Category Archives: Sustainability

Sustainable Supply Chains Sacrifice China! (Most of the Time.)

Last Friday we posted China is the Enemy because, especially where your supply chain is concerned, China has just demonstrated what SI has known for over a decade — it is the enemy. (This isn’t the only situation where China or the CCP is the enemy, but those are different rants. Note that we do NOT equate China or CCP with Chinese people. Most Chinese are NOT the enemy of your supply chain or democracy just like most Americans are NOT the enemy of intelligence and common sense.)

Long time readers will know that in the naughts, SI spent a lot of bandwidth telling your deaf ears that you should be investing heavily in nearshoring and home country sourcing because of the dangers of outsourcing in general, and, the dangers of oversourcing to a specific country, like China, in particular — which have finally become very apparent. It’s too bad it took a freakin’ pandemic to make clear how dangerous it is to outsource so many critical products and JIT materials to a country halfway around the globe, especially when such sourcing in bulk across the industry leads to the lack of capacity close to home due to factory closures and talent evaporation.

There’s a reason the doctor told you two weeks ago to remember the 80’s (and the early 80s in particular) … and that’s because that’s the last time most multi-national corporations in the Americas got outsourcing right … when they were near-sourcing to Mexico (who should build the wall just to keep Trump out, but that’s yet another rant for another day).

Let’s face it, some stuff just shouldn’t be sourced from home. Stuff that’s not critical, stuff that’s very expensive to make at home (but easily trucked across a single border) for various reasons (which can go beyond labour to energy costs if there are no affordable renewable sources nearby, transportation costs for raw or unprocessed materials are ridiculous otherwise, etc.), or stuff where most of the raw materials or necessary environmental conditions (for growing, mining, etc.) are just not present at, or near, home.

But when you consider a typical organization, how much stuff really falls into this category? First of all, you have to exclude any product for (re)sale that’s a primary profit line. Then you need to exclude any raw material or component critical to production unless you just can’t get it nearby. Then any product necessary for security or safety. And so on. At the end of the day, you don’t have much left, and if you’re doing the analysis right, you’re going to be left with:


  • raw materials and products just not available nearby (because you need certain growing conditions, large deposits of a mineral only found in certain geographies, etc.)
  • processed materials or chemicals where the raw materials are very expensive or dangerous to transport
  • products unique to a culture or region
  • novelty or other items not critical to your business

which (before the short-sighted wall-street loving common sense hating clueless and unskilled consultants of the late 80’s and early 90’s, like Steve Castle, put everything into the outsourcing bandwagon and blinged it out beyond belief) were the only products a company would outsource halfway around the world and still the only products a company should be sourcing from halfway around the world. Everything else should be near-sourced, and if really critical or the cost differential is small, home-sourced.

This also means that just shifting everything to another country in the BRIC, and India (which is ruled by a more open, transparent, and dependable democracy) in particular, is also NOT the answer. (They may not be the enemy, but they are still NOT the answer.)

So, unless you want your Supply Chain to completely collapse after the next global disaster, go back to basics, remember the smart outsourcing decision from the 80s, reopen those Mexican factories, and start near-sourcing again. And then, where you can, bring it back (close to) home.

Sustainability is Getting the Buzz …

… but will it get the buck?

By now it’s very unlikely that you haven’t heard the recent news about Ecovadis getting a 200 Million investment to spread its sustainability ratings to a larger audience … both directly and indirectly through its ever-expanding partner network.

And while it may be the case that momentum towards a more environmentally and societally focused economy has been building for years, that doesn’t mean that it’s here. It doesn’t mean that an organization will put their money where their data is and actually choose the most sustainable supplier for the award.

After all, the last few surveys that have been done asking buyers how much more sustainability is worth to them in real dollar terms have continued to demonstrate that while buyers want ethical and sustainable companies and products, they aren’t willing to pay much more for them. A few percentage points, tops.

And with inflationary times back, this means that companies are still under pressure to keep costs down to sell in addition to keeping profits high to keep the shareholders happy. This leaves little room for a move to a costlier supplier, even if that supplier is much more sustainable.

After all, unless the organization is willing to stand up to its investors and take a profit hit in the short term to embrace a new sustainability agenda (which WILL pay off in the long term as lack of non-sustainable resources causes everything to go up in price), all that is going to happen is that the buying organization is going to use the sustainability data to choose the lesser of two or three evils, not the most sustainable organization that will generate the greatest benefits over time.

And despite the hopefulness of companies like EcoVadis, and their investors, the doctor doesn’t think that tipping point has been reached yet, or that we are even close. However, the need to look like you’re doing good is growing, and making statements about the use of independent data on sustainability and ethics helps you look good (for now, anyway), so it is a good time to be one of the few, big, global players so the doctor does project continue growth for Ecovadis, even if the companies that subscribe to the data aren’t using it the way that they should.

Have You Solved Your Supply Chain Water Problem?

While energy production and availability is likely to be a problem in the decade to come, most experts believe that non-renewable energy production will peak between 2030 and 2035 and then trail off as hydro, wind, solar, geothermal and other renewable methods take over and begin to meet energy demands for decades to come.

