Sustainability and suppliers, don’t engage, transform…

Having spent some time writing about palm oil and interviewing the Unilever CEO recently, I’m convinced, as I have been for a while, that large companies need to go much further than many do on supplier engagement.

Consumers are very hard to engage, as we know. Supply chains, particularly Tier One suppliers, are where much more can be achieved much more quickly than with consumers.

Audits and requests for data are all every well, but as reported this month again, we know they only deliver in the short term, at best.

Further resources, supported at a higher level are needed for real, lasting results. Results that deliver for all. Coca-Cola Enterprises deserves serious praise in this area. When it is CEO-led, it matters, and can be embedded.

More on all that below.

Tomorrow I’ll be speaking with the Coca-Cola Enterprises CEO John Brock, about this in more detail at the Responsible Business Summit in London.

I’ll also be asking the Kingfisher and Desso CEOs about suppliers, and sustainability leadership, on Tuesday.

I’ll report back on the conference later in the week on the blog.

Here’s my latest column for Ethical Corporation on the subject.

It’s also below.

Supplier operations: Smarter business works

Transforming supplier business models is the corporate strategy of the future, argues Toby Webb

The old cliché says that “charity begins at home”. Is that right? Well, yes and no.

Yes, because in a corporate sustainability context you have to get your house in order, that’s clear.

No, because much of your impacts are likely to be in your supply chain (although there are exceptions). So it makes sense to get into that chain as early as possible.

Today lots of large companies, perhaps 5,000 from the 100,000 or so transnational firms in the world, have sustainability targets. Many even have holistic “plans” with ambitious 2015 or 2020 targets across their business.

This is all excellent stuff. Well done us. Jolly good show. Pat on the back.

But for many businesses, making these plans happen, and making them have an impact internationally, is going to be about sustainable change in how suppliers operate.

This is now becoming patently obvious. If you want to solve supply chain sustainability challenges, you’ve got to go back to the way business used to be done, but now with technology, training and human/resource efficiency prioritised.

Longer-term contracts, financing mechanisms, technical training, less chopping and changing for a quick buck. These are all key areas to work on.

When we wanted FSC paper for Ethical Corporation ten years ago, we collaborated with our printer (the only one we’ve ever used) to buy 400 tonnes of paper, so we could get the price down. That was done on a handshake, but that commitment locked us in to working with that supplier, morally speaking, for many years, right up until today. Not that we wanted to switch, despite cheaper offers, but it meant the relationship felt solid. They invested, and we promised to buy from them. We both won. Eventually the printer switched all its printing to FSC. Win-win-win.

Companies that lead the way on sustainability have been pioneering longer-term and more in-depth supplier relationships for years. For them, this is not new. I’m talking about companies such as Nike (technical training for suppliers), Unilever (smallholder farmers) Marks & Spencer (eco-factories) and Sainsbury’s (bananas).

Cadbury, before being swallowed by Kraft, was also developing long-term supplier partnerships with cocoa-producing villages in Ghana. I know, I went there and saw them. There are other examples out there, of course.

Genuine collaboration

Now we’re seeing firms such as Nestlé take the cloying concept of “shared value” and turn it into genuine, in-depth supplier collaboration. Its work with Golden-Agri Resources on palm oil could soon become a model for supply chain transparency in Indonesia, a difficult operating environment to get good news stories from.

In the equally complicated and low-margin clothing industry, companies such as New Look have done amazing work with suppliers, helping them understand how to run better factories. What have better factory management practices got to do with sustainability? Everything. If you want to cut forced overtime for workers, increase productivity, reduce accidents, increase profits and lower environmental emissions and impacts, that’s all about smarter business.

That’s easy to say, but your average stressed shift manager or factory owner doesn’t usually know how smarter business can or should be applied to their workers or business operations. We must remember that most developing country entrepreneurs and managers didn’t go to business school. They didn’t have much, if any, real training. They saw opportunities, and they made it up as they went along.

That makes them heroes in many ways: for taking risks, creating jobs, lowering prices. But the unintended consequences of that created demand have been serious impacts on the environment and human well-being, as we all know. These managers are not bad people. They just didn’t understand how to do business any other way, and most still don’t. Big companies must help them find out, and push them to improve. Resource efficiency, environmental impacts and the need to hang on to workers have created a pressing business case.

I don’t know of a manager or business owner anywhere who would turn down practical help to become more efficient. Making sustainability stick has to be framed in those terms. Get that right, and put the resources into doing so, in a five-year timescale with annual reporting and measurement, and you’ll be amazed at the results, for both your business and the planet.

It really can be that simple. Put in a little money, and get a massive sustainability return.

Toby Webb is founder and chairman of Ethical Corporation, and chief executive of Stakeholder Intelligence, a research and training firm.