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Tackling real-world supply chain management challenges by applying research, experience and knowledge.

SCRC Article Library: Industrial Manufacturing Industry Sustainability Report

Industrial Manufacturing Industry Sustainability Report

Published on: Jun, 18, 2012

by: SCRC Team 5 Spring 2012

Key Sustainability Issues in the Industrial Manufacturing Industry (Construction, Industrial, Automotive, Farm, and Miscellaneous Manufacturing)

  • Green is “popular” right now; therefore, finding more information about environmental sustainability on the company websites
  • Companies are focusing on the environmental impacts of products, but not necessarily within either manufacturing or product supply chain; therefore, companies are not actively forcing sustainability on suppliers
  • With extended supply chains with distribution channels and suppliers, it is difficult to implement changes across subsidiaries and supply chains
  • Sustainability is driving new collaborations between competitors to limit cost impact while building industry standards

Based on nation of origin, different types of concerns were addressed:

  • Europe: Focused on both LHR and environmental sustainability; expectations for both company and suppliers (for example, with Ingersoll Rand); European culture has these focuses as well with work-week, vacation, work-life balance, etc.
  • North America: Have historically looked at LHR expectations, especially within the U.S. and seem to be focused more now on environmental ; recent push by domestic OEMs to require supplier adherence to company standards – (for example, AIAG (Automotive Industry Action Group), a North American member-based, non-profit industry group working to improve supply chain and LHR conditions while standardizing indicators/metrics
  • Asia: Focused on green issues, mentions of LHR and expectations of respect for people; Asian culture is willing to work hard and put what in what is needed; Asian companies reluctant to allow unions to take root creating conflict with employees ; working conditions and wages are not competitive with American and European competitors

Based on manufacturing industry, different types of concerns were addressed:

Automotive

  • CEOs are aware that sustainability will be an important way of doing business in the future but hesitant to commit due to changing customer requirements, evolving technologies, changing regulatory landscape, and lack of recognition of the importance of sustainability projects from investors
  • Automotive executives see the importance of sustainability education for future industry leaders
  • Inferred Conflict between sustainability efforts and strategic priorities
  • 90% of industry execs believe that economic downturn has raised the importance of sustainability – “brand, trust, and reputation” is driving executives to take action

Construction and Farm Machinery

  • Companies with this industry have code of conducts that apply to their extended supply networks with application to tier 2 and beyond suppliers
  • Strong supplier relationships exist within these markets where total supply chain transparency is required in order to ensure enforcement of the code of conduct, as well as support in case of natural disasters, etc.
  • These companies present updated information annually regarding their adherence to the environmental and LHR sustainability over the past year’s operations within their own operations, as well as their suppliers, like natural resource usage, efforts within the community, and other items

Industrial Machinery

  • Larger companies in this industry try to collaborate with their suppliers as much as they can. However, this intention still needs further development.
  • Most companies in this industry focus only on their 1st tier suppliers, but they do not extend requirements to 2nd tier suppliers and beyond.
  • The companies already include LHR issues in their codes of conduct. Also, many companies also focus on employee development programs that increase employees’ knowledge, skills, and satisfaction.
  • The companies in this industry already track the effect of their production on the environment, especially carbon footprint and are identifying ways of reducing emissions and waste.

Methodology and Rating System

Brief overview of the system and approach for research and ratings. This will be the same for all teams; this will be provided by the research group.

List of Company Ratings

Company Ratings

Industry Best Practices

  • GM (and the US portion of Honda)are part of the Automotive Industry Action Group (AIAG) which is a North American member-based, non-profit group working to improve supply chain issues
  • Volkswagen has a reputation for being an industry leader in enforcing the rights of employees
  • Within the Supplier Code of Conduct for John Deere, it requires complete supply chain transparency to confirm compliance of both the codes of conduct, as well as corrective actions when issues arise
  • Ingersoll Rand has been recognized for energy efficiency, and it has created the Center for Energy Efficiency and Sustainability, where it works with other companies and suppliers within the industry to teach how efficiently use energy and natural resources and also continues to research new sustainability and efficiency technologies for the future
  • EATON has developed WISPER (Worldwide Interactive Supplier Performance Evaluation Resource) to improve collaboration between the company and its suppliers.

Common Gaps, Opportunities, and Industry Recommendations

  • Since the majority of automotive OEMs use the same suppliers, we recommend that the automotive industry continues to work closely together to ensure supplier adherence to LHR expectations
  • Companies should continue to support sustainability education programs for employees and external college curriculum to ensure that future industry leadership is prepared to deal with sustainability issues
  • Most companies in the industry still lack the high integration and collaboration between the companies and their suppliers; companies need to work with suppliers and competition within the industry to drive best practices and industry benchmarks to improve industry adherence and reputation with regard to sustainability
  • Companies with the codes of conduct require all partners, suppliers, and distributors to adhere to all of the environmental, LHR, and SRM; however, the companies are not strictly enforcing the audits, and the companies should be following all audit processes to ensure adherence to these requirements
    • If companies do not enforce their codes of conduct with their suppliers, they may be held responsible for their suppliers’ environmental or LHR infractions
  • The companies within this industry seem to be focusing more on environmental impacts, but not on LHR, especially within both domestic and international markets, and these companies need to have dedicated focus on both environmental and LHR sustainability

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