Quarter Plenary, 27 June 2013
Sustainable Supply Chains: Moving Towards
Strategic Sustainability
Prof Suzanne Benn,
Professor of Sustainable Enterprise
UTS Business School
Understanding where corporations are in
terms of their sustainability trajectories
• ‘Sustainability’ is a term that needs to be understood in context
– it is associated with longevity, but also with corporate
environmental and social responsibility
• In assessing the capacity of corporations and firms to balance
environmental, economic and social factors, a phase model of
organisational sustainability provides a framework
* to analyse characteristics of organisations as they are
* indicates appropriate action to advance sustainability
These phases do not form a linear model, but are indicative
characteristics of phases of organisational sustainability.
The Sustainability Phase Model
Rejection
(freeloaders & stealthy saboteurs)
Non-responsiveness
(‘bunker wombats’)
Compliance
(reactive minimalists)
Efficiency
(industrious stewards)
Strategic pro-activity
(proactive strategists)
The Sustaining Corporation
(transformative futurists)
From Dunphy, D. , Giffiths, A. and Benn, S., Organisational Change for Corporate
Sustainability, Routledge, London and New York, 2003; revised edition 2007)
Waves of Sustainability
1st Wave
Opposition
Rejection
• Highly
instrumental
perspective on
employees and
natural
environment
• Culture of
exploitation
• Opposition to
government and
green activists
• Community
claims seen as
illegitimate.
Value
destroyers
2nd Wave
Ignorance
Non
responsiveness
• Financial and
technological
factors have
primacy
• More ignorant
than
oppositional.
• Seeks business as
usual, compliant
workforce.
• Environmental
resources seen as
a free good.
Value
limiters
Risk
Compliance
• Focuses on
reducing risks of
sanctions for
failing to meet
minimum legal
and community
standards.
• Little integration
between HR and
environmental
functions.
• Follows route of
compliance plus
proactive
measures to
maintain good
citizen image.
Value
conservers
Cost
3rd Wave
Competitive
Advantage
Efficiency
Strategic
Pro-activity
Transformation
The sustaining
corporation
• HR systems seen • Focus on
• Reinterprets the
as means to
innovation
nature of the
higher
corporation to an
• Seeks stakeholder
productivity and
integral selfengagement to
efficiency
renewing element
innovate safe,
of the whole
• Environmental
environmentally
society in its
management
friendly products
ecological context.
seen as a source
and processes.
of avoidable cost
• Advocates good
for the
citizenship to
organisation.
maximise profits
and increase
employee attraction
and retention.
Value
creators
Sustainable
business
Phases of Organisational Sustainability
Rejection
 Activism
against
sustainability
 Risk loss of
business and
reputation
Inappropriate
use of science
NonResponse
 BAU
 Risk loss of
business and
reputation
 Greenwash
Compliance
Efficiency
Proactivity
Sustaining
Organisation
Transformative
culture
 Implement
 Systematic
 Proactive and
environmental
awareness
EMS/ HRM
strategic
Emphasis on
reporting
High level
interpersonal/
soft skills
 Risk
avoidance
Structural
redesign for
flexibility
 Minimise
risks
 Image
building
 Improved
efficiency and
engagement
 Redefine
business
relationships
and context
Stakeholder
management
Partnering
for renewal
Innovative
capacity
Systems
design
Auditing
Reporting
© Source: The Phase Model – Dunphy,
Griffiths and Benn, 2007
What does this mean in terms of the establishment
of Sustainable Supply Chains?
•
•
•
Organisations may demonstrate characteristics of more than one phase.
They may easily reverse their positions - especially in phases 3 & 4.
It becomes difficult to reverse in phase 5 and impossible in phase 6
without further radical transformation.
KEY FEATURES OF SUCCESSFUL CHANGE
• Moving to future fit - incorporating resource shortages and tensions
into business models,
• Working in partnership,
• Looking to cradle to cradle or industrial ecology or product service
arrangements,
• Integrating human and ecological sustainability.
