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Sustainable Supply Chains in Chinese Factories

The SSC Team May 19, 2015 Tags: , , , , , , , , , Strategic Sustainability Consulting No comments
Enjoy this 2013 interview from the SSC archives: An increasing number of companies are implementing sustainable supply chain programs. These programs usually include requests to suppliers to fill out long surveys, track and report data, and develop internal management systems to improve factory-level sustainability performance. At Strategic Sustainability Consulting, we believe that effective supply chain engagement on sustainability is critical to manage risk and leverage opportunities, but we also know that suppliers are often overwhelmed at the requests they are getting from their customers. To get some insight into the challenges facing suppliers, we recently interviewed Nate Sullivan of Efficiency Exchange (EEx). We've worked with EEx, a provider of sustainability software and services to Chinese factories, for many years, and believe they have their finger on the pulse of the Chinese supply chain. SSC: You specialize in working with Chinese factories. What are you seeing in these factories with regard to supplier questionnaires? Nate Sullivan: Supplier questionnaires and worksheets are not a new thing -- factories have seen them for decades.  They've always had to fill out spreadsheets and word documents with tons of information about their facility -- from general company information, to detailed labor practices and customized quote sheets.  However, they complain that the only ones that seem to have a real impact are the quote sheets, because they're about price, and that's ultimately what customers care about in practice.  Now they are being asked to fill out sustainability questionnaires full of data, which requires a full time job to compile and document (around 40 hours a month).  Most of the time they don't even know why the customer is asking for the data, and they say that they rarely hear much back after submitting the information.  So basically it's another hoop to jump through that doesn't appear to influence purchasing decisions, and keeps factories from focusing on what they do well -- which is making stuff. SSC: What are the biggest obstacles to effectively measuring and managing sustainability impacts (like energy, waste, and water) at the supplier factory level? NS: The biggest problem, by far, is accuracy. People really need to realize that there's a tremendous amount of bad, inaccurate data out there that is useless no matter how you look at it, because it simply doesn't reflect reality. That's almost entirely due to how and why it's collected, which is usually through required self-reporting, without any incentive for suppliers that what they provide is true. Unless you're going to sit there in every facility, forever, and actively track what's happening -- which isn't practical for any retailer we've met, no matter how big -- you simply have to find a better reason for suppliers to track and truthfully report what's going on than "because I say so." And that doesn't even address the fact that suppliers have lots of customers who all have their own elaborate set of disclosure requirements, or that factories have no idea how to measure many of the things they're asked to report. SSC: Your company, Efficiency Exchange, has developed software and services that aim to overcome these challenges. Can you explain the 3-4 most important elements that supplier factories should be looking for in sustainability programs and tools? NS: The number one thing factories should be looking for is something that helps their business. Manufacturing is a tough gig; it's not like these guys have huge margins they can afford to cut into an order to look good for potential customers. So the most important characteristic of any kind of factory facing tool is that it provides direct business value to that factory. Any investment that is going to provide that kind of value to a factory needs to be easy to use, and inexpensive not only to buy, but to operate, understand, implement, etc. In our experience, what's missing from every tool we've looked at is simplicity and clarity. There are lots of systems that are really powerful and complex, but they're usually designed to be all things to all people -- utilities, retailers, manufacturers- and anybody who could conceivably buy it, really. With any kind of typical enterprise software, you end up buying this incredibly expensive, super-capable system, and then a bunch of consulting services, training, and support on top of that.  (Then you have to) whittle it down and customize it into something that's actually useful to you. Factories don't have the time or money or expertise to deal with any of that. So any tool that's going to make sense at the factory level has to strip away all of that extra nonsense, and focus on being something that's lightweight, useful, and solves a problem right out of the box. That means it can't necessarily be all things to all people -- it has to be built specifically for factories that need help with this kind of stuff, and it has to provide that help in a really direct way. If you're a factory looking at any kind of sustainability or operational improvement tool, just stop and think about how the tool is going to affect what you do all day. Are you going to get a dashboard or a weekly report? What are you actually going to do with that? Are you going to print it out once a month and put it in a file cabinet? If so, that tool doesn't make sense for you. Anything that's going to be useful needs to go from login, all the way to the part where you're saving money, or getting new business, or removing some obstacle that slows down your growth. Everyone talks about intelligence versus just data, but "actionable intelligence" versus just intelligence is just as important of a distinction, especially for factories. Whatever tool you're investing in needs to take you from software to actually doing something inside your facility that helps your business. How is sustainability saving Chinese textile mills money? Read about it here!

Workplace Movement Toward Environmental Sustainability – Pt. 2

The SSC Team May 7, 2015 Tags: , , , , , , , , , , , , , Strategic Sustainability Consulting No comments
By: Alexandra Kueller Two weeks ago, we introduced the Retail Industry Leaders Association’s (RILA) brand new Retail Sustainability Management Maturity Matrix. The Matrix hopes to be a tool that will be used by sustainability executives, individual companies, and industry-wide. We also noted that while the Matrix is designed with the retail industry in mind, we think that is has a wide applicability beyond just the retail sector. Last week, we discussed the first three sectors that are featured in the Matrix. Today we are focusing on the final four of the seven sectors. Hoping to provide a more in-depth look at how RILA hopes to benchmark across the industry in terms of environmental sustainability, we are going to look at what it would take for a company to become a leader in that sector.

Retail Operations

Environmental sustainability extends to all aspects of a company, including their retail operations. Whether it is a store or corporate offices, a company should be putting in effort to make these areas as sustainable as possible, such as having facilities be LEED certified. Other ways to make your retail operations more "green" can include incorporating green standards for all new warehousing and participating in the ENERGY STAR program. The Retail Operations sector has three different dimensions:
  • Store/Corporate Offices
  • Warehouses/DCs
  • Data Center & Applications

Supply Chain

Supply chain sustainability might not be the first aspect of a company's sustainability plan to come to mind, but it is no less important than any other aspect. To be a leader in the retail industry when it comes to supply chain sustainability, a company must demonstrate the reduction of environmental impact through the optimization of transportation, work closely with suppliers to help improve their sustainability metrics, and be more transparent when it comes to audit statistics (e.g., percent of non-compliant factories). The Supply Chain sector has three different dimensions:
  • Transportation/Logistics
  • Supplier Engagement
  • Supply Chain Transparency & Traceability

Products

When someone thinks of a retail organization and sustainability, often times their first thought is "how sustainable is the product?" RILA recognizes that product sustainability is a key component in a company's overall environmental sustainability and offers some suggestions on how to be a leader when it comes to making a company's product more sustainable. Some examples are using renewable energy sources during manufacturing, offering take-back services, and designing products with a "cradle to cradle" outlook. The Products sector has three different dimensions:
  • Product & Packaging Design and Development
  • Owned Manufacturing/Production
  • Product & Packaging End-Of-Life Stewardship

Environmental Issues

And finally, true environmental sustainability cannot happen if a company does not focus on the environmental issues at hand. How a company addresses these issues - energy, waste, recycling, etc. - in the context of the retail sector is telling, and some industry leaders are already paving the way. Some of these companies are implementing leading waste technologies and policies, establishing green chemistry programs that helps reduce toxins, recycling and reusing water, using alternative energies, and more. The Environmental Issues sector has four different dimensions:
  • Energy & GHG Emissions
  • Water & Wastewater
  • Waste & Recycling
  • Chemical & Toxics
Last fall we attended the annual RILA Sustainability Conference. Read about some of our thoughts on the conference here.