Sustainable supply chains: a resourceful approach

6 April 2014



Dr Nick Murry, chief sustainability officer at supply chain management specialist Ecodesk, discusses major changes to sustainability reporting requirements that are being brought in this year, and will have implications for packaging businesses of all sizes.


The signs are that 2014 will see a shift in how businesses react to sustainability reporting. A combination of regulation, economic pressures and risk management issues will push sustainability further up the business agenda, and more customers than ever will demand to know the sustainability credentials of their suppliers. Nowhere will this be more prevalent than in the packaging sector.

This isn't simply about sustainable packaging materials though, it's about the resources used in production and their resulting social and environmental impacts – sustainable supply chains, in other words.

Many large packaging firms will already have experience of receiving customer questionnaires requesting carbon, energy, water and waste information, and these demands are set to increase – and to encompass a greater proportion of SMEs too. There will also be an increased demand for transparency.

Definitions of business value are changing. Long term value creation is becoming a key yardstick for determining business success. Stakeholders are increasingly taking into consideration non-financial capital in their service procurement and investment decision making.

Couple this with growing concerns about business continuity and the need for cost saving energy and resource efficiency, and you have some strong drivers for change.

The packaging industry is an important component in making supply chains more sustainable, as it touches so many sectors – one of the reasons behind Ecodesk's partnership with the PMMI-run Alliance for Innovation and Operational Excellence (AIOE), aimed at promoting sustainability reporting within this industry through its members.

Through this initiative, global brands such as Cadbury, Coca-Cola, Kellogg and Kraft Foods will be encouraged to get their suppliers, including packaging manufacturers, to openly report their sustainability data on Ecodesk.

Global effort

In addition to customer pressure, 2014 will also see increased regulation as governments too are recognising the value of sustainability data as a measure of business efficiency and accountability.

In October last year the UK implemented a mandatory reporting regulation for LSE listed businesses, which will begin to take effect this year.

This year will also see the introduction of amendments to the European Union's Accounting Directives (due for its first reading at the European Parliament in March) that will require supply chain reporting for all large companies.

2014 will also see greater emphasis on supply chain within changes in the ISO14001 environmental management standard, used widely across business and industry.

On a global scale, the World Bank is also piloting an open reporting sustainability data site (powered by Ecodesk) called Open Supply Chain (https://opensupplychain.ecodesk.com). The aim is for governments and industry bodies to push their local suppliers into open supply chain sustainability reporting.

Customer power

But despite more demanding regulations and standards, the influence of large customer organisations on sustainability data reporting remains the main driver for change for many organisations. It is this business-to-business relationship that is crucial in creating an environment in which companies of all shapes and sizes are prepared not simply to disclose information, but also see the benefits of doing so for their own businesses.

And the impetus is moving down the pyramid to a growing number of small and medium sized enterprises (SMEs). A UK-based survey at the end of 2013 by Lloyds Bank Commercial Banking found that over half of SMEs polled recognised the cost benefits of implementing sustainable business practices, with some stating they have already seen improved profitability as a result.

While sustainability has become a strategic business issue, procurement departments are where some of the greatest influence will be realised and where industry changes will be driven.

Companies such as US pharmaceutical giant Allergan are no strangers to sustainability measurement and admit that in future they will only want to work with companies that meet their sustainability expectations. This is a powerful influence, and Allergan is not alone.

Ahead of the game

Sustainable procurement is rising up the business agenda, as buyers seek to get a better understanding of, and long-term value from, their suppliers.

Using supply chain monitoring systems, with associated analytics and scorecards, enables buyers to compare and contrast suppliers on a range of environmental and social metrics, thereby enabling more informed decisions around supplier risk and alignment.

2014 will see the convergence of many influences, with governments, industry bodies and major corporates all pushing in the same direction.

Packaging firms should see this as an opportunity to prepare themselves for these changes and capitalise on the benefits of more sustainable supply – something that cloud-based technology has made easier to achieve than ever before.

www.ecodesk.com

 



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