A Definition of Sustainable Supply Chain
Management (SSCM)
‘…the management of material, information and
capital flows as well as cooperation among
companies along the supply chain while taking goals
from all three dimensions of sustainable
development, i.e., economic, environmental and
social, into account which are derived from
customer and stakeholder requirements.’
(Seuring & Muller, 2008)
Importantly, this definition directs attention
to the significance of SYSTEMS THINKING
Sustainable Management of Supply Chains
involves recognition of the organisation as part
of a broader system
Systems thinking
Action learning
Critical thinking
Creativity
What does systems thinking mean for SSCM?
Integrating three approaches to systems thinking
Life Cycle Thinking
Interacting social
systems/ networks
Complexity thinking
Cyclical material and
energy flows
Iterative cycles of learning
and dialogue
Emergence and bottom up
change; Connectivity
• LCA, industrial ecology
•Stakeholder engagement
and dialogue
•Experiential exercises
(with attendant risks and
opportunities).
Source: Crittenden et al, 2011; Dunphy & Perrott, 2011; Benn et al, 2011;
Porter, 2008; Porter, forthcoming; Porter and Cordoba, 2009; Taylor, 2011
Phases of Sustainability incorporating SSCM
Rejection
 Activism
against
sustainability
 Risk loss of
business and
reputation
Inappropriate
use of science
NonResponse
 BAU
 Risk loss of
business and
reputation
 Greenwash
Compliance
Efficiency
Proactivity
 Implement
 Systematic
 Proactive and
environmental
awareness
EMS/ HRM
INCREASED
emphasis on
reporting
 Risk
avoidance
particularly
reputational
risk
 Improved
efficiency and
engagement
linked to
supply chain
strategic
High level
interpersonal/
soft skills
Focus on
certification
Structural
redesign for
flexibility
Stakeholder
management
 Minimise
risks
 Image
building
Developing
awareness of
supply chain
risks
Sustaining
Organisation
Transformative
culture
 Redefine
business
relationships
High levels of
transparency,
auditability &
accountability
upstream
/downstream
Innovative
capacity
Partnering
for renewal
Systems
design
Auditing
Reporting
© Source: The Phase Model – Dunphy,
Griffiths and Benn, 2007
Risks – pull factors
Social tendencies:
Can give rise to risks e.g:
1. Globalisation
2. Demands for greater
transparency (NGOs, media &
public)
3. Pricing & quality issues
(value for money)
4. Changes to modes of
consumption
5. Shortage of natural
resources
1. Lengthy, complex chains
difficult and costly to manage
2. Reputational risks arise from
failure to manage supply chain
3. Lack of information or
understanding of supplier
capabilities, customer needs can
inhibit innovation
4. Rising costs of raw materials
may be inevitable
Opportunities – push factors
• Collaboration with stakeholders can integrate sustainable
practice in the value chain and strengthen reputation in the
eyes of suppliers and customers
• Collaboration & consultation with suppliers and customers can
optimise quality and reduce costs, leading to development
of innovative services or products
• Certification of products and services as sustainable provides
entry to new markets and increased market share
• Collaboration & consultation with upstream and downstream
stakeholders in the value chain can ‘close the loop’ and reduce
costs
Due to globalization, materials may be
produced in one region, used in another,
and managed as waste in a
third. The fastest growing waste stream
in the world is e-waste (i.e., obsolete
electrical and electronic products),
estimated at 20-50 million tonnes per
year .
http://www.unep.org/geo/pdfs/geo5/GEO
5_for_Business.pdf
2013 Report
So where are the opportunities?
• Leave the Freeloaders, Stealthy Saboteurs and
Bunker Wombats to experience increasing isolation.
• The real opportunities begin with the Compliance
Phase when it is likely that a corporation will become
aware of the potentially adverse impact of failing to
manage supply chains appropriately.
Let’s look more closely at the last three phases:
efficiency, strategic proactivity and the sustaining
corporation.
