31 July 2009, http://hipinvestor.com/news/walmarts-sustainability-index-driving-60000-suppliers-to-be-more-hip/, accessed 8 August 2013.

[10] “Sustainability Index,” Wal-Mart, http://corporate.walmart.com/global-responsibility/environment-sustainability/sustainability-index, accessed 8 August 2013.

[11] “P&G First Year Supplier Sustainability Scorecard Results in Collaboration and Innovation; Company upgrades 2011 scorecard and expands distribution to 600 suppliers,” Procter & Gamble, 7 April 2011, http://www.pginvestor.com/phoenix.zhtml?c=104574&p=irol-newsArticle&ID=1547941, accessed 8 August 2013.

[12] Anne Marie Mohan, “P&G launches Supplier Environmental Sustainability Scorecard,” Greener Package, 15 June 2010, http://www.greenerpackage.com/metrics_standards_and_lca/pg_launches_supplier_environmental_sustainability_scorecard, accessed 8 August 2013.

[13] “P&G First Year Supplier Sustainability Scorecard Results in Collaboration and Innovation; Company upgrades 2011 scorecard and expands distribution to 600 suppliers,” Procter & Gamble, 7 April 2011, http://www.pginvestor.com/phoenix.zhtml?c=104574&p=irol-newsArticle&ID=1547941, accessed 8 August 2013.

[14] “CFO insights: Sustainability: developing key performance indicators,” Deloitte, http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_cfo_kpis%20for%20sustainability_Nov202009.pdf, accessed 8 August 2013.

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