Amy Longsworth, Managing Director, Sustainable Business Solutions, PwC
Amy Hargroves, Director of Corporate Responsibility, Sprint
Is there hope for overcoming supplier survey and scorecard fatigue? Have individual leading companies' custom scorecards worked well to drive supplier sustainability, and is there a clear need to design overarching industry-level standards? What brands and other organizations are best positioned to lead such efforts, and why?
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Beyond Supply Chain Scorecards: New Approaches to Elevating Supplier Responsibility
1. Beyond Supply Chain Scorecards: New Approaches
to Elevating Supplier Responsibility
The New Metrics of Sustainable Business 2013
Amy Longsworth, PwC
Amy Hargroves, Sprint
2. Playing to Win:
New Approaches to Supply
Chain Management
The New Metrics of Sustainable
Business Conference
September 2013
www.pwc.com
3. PwC
Why PwC cares about supply chain engagement
3
• Build resilience
• Address material risks
• Meet their goals and commitments
Help our clients
• Work to identify and measure costs
• Find opportunities to create strategic value
• Continuously improve strategy
• Tell the story through integrated reporting
Help all companies become aware of
their footprint and material issues
4. PwC
As supply chains become more complex, managing sustainability
risks has become even more critical and difficult
4
Examples of sustainability-related incidents and their impact, 2010-2012
5. PwC
Supplier standards alone are not sufficient
1 Final
Product
American
Cheese
Pickle
Slices
Onions
Lettuce
Sauce
Bun
100% Beef
Patty
7 Components
29 Sauce ingredients:
Soybean oil, pickle relish,
vinegar, corn syrup, onion
powder, mustard seed, etc.
1 Lettuce ingredient:
Iceberg lettuce
33 Bun ingredients:
Flour, corn syrup, soybean
oil, sesame seed, etc.
3 Patty ingredients:
100% pure beef, black
pepper, salt
1 Onion ingredient:
Chopped onions
14 Cheese ingredients:
Milk, cheese culture, sodium
citrate, salt, etc.
10 Pickle ingredients:
Cucumbers, vinegar, salt,
calcium chloride, etc.
90 Ingredients21+ Tier 1 Direct
Suppliers
Patty Supplier A
Patty Supplier B
Patty Supplier C
Pickle Supplier A
Pickle Supplier B
Pickle Supplier C
Bun Supplier A
Bun Supplier B
Bun Supplier C
Sauce Supplier A
Sauce Supplier B
Sauce Supplier C
Lettuce Supplier A
Lettuce Supplier B
Lettuce Supplier C
Onion Supplier A
Onion Supplier B
Onion Supplier C
Cheese Supplier A
Cheese Supplier B
Cheese Supplier C
1,000+ Tier 3/4
Farmers,
Processors, &
SuppliersFlour Supplier A
Flour Supplier B
Flour Supplier C
Corn Syrup Supplier A
Sesame Seed Supplier A
Corn Syrup Supplier B
Corn Syrup Supplier C
300+ Tier 2
Ingredient
Suppliers
Sesame Seed Supplier B
Sesame Seed Supplier C
Supplier
Code of
Conduct
5
6. PwC
Why managing your supply chain matters
6
Managing risk1
Managing resources2
Finding efficiencies3
Creating value opportunities4
7. PwC
Top challenges encountered with regard to implementing
supply chain sustainability initiatives
7
Ranked as the #1 obstacle to supply
chain sustainability
“Leadership does not provide the mandate,
incentives, and resources to turn
sustainable strategies into action.”