4. EFFICIENCY PHASE:
The Industrious Stewards
•
•
•
•
Objective: Progressively eliminate waste and increase process and materials efficiencies.
Key business opportunity: Increase efficiencies by waste reduction and reorganisation.
Increased emphasis on reporting.
Typical actions:
– reduce resource use (energy, water, materials)
– design/redesign buildings/plant to dramatically reduce ‘footprint’, create adaptable
spaces
– move to front-of-pipe solutions to eliminate waste or return it to the production cycle
as a resource (e.g. biomimicry).
– recycle/remanufacture (life cycle stewardship; cleaner production)
– dematerialise –service provision rather than material production
– redesign products: sustainably produced and environmentally friendly
– meet international Global Reporting Initiative (GRI) guidelines.
Potential business benefits:
– cost reduction; savings
– increased employee productivity
– increased employee involvement/engagement
– better teamwork and lateral communication.
“DO MORE WITH LESS”
5. STRATEGIC PROACTIVITY PHASE:
The Proactive Strategists
•
•
•
•
Objective: Pursue the strategic opportunities in sustainability.
Key business opportunity: Become market leader through pursuing the strategic potential of
sustainability.
Typical actions:
– commit strongly to sustainability
– re-brand and build wider stakeholder support
– be early in on new product/service demand curves
– creatively destroy existing product designs, manufacturing models and re-invent the firm,
leapfrog competition by early breakthroughs
– increase employee and stakeholder engagement to source innovative ideas
– shift the prevailing business paradigm in environmental and social ideas
– innovate with new models of stakeholder governance
– concentrate on adding value and innovating, focus on certification self-reporting and/or
independent audit.
Potential business benefits:
– increased revenue and market share
– stronger stakeholder support (reputation and commitment)
– higher customer retention rates; faster attraction of new customers
– established lead in developing new markets
– employer of choice – attract and retain skilled managers and professionals
– operate at high value-added end of market.
“LEAD IN VALUE-ADDING AND INNOVATION”
6.THE SUSTAINING CORPORATION PHASE:
The Transforming Futurists
•
•
•
•
Objective: Redefine the business environment in the interests of a more sustainable world and to
support the core strategies of the firm.
Key business opportunity: Create a constructive culture that continually renews the long-term
viability of the organisation. Focus on transparency, accountability, auditability upstream and
downstream
Typical actions:
– participating in changing the ‘rules of the game’ to achieve sustainability
– participate in public policy formation
– reorganise the company’s supply chain to ensure that the whole production process is
sustainable
– build human and relational capital
– support dematerialisation and the growth of the knowledge-based economy
– model best practice; support/publicise best practice elsewhere
– participate in international agreements
– seek external auditing of sustainability
– influence capital markets to support long-term value-adding
– build a constructive culture that encourages openness, debate, innovation and participation
Potential business benefits:
– global leadership of the sustainability movement
– enhanced reputation and stakeholder support and involvement
– increased share value
– attraction/retention of talented, highly motivated employees.
“TRANSFORM OURSELVES: LEAD IN CREATING A SUSTAINABLE WORLD”
Perceived best practice model
Perceived best practice model
Good practice adaptive management
Three examples of attempts to
establish sustainable supply chains in
highly complex circumstances
First, an Australian example:
Steel Stewardship Forum
Steel Supply Chain Stewardship:
Steel Stewardship Forum
http://steelstewardship.com/
22
History
• 2007
APEC Ministers Responsible for Mining
• 2008
SSF ESTABLISHED
• 2010 SSF memorandum of understanding with the
Australian Steel Institute.
• 2011 SSF has 13 members across the stewardship
chain ±60 stakeholders
• 2012
• 2013
SSF completes first two major projects
Commence Phase 2 of Responsible Steel
Membership
24
2011-2012
• Two major projects commenced in parallel in July 2011 as
part of the pre-feasibility study.
• The Steel Chain Footprint
– A high level input/output mapping of the Australian steel
chain to identify ‘areas of interest’ and direct attention
towards improvement solutions. Mapping key materials and
emissions
• Responