Category Archives: Sustainability

If the US Implements Cap and Trade Instead Of Carbon Tariffs, Are You Ready?

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As my long-time readers will recall, green and sustainability were major foci of this blog before they became popular topics among other bloggers. As a result, I’ve been following, and occasionally blogging about, carbon tariffs for years, which I expected to see more of in the (near) future as some states and provinces have already implemented a carbon tax (like California and British Columbia) and a bill was introduced into US Congress.

But recently I’ve been seeing references to cap and trade, which disturbed me for reasons I couldn’t quite pinpoint, mainly because I never saw a good definition of what it was, how it might be implemented, or what impacts it will have on your (global) supply chain. Needless to say, I was glad to see this recent article on the supply chain and cap and trade by Supply Chain Digest Editor-in-Chief Dan Gilmore and find out that I’m not alone. Seems Dan was in the same boat too.

So he did some research, and a few calculations, and arrived at some conclusions which are even more disturbing than you might expect. Not only will cap and trade, which would dole out carbon permits for so many tons of CO2 to your company, cost you and be more complicated than a carbon policy needs to be, but it will add volatility and risk into your supply chain … and that’s not good. You see, if cap and trade comes into play, we have the following unknowns to deal with:

  • the details
    depending on the implementation of cap and trade, the impact on your supply chain could be anywhere on the scale from minor nuisance through major burden
  • the complexity
    any scheme will necessarily be more complex than a straight carbon tariff (per ton) and will take years to implement
  • the global impact
    how will offshore carbon production be addressed, will it result in a move back to near-shore or home production, and will it result in more telecommuting to reduce office space?
  • the cost
    if your emissions are capped, you either have to reduce them or buy permits from your competitors, who will be auctioning them to the highest bidder … so you have no way to plan for the potential cost in advance

Policies should reduce the risk and volatility of your supply chain, not add to them … which is precisely what a cap and trade approach will do. So be sure to support your local trade association in lobbying for a straight carbon tariff. At least you can plan for that.

Ensuring Responsible & Ethical Production: Can You Answer Walmart’s Five Questions?

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Walmart has made it’s 15 Question Sustainability Product Index public. Can you answer it’s five questions on people and community?

  • Do you know the location of 100% of the facilities that produce your product(s)?
    You should. You really, really should. Not just for ethical reasons, but for compliance and regulatory reasons.
  • Before beginning a business relationship with a manufacturing facility, do you evaluate the quality of, and capacity for, production?
    If you sell the product, and it’s defective, you’re on the hook.
  • Do you have a process for managing social compliance at the manufacturing level?
    If you don’t, how do you insure your social policies are being followed?
  • Do you work with your supply base to resolve issues found during social compliance evaluations and also document specific corrections and improvements?
    You need to lead the way.
  • Do you invest in community development activities in the markets you source from and/or operate within?
    While not critical from a compliance or regulatory viewpoint, it’s the right thing to do.

Can we Sustain the Global Food Supply Chain?

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The threat of contamination can be disastrous for both public health and businesses, thus prompting companies of all sizes to focus on sustainability initiatives designed to ensure the health of the entire food and beverage ecosystem.
Aberdeen Group, “Sustaining the Global Food Supply Chain”, January 2009

In their research preview, which noted that global food production, processing, distribution, and retailing have never been under greater scrutiny by both regulators and consumers than they are today and that their upcoming study will explore pressure points, planned actions, and best practices in supply chain management, Aberdeen points out that thought leading food and beverage companies have taken on aggressive goals to ensure end-to-end visibility and quality, reduce negative impacts on the environment, and enhance positive change on society through frameworks of shared value.

But sustainability requires organizations to change and innovate in fundamental ways and represents, in and of itself, a sea change in the way society views the role of business and the centrality of business ethics. And in this economy, despite the need, not many companies are changing. This is a disturbing thought when you take into account that last year, global food reserves reached fifty, if not one hundred, year lows and that global shipping is currently responsible for 4.0% of all global climate change emissions due to an utter lack of regulatory requirements compared to the automative and trucking industries.

So can we sustain the global food supply chain?

Corpedia’s Top Five Compliance Measures for Surviving Tough Economic Times

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Corpedia, a consulting and e-learning provider of compliance and ethics solutions and training, recently released its recommendations on what compliance measures companies can take to weather the storm, as reported in a recent article in Supply and Demand Chain Executive on “Surviving Tough Economic Times”.

Since the Justice Department is already investigating 120 companies for violations of the FPCA (Foreign Corrupt Practices Act), up from 100 last year, and the year is only half over, you should make sure you are heeding these points. The government needs money too … and if they think they can fine you millions, or billions, of dollars … now is the time they’re going to be banging on your door.

The five measures, which are very common-sense and easy to implement, are the following:

  • don’t wait until it’s too late
    even if you don’t have the budget for everything you’d like to do, you can start designing your program now and identify process improvements to improve your state of operations and implement your program incrementally (and if you happen to be unknowingly violating an act, the government will be a lot more lenient if they see you were taking measures to prevent accidental violations)
  • articulate expectations
    unless you effectively communicate a clear, comprehensive code of conduct, and reinforce desired behavior from time to time, you can’t expect that your employees will always know what to do
  • you can’t run or hide … so don’t try
    you must be organized, transparent, and accountable … because even if you have nothing to hide, you’ll look like you do … and that alone could trigger a costly investigation
  • work out the old, bring in the new
    review and modify existing policies and procedures as necessary and create new controls to insure they are followed
  • utilize available knowledge
    Take advantage of available research that sheds light on others’ successes and failures and outlines the framework for a bulletproof compliance program

Checklists for Identifying, and Helping, Distressed Suppliers

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A recent CPO Agenda article, on why you should put “suppliers and vendors first”, in addition to making a few very good points, had some good checklists that you can use for identifying distressed suppliers and, if they are key suppliers, helping them.

Distressed suppliers often do one or more of the following:

  • ask for pre-payment, price increases, and contractual relationships (to show to their bank)
  • change factory habits upward and/or delay tax payments and VAT returns
  • substantially increase their CCC over a short time period
  • announce “temporary redundancies”, travel freezes, or both
  • suspend capital expenditure programs
  • stop paying dividends or buying back shares
  • cut bonus payments on a large scale

If a supplier is distressed, the following might help the supplier out:

  • pay your invoices on time
  • pay your invoices on delivery of goods
  • make advance payments
  • buy raw materials directly from a tier two supplier and pay only a conversion fee to the tier one supplier
  • provide or support financing
  • take an equity stake
  • merge or acquire

While the current economic and cash crisis will claim many more victims and will not be a “quick win” for anyone , there are things you can do to make sure your key supplier is not one of the victims. If you’re on the ball, you can foresee the disaster before it happens and take steps to prevent it. It’s up to you.