However, the situation is not the same when it comes to demand for clean, drinkable, usable water. Global water demand is expected to increase from about 4,600 km3 per year to 6,000 lm3 per year. As a result, by 2050, the projection from the United Nations World Water Development Report is that nearly 6 Billion people will suffer form clean water scarcity by 2050. That’s almost 6/7ths of the current population. Think about that for a minute. BY 2050 ONLY 1 IN 7 PEOPLE WILL HAVE ENOUGH CLEAR, DRINKABLE, USABLE WATER FOR THEIR NEEDS.

Now think about this. WHAT IMPACT IS THAT GOING TO HAVE ON YOUR SUPPLY CHAIN? Regardless of your industry huge. There isn’t a single industry that doesn’t require water. Agriculture, Apparel, Electronics, Forestry, Manufacturing and so on all require huge amounts of water. And Apparel, for example wasn’t a typo – it takes 7,600 litres of water to make one pair of jeans. And Agriculture, Electronics, and Forestry all take considerably more water than you think. That cup of coffee you’re drinking now required 140 litres of water. The smart phone you might be reading this post on, 900 to 1,000 litres on average. And that quarter pound of bacon you’re eating, 526 litres of water.

And your workers need water too. And right now even first world countries are experiencing water issues. Thanks to aging (lead-based) infrastructure, there are a number of places in North America where the population (including school children) do not have clean drinking water. And thanks to drought and lack of infrastructure, water shortages are becoming more and more common. Just this year alone saw major problems in (Cape Town) South Africa and (Chennai) India.
In fact, the World Resources Institute (WRI) identifies seventeen (17) countries, and 1.7 billion people (or 1 in 5 people on the planet), as experiencing “extremely high” level of baseline water stress (as per this graphic from the WRI). (Most are in the Middle East or Asia, or Africa.) Moreover, another 27 countries are experiencing high baseline water stress and within a few years we could be seeing this list (and population base) double. Plus, while the US ranks well overall, the state of New Mexico has “extremely high” water stress (similar to the UAE that is 10th on the list) and projections are that within a few decades the southern Great Plains Southwest Rocky Mountain States, and California will also be under extremely high water stress. (And if you go five decades into the future, about half of the US.)

Without an immediate reduction in water use, improvements in wastewater recycling and reuse, and overall process efficiency across industry, water scarcity and stress will soon hit everyone, and every supply chain, hard and put entire companies, countries, and global supply chains at risk.

So, Have YOU Solved Your Supply Chain Water Problem?

Another Decade Has Passed. How Are You Doing on the 10 Rs?

Ten years ago (yes, this blog has been around for a long time, especially in internet years), we picked up on a great article by SupplyChainBrain on Ten Steps to Green Packaging in the CPG Industry which was a great article not just because it demonstrated just how many ways there were to make packaging green, but because it gave us so many ideas on how to make our entire supply chain green.

In brief, the ten steps were:

  1. Replenish
    Purchase raw materials from suppliers who employ sustainable resource management practices.
  2. Re-use (Re-explore)
    Use recyclable material.
  3. Reduce
    Use ergonomic design and optimization to minimize the use, and size, of packaging material.
  4. Replace
    Replace hazardous and harmful substances with eco-friendly materials.
  5. Reconsider
    Use renewable materials whenever possible.
  6. Review
    Inspect, monitor, and control waste in the packaging process.
  7. Recall
    Immediately recall harmful packaging and put processes in place end harmful packaging.
  8. Redeem
    Collaborate with retailers and collect reusable and recyclable packaging materials.
  9. Reinforce
    Set up a Centre of Excellence (COE) to disseminate environmental best practices.
  10. Register
    Sign up for a carbon reduction commitment initiative and follow-through.

And they are globally applicable.

  1. Replenish
    Regardless of what you are buying, you want a supplier who is focussed on sustainability.
  2. Re-use (Re-explore)
    Modern science has advanced us to a point where most materials are reusable and recoverable. You should be working to get to 90% re-used/recycled/replenished content within a decade.
  3. Reduce
    Modern structural analytic techniques (especially with the low-cost availability of high-powered computing, low-power cores, and the ability to host data centers in naturally cooled environments) allow for the usage of much less material than before, without compromising any structural integrity
  4. Replace
    There is no need for hazardous materials in the majority of products on the market today. Science has delivered us alternatives.
  5. Reconsider
    Non-renewable materials are becoming limited. It’s not just a cost or green consideration anymore, it’s becoming a necessity.
  6. Review
    Waste should be minimized inside your organization and eliminated in your supply chain. Waste to you can be raw material to someone else. Food stuffs don’t meet your level of quality for human consumption? Might more than surpass the level of quality for animal consumption and, if not, there’s always bio-mass energy production. Metal scraps? Straight to smelting and recycling. And so on. Your waste can always be someone else’s inputs if you are smart about your process.
  7. Recall
    Whatever you are creating should be benefiting the consumer, not harming them. If you screw up, recall the product, immediately fix or recycle it, and improve your processes so it doesn’t happen again. (Don’t reprimand the workers, but fire the pointy haired idiot who requested it or was responsible for guiding the workers. And yes, SI still disdains the average Master of Bullshit Administration.)
  8. Redeem
    Make all of your packaging reusable and get it back. (Considering how many empty miles exist in the trucking industry, this is not a big deal or big cost if properly planned. Coupa Sourcing Optimization and Jaggaer One Advanced Sourcing Optimization in particular have models customized for transportation and reverse transportation. USE THEM!)
  9. Reinforce
    … and mandate! Set up the COE, make an executive mandate that policies must be followed, and green your operation.
  10. Register
    Make a public commitment to carbon reduction, waste reduction, and energy usage reduction, measure annually, publicly report, and follow-through. (And don’t just buy carbon credits or carbon offsets. Don’t make your problem someone else’s.)

