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Supply Chain Sustainability – "You Don't Have to Be Good, You Have to be Transparent!'

This quote came from Lou Ferretti, Environmental Compliance and Supply Chain Social Responsibility Executive from IBM at the recent SCRC meeting on April 28. He emphasized that it is not possible to have sustainability from the bottom up. It has to start at the top, in this case from Sam Palmisano. It is a big change in the way companies do business, and has to be institutionalized. It is NOT just something else that we have to do with suppliers, but is something that we need to do. It is part of what we have to do, and it is in the fundamentals of profitability. The companies who are better at managing supply, with less scrap, and more recycling, will be in a better position as raw materials go up, and will outperform their competitors. And they will be the ones that customers will buy from.

The theme of transparency was also apparent in the presentation by Steve Walker and Shannon Hess from Burt’s Bees, who shared with the audience their views on creating a Culture of Sustainability. They emphasized that sustainability isn’t something that can be mandated, and can’t simply be contracted – but that is needs to be driven through collaboration and development to ensure that suppliers see the benefits of improving their labor and human rights codes of conduct, their own suppliers’ codes of conduct, and their sustainability activities. Responsible Sourcing is at the heart of Burt’s Bees efforts, which spans not just environmental and regulatory requirements, but materials, manufacturing locations, claims, and most importantly, trust. Showing a picture of a donkey carrying product in one of their markets, Shannon discussed how “the main objective is to reduce variability in our supply chains.” It is also about mitigating risk – and empowering people to ask the “right questions”, and not hide the responses, even if they aren’t what you would hope to show the public.

Jason Schenker of Prestige Economics discussed some of the current economic challenges to sustainability. For alternative energy, the challenges to building natural gas is the transportation infrastructure in the US, and given the increases in the cost of precious metals such as nickel that are required to build this network. He also emphasized the challenges facing the US economy in terms of the dollar, the debt, and the impacts of the Arab spring and Japanese tsunami on energy prices, LNG, and nuclear power. Sustainability reduces demand and diversifies supply – and creates more transparency over demand – and you now can start to drive more exposure over supply. It is important.

These are some of the highlights from today’s SCRC meeting on sustainability in the supply chain. Additional posts will provide more detail…