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Greening the supply chain

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Today, organisations are facing pressure to enhance their sustainability performance. Regulators, consumers, customers, investors, insurers, environmental advocacy groups and employees are all demanding more sustainable behaviour from both business and society.  

As part of this trend, there is growing public scrutiny of the social, economic and environmental impact of organisations' supply chains, and how companies identify and minimise these impacts.

The 'supply chain' encompasses all activities associated with the flow and transformation of goods - from raw materials (including extraction), through to the end user; as well as information and materials flows both up and down the supply chain.

This approach doesn’t have to be a burden to companies, including small and medium enterprises (SMEs), which may feel daunted by the task, or even by the concept of life cycle thinking and greening their supply chains. Some organisations still have the age-old fallback position of engaging the cheapest supplier or contractor, for example, and making no assessment of the full lifecycle cost of that decision.

In a way, we all act like that on a more personal basis, shopping for ever lower-value products and with little regard as to the upstream and downstream social, economic and environmental impacts associated with the manufacture, use and disposal of the products we buy. But, as it happens at organisational level, this is also changing as consumers become more aware of links between price and poor sustainability practices.

Thinking about supply chains from a more sustainability-focused viewpoint will help identify opportunities that may improve the 'triple bottom line' (i.e. the social, environmental and financial impact, performance and benefits) of your organisation, be it an office, a small manufacturing business or a large multinational.

In fact, for those organisations that are seeking to comply with the ISO 14001:2015 environmental management systems standard, there is now a requirement to consider the concept of life cycle and the social, economic and environmental issues of their products, services and operations, within the scope of their formal environmental management system. A detailed life cycle assessment is not required – as set out in the ISO 14040 series of standards – though some companies do engage with the ISO 14040 standard to identify environmental performance opportunities for their organisation.

Thinking and acting about the life cycle of a product, where possible, can influence a change in any organisation.

The definition of life cycle is: consecutive and interlinked stages of a product – or service – system, from raw material acquisition or generation from natural resources to final disposal. Life cycle stages include acquisition of raw materials, design, production, transportation/delivery, use, end-of-life treatment and final disposal.

Moreover, identifying potential opportunities to improve the supply chain performance can also link to the requirement under ISO 14001:2015 to identify environmental opportunities and risks to the business.

Organisations leading this way do so not only because of the inherent social and environmental risks and the governance challenges the supply chain poses, but also because of the many rewards supply chain sustainability opportunities can deliver. Moreover, it is not just the blue chip or large organisations who are doing this, all companies can engage in the process to become sustainably minded in the way they purchase and provide materials, goods and services.

This is called ‘greening the supply chain’, a term that provides 154 million results on a Google search alone, reflecting the growing global importance of this concept, or at least of the general interest around it. By re-evaluating the company’s supply chain, from purchasing, planning, and managing the use of materials to shipping and distributing final products, savings are often identified as a benefit of implementing sustainability policies.

The concept of supply chain management was born in the manufacturing industry in the 1990s with the Just In Time (JIT) delivery system implemented in the automotive sector. Its main aim was reducing inventories and regulating suppliers' interaction with the production lines. Nevertheless, since its birth, supply chain management has evolved into a full range of disciplines that involves closer customer-supplier relationships.

So, what can a business do to embed sustainability and environmental thinking into its supply chain? There are many approaches to greening the supply chain but there are three basic green procurement activities that can be undertaken for the average company, and even in your own home:

  • Procuring ecolabelled products or services
  • Internal management systems and product life-cycle evaluations
  • Outsourcing and offshoring.

Procuring green
The procurement of ecolabelled products or services and seeking out green claims is all about taking social and environmental factors into consideration – alongside financial factors – in making purchasing decisions. It involves looking beyond the traditional economic parameters and making decisions based on the whole cost, the associated risks, measures of success and implications for society and the environment. You may already be aware of ecolabels and claims on products that are regularly seen in the supermarket products we buy, on your office consumables, and maybe on food products in the canteen.

For the British Safety Council, example, this means making sure the paper we print our magazine on, and use in our offices, has a Forest Stewardship Council (FSC) or Programme for the Endorsement of Forest Certification (PEFC) certification logo.

At home, I actively seek out ecolabelled products. For example, I also look for EU-ecolabelled paper and cleaning products and buy marine stewardship labelled fish products. I have seen many organisations also actively seek out ecolabelled products, and those with green claims, where financially viable, and even link the purchasing process to their overall strategy. To start, the product doesn’t have to be the greenest one, with the lowest environmental impact, but an improvement on the previous product last procured in a general bid to consider more ethical purchasing.

Internal systems and evaluations
Many businesses opt to implement an internal environmental management system (EMS) to improve their environmental performance and be protected from unnecessary liability. This system may or may not be externally certified, but will probably follow the structure of ISO 14001. Over 300,000 companies have implemented ISO 14001 globally, as part of a very strong year-on-year growth of certified organisations.

There are many reasons a company would implement such a standard, but one often cited by manufacturers is to win, or at least be in contention, of winning contracts. Again, this can be thought of as greening the supply chain.

Most ecolabels have all one thing in common: the goods and services have been internally assessed from an environmental or sustainability perspective. The products would have been subject to a formal life cycle assessment (LCA) using ISO 14040 series as guides. The LCA is essentially a decision-aiding tool with several applications in the field of environmental management. It can help to ensure that an organisation’s choices are environmentally sound, whether in the design, manufacture or use of a product or service. The use of LCA can help organisations to improve their products and find new approaches to delivering services, becoming more efficient and reducing costs in the process.

Outsourcing and offshoring
Many organisations outsource or offshore certain aspects of their business such as information technology, customer services, security, freight transport and general facility management services.

Outsourcing to organisations that are specialists in the provision of these services can lead to many benefits, including lower overall costs and access to up to date specialist technology and more qualified staff.

However, as a significant portion of a business’ environmental footprint lies outside of the organisation, businesses need to ensure that any outsourced service providers are adequately controlling their own environmental risks, liabilities and performance. In other words, outsourcing should not mean transferring your sustainability liabilities to companies known to have weaker environmental, health and safety controls.

Therefore, outsourcing to countries with weaker environmental, health and safety legislation and implementation should not be the approach - even if this could be result in financial and operational benefits. In fact, ISO14001:2015 states the organisation shall ensure that outsourced processes are controlled or influenced. The type and extent of control or influence that should be applied to the process should be defined within the environmental management system.

A new standard published in April 2016 (ISO 20400:2017) on Sustainable Procurement Guidance is intended for stakeholders involved in, or impacted by, procurement decisions and processes. It is designed to guide organisations, independent of their activity or size, on integrating sustainability within procurement.

This standard can help your organisation to practice sustainable procurement. Some organisations also draw upon PAS 7000:2014 Supply Chain Risk Management Supplier Prequalification Guidance in setting up clear and transparent tendering systems.

Conclusion
For most organisations, it should be relatively easy to take the business decision to procure in an environmentally responsible manner and consider even basic life-cycle thinking during the purchasing process.

An environmental procurement policy does not normally require any structural changes. However, putting a policy into action will require some strategic planning, including appropriate training for staff, access to relevant environmental information and prioritisation of products, services and operations to find which are most suitable for greening the supply chain.

Keith Whitehead is a senior environmental consultant at the British Safety Council.

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