Category Archives: CSR

Sustainability is a Long Term Goal

I enjoyed a recent post over on the HBR Blogs on “Ford’s Impressive Sustainability Strategy” that noted that a real sustainability effort requires both a short term and a long term sustainability challenge.

As the article notes, if we are running out of resources at less than 7 Billion people, imagine the situation when we get to 9 Billion people in less than 40 years. Sustainability can no longer be a fad, it must be a way of doing business. And it’s not going to be obtained with short-term quick fixes. And even if you eliminate 90% of waste from the production process, that still leaves one tenth the waste to be eliminated and, most importantly, the process is probably still using too much energy and water, which are becoming increasingly scarce resources.

Plus, market saturation is not always sustainable. Sometimes the right level of market penetration is less, not more, and sometimes users should pay a premium for the privilege of the product, or a penalty for overusing a product or service.

And, most importantly, sustainability is more than strategy. As the post points out, it’s execution.

Improving the State of Sustainable Procurement Reporting

A few weeks ago we reviewed the state of sustainable procurement reporting and found that it still wasn’t very good. Over half of American companies are not effective at communicating their goals and structuring their policies, only half have sustainability targets, only 1 in 10 have a sustainable procurement team, and only 1 in 20 train their suppliers to be sustainable. All in all, it’s just not good.

So what needs to be done? There are a lot of proposals on the table, including this recent article on “graduating to the next level of sustainability” (in Industry Week), but the reality is that it’s not that complicated, at least in the beginning. It really boils down to these four steps:

Put a Team in Place
The first thing you have to do is assemble a team with responsibility and authority. Sustainability has to be part of their job duties and their bonus structure partially dependent on the results. Furthermore, at least one team member needs to be a C-suite executive with the authority to actually take action. If all the team can do is make recommendations, nothing will ever happen.
Benchmark Current Performance
If the current state of affairs is not understood, there will be no way to define or measure progress. The team has to start by defining some basic benchmarks and measuring against them. The team should not spend too much time on benchmark selection, as it’s pretty much impossible to get it 100% right the first time, but on selecting the most common benchmarks and measuring against them. As the understanding of the current, and desired, situation improves, the benchmarks can be modified to be more in tune with company operations.
Define a Vision with Measurable Targets
Once the current state of affairs is understood, the next step is to define the corporate sustainability vision and to translate it into specific, measurable, short-term and long-term targets. ‘Reduce waste’ is good, but ‘reduce waste by 20% over the current level of 1 Million tons within 24 months’ is better.
Continually Measure Progress and Adjust Performance
Progress must be measured at least quarterly and operational processes adjusted, or targets revised, if desired performance isn’t being achieved.

That’s it in a blog-shell. It will be a lot of work, but it’s not a difficult task to embark upon a sustainability effort.

Are You Really Doing More With Less?

Or are your people just working more hours?

Long time readers may recall that back in 2007, I did a 12-part series on Responsible Sourcing, inspired by the “Responsible Sourcing Supplier Workbook” from the John Lewis Partnership that was created to insure that companies that sourced from low-cost countries did so responsibly. However, as a result of the recent economic climate, I believe companies should be re-reading the workbook while analyzing their supply chain at home.

Why? Productivity is going up, but jobs aren’t coming back. There’s only two ways you can increase productivity in a jobless recovery.

Adopt better processes and tools that allow for more efficient work.
Work more hours.

And, to be honest, giving how spending came to a standstill during the recession, I don’t think many organizations improved their in-house toolsets. This only leaves “work more hours” as a likely explanation for the recovery. Given that, in 2006, 17% of employees worked more than 48 hours per week, and that, in South Korea, the average number of hours worked was 45 hours per week across the entire population, this is very worrisome. Now, I know the average number of hours worked in the US has been dropping since 2000, and the average number of hours worked in the UK has been dropping since 2005, but this includes hourly workers, whose hours have been cut as a result of the recession, as well as salary workers, which is where my concern lies.

While the average number of hours worked, after dropping in 2009, is roughly at 2008 levels, before the recession began, the average number of hours worked is rising and will have to continue to rise still if productivity is to increase without new hiring. And when 85.8% of males and 66.5% of females in the US are already working more than 40 hours per week, this is a very troubling thought. Americans are already working 137 hours more annually than the Japanese, 260 hours more annually than the British, and 499 hours more annually than the French (according to the ILO) — how much more can we work?

And what’s really scary is that the US is one of the few countries in the world that does not have a law mandating the maximum length of the work week! Over 134 countries have laws limiting how many hours an employee can be forced to work in a week. In Europe, the Working Time Regulation implements a maximum work week of 48 hours. This is on top of the fact that American workers average 10 paid holidays per year while British workers get 25 paid holidays and some European workers get 30 days. The way things are going, it won’t be long until Americans are working more than workers in 3^rd world countries. And this is disturbing. Don’t you agree?

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The State of Sustainable Procurement Reporting

ORSE (Observatoire sur la Responsabilite Societale des Entreprises) just released a detailed 36-page study on “Sustainable Procurement Reporting”, sponsored by Ecovadis, that aimed to identify the major trends in terms of Sustainable Procurement Policies. Many of the observations were not unexpected given the recent uptake in sustainability in the corporate world, but a few of the findings were disturbing.

First of all, the finding that European companies are twice as effective at communicating their sustainability goals and structuring their policies (75% of European companies are at an ‘advanced’ level compared to only 40% of American companies) is bothersome. Why is Europe so far ahead of us?

Secondly, despite the fact that 95% of companies mention Sustainable Procurement in their Sustainable Development reports, only 51% of companies have quantitative Sustainable Procurement targets. Without goals, it’s all just a bunch of hot air.

Thirdly, even though two thirds of North American companies (and almost nine tenths of European companies) analyze supplier performance, in some sectors, less than half of the companies assess the CSR performance of their suppliers. Why is performance so inconsistent across industries?

Fourth, only 13% of companies have a sustainable procurement team. While dedicated full time staff are not required, there should be a dedicated team of employees who have sustainable policy development, implementation, and (supplier) training as part of their job.

Fifth, on average, only 6% of companies train their suppliers to be sustainable. In order for sustainable practices to take root, they need to spread. In order for them to spread, they need to be taught.

In other words, the state of sustainable procurement reporting is improving, but there is still a long way to go. For more details, check out the detailed 36-page study on Sustainable Procurement Reporting.

What’s the Fastest Way to Lose a Supplier?

It’s a good question, but is it one that has a statistically backed up answer? I have to admit, I don’t know, but I’d like to.

Recently, I came across this article over on the Get Satisfaction blog on the fastest way to lose customers. According to the article, the top three reasons that customers leave a company are because:

they move to the competition
they are dissatisfied with the products and service
they don’t like the treatment they received

However, most of the time, it’s because they don’t like the treatment they received. In fact, that’s the case seven (7) out of ten (10) times.

But how often does a supplier leave when they don’t like the treatment they receive? My guess is not very often. As long as the bills get paid, suppliers will put up with a lot more than customers, even if they shouldn’t. However, go long enough without paying your bills, and your suppliers will probably bolt faster than lightening after serving you with a summons. However, depending on order size and frequency, it could take a while before the amount owed is enough for the supplier to drop you.

So what is the fastest way to lose a supplier? And how do you prevent it from ever happening?