Sustainability isn’t hard anymore … and the organizations that start now will be the ones that will be around in the decades ahead.

CSR, Procurement and North America: Creating a Market

In our previous article, we asked if you could solve the modern compliance challenge, and, more specifically if you could do it with Ecovadis. This is because compliance has morphed over the past few years from insuring you weren’t doing any illegal trading and simply satisfying the tax man (and import/export compliance is essentially just respecting the legality of the country you are trading with and satisfying its tax man) to having to comply and deal with a lot of regulations around financial reporting and global trade to having to respect the environment (pretty much everywhere but the US, with the exception of California) to having to take corporate social responsibility for the organization’s entire supply chain and ensure there is no violation of worker’s rights, child labour, or human trafficking — or face the consequences that can not only include bad press (at internet speed) and large fines but, in some countries, criminal charges against the officers of the corporation.

We also noted that solving the compliance challenge was tough because you needed environmental data, sustainability data, social compliance data, and even third party audits on your suppliers, and sources of this data (outside of internal surveys that were unverifiable without site audits) were few and far between. The few players with even remotely recognizable names that exist are in Europe, and Ecovadis is the largest. As a result, it likely has the best shot at championing a market in North America, especially with its increasing partner footprint, supplier database (with over 55K assessed companies), and global reach (as they cover suppliers across 155 countries).

But Ecovadis is not a household brand in North America. To become one, it really must drive material commercial traction outside of the EU and, most important, prove that the market for CSR ratings and compliance in North America is as central to supplier management as other supplier management initiatives (e.g., risk, EHS, etc.) to truly “go global”.

The case for an Ecovadis model is sound. Most major procurement departments at US F500s and larger mid-size companies are still focussed on cost-cutting. And using Ecovadis to get the sustainability data the organization needs is roughly 20% of the cost of trying to do it in house.

Further:

  • Organizations that are embarking upon more strategic category management want deep supplier information before selecting potential strategic suppliers and the response rate to Ecovadis-initiated assessments is 90%
  • The average organization will struggle with a 70% response rate in such initiatives, especially when you consider the average supplier turn-over (as identified in a recent QIMA survey) is 27%
  • Once a supplier is in the Ecovadis network, the chances that their overall CSR rating will improve on their next (annual) assessment is 64%
  • For an average company, unless they initiate a supplier development program and work with the supplier, the chances the supplier will otherwise improve on their own is, as we all know, closer to 6.4% than 64%

Less money. Better results. You’d think it would be an instant buy, but it’s not. So why. Is it because it’s European?

Not necessarily — Jaggaer One+ and Jaggaer One Direct from Jaggaer, which is one of the S2P juggernauts, has good NA penetration, and those solutions (formerly BravoSolution and Pool4Tool) are European.

So that’s not it.

Is it because the space is new or unproven? Can’t be. Ecovadis has been around for 12 years and Sedex Global for 18. Plus, there are a number of other players in the space. Is it because the solution is not user friendly? No — it’s delivered via a simple SaaS platform and they even have public quotes from F500s to that effect. So what’s the problem?

North American companies.

First of all, with apologies to Spike Lee, many will “only do the right thing” when they are forced, and then only to the extent necessary (although this may be changing).

Second, they’d rather profit today than save tomorrow (even if the long term savings would be multiples of the short term profit gains). This means that for them to invest in a solution, they want to see a large, immediate, sometimes unreasonable ROI.

Third, they tend to only act when they’re scared (e.g., losing budget if they have extra).

This means that, unless something changes, for Ecovadis to create a true market in North America with a similar reasonable TAM for say, the compliance management side of supplier / contractor management, it will need to lead with evangelism and, perhaps, more.

All things are possible. But as Vincent Ngo speculated decades ago, it takes a superhero to change the mind of the corporate culture. Can Ecovadis be that superhero?

For the sake of procurement and a better world, we hope that they’ll do it — or someone else.

For more information on Ecovadis, check out Spend Matters’ recent post on Catching Up on a Provider to Know (which also includes links to a deep 3-Part Vendor snap-shot co-written by the doctor and the maverick).