Generally marked as a challenge by
larger ($1bn+) companies
“The impact on shareholder value is not
measurable”
Respondents were less likely to
indicate an increase in supply chain
sustainability focus for the next 3 years
“Our customers are not asking for it”
The clearer a company’s strategy and
goals are, the more likely the company
achieves value from sustainability
“There is significant confusion about the
scope and company goals on sustainable
supply chain”
Respondents indicated that ethics and
compliance are the major
sustainability drivers
“Compliance drives the majority of actions”
Question: Check all the applicable challenges within your organization, then rank the top three
challenges with regard to implementing sustainable supply chain initiatives. (N=109)
8. PwC
Those who realized value from sustainability efforts were
far more likely to have an established strategy
8
• 77% of those who did not achieve value from sustainability said their strategy does not
exist or strategic approach is undocumented
“Realized value”: those who indicated revenue gains, cost reduction, market share gains,
market size gains, or environmental impact reduction from sustainability efforts
“Others”: those who did not indicate value achieved in any of the five areas above
A strategy does not exist
General discussion exists, but the
corporate strategic approach is not
documented
A strategy does exist, but the plan is not
communicated to all levels of the
organization
A strategy exists and is fully communicated
across the organization
Realized Value Other
(N=60) (N=35)
8%
34%
35%
23%
37%
40%
14%
9%
9. PwC
The perceived existence and communication of
sustainability strategy differs between levels
9
• More managers say that an SCS strategy does not exist at their companies
• Almost half of respondents, regardless of level, don't have a documented SCS strategy
Strategy does not exist
General discussion exists, but the
corporate strategic approach is not
documented
Strategy does exist, but the plan is not
communicated to all levels of the
organization
Strategy exists and is fully communicated
across the organization
Executive & Director Manager & Below
(N=20) (N=85)
21%
34%
28%
17%
5%
40%
25%
30%
10. PwC 10
What are you trying to accomplish in managing your supply
chain?
Supplier
standards
Sustainability
criteria in
procurement
Sourcing certified
or alternative raw
materials
Dedicated or
integrated supply
chain
Supplier and
stakeholder
collaboration
Set minimum
performance
standards for
suppliers on social,
environmental and
ethical issues
Integrate
sustainability
criteria alongside
traditional
procurement criteria
of cost, quality and
performance
Source 3rd party
certified raw
materials or
alternative raw
materials to reduce
reputation risk
exposure
Take control of
components of the
supply chain
through acquisition
or long-term,
dedicated supplier
agreements
Collaborate with key
suppliers and
stakeholders to
address pervasive
environmental and
social issues in the
supply chain
Examples:
• Supplier codes of
conduct
• Sustainability
criteria in RFPs
Examples:
• Walmart and
P&G’s supplier
scorecards
• Annual reviews of
suppliers that
consider
sustainability
performance
Examples:
• CPGs sourcing
certified cocoa
have reduced
reputation risk
while procuring
better quality cocoa
• Unilever testing
algal based
substitute for palm
oil
Examples:
• Unilever
announced plans to
build palm oil
refinery in
Indonesia
• Partnering with
suppliers on
packaging
innovation
Examples:
• Walmart’s Supplier
GHG Innovation
Program
• Partnering with
suppliers to pilot
new products
Play not to lose Play to win
Source: PwC, “Resilience: Sustaining the supply chain,” July 2012
11. PwC
Engagement is the new process design
Business process
focused (1980’s to Present)
Stakeholder engagement
focused (2000’s to Present)
Source Make Deliver
Target Acquire Retain
Ideate Develop Launch
Stake
holder
Stake
holder
Stake
holder
Stake
holder
Engagement
11
12. PwC
Cargill engages key customers to align on supply chain
issues and identify shared value
Cargill’s Responsible Supply Chain (RSC)
approach:
• Engage key food and beverage customers
• Rapidly identify and assess areas of risk and
opportunity in shared supply chain
• Evaluate financial value at stake – risk, cost or
revenue
• Facilitates collaboration and alignment across all
partners in the supply chain to move quickly to
address issues and opportunities
Source: www.cargill.com/news/releases/2013/NA3075837.jsp
Cargill’s RSC framework:
Farmer Aggregator
Retail/Food
Manufacturing
Customer
Consumer
12
13. PwC
Creative sustainability-based supplier engagement is just
getting started…
13
• Margin increase: An apparel company provides suppliers with training, coaching,
and technical assistance, increasing productivity and profitability, and reducing cost
of a t-shirt by 60%
• Share growth: A technology company used its own supplier diversity program to
differentiate itself with customers; over 12 years, this contributed to $6 Billion worth
of business
• Cost savings: A retail chain launched a supplier initiative to drive environmental
innovation in product manufacturing, packaging and distribution; in phase 1,
suppliers targeted sustainable packaging and identified $100m in savings
• Market expansion: A food and beverage company created a “micro-distribution”
model in Africa that creates jobs, promotes entrepreneurship, and strengthens local
economies; it employs 19K+ people and generates more than $950 million in annual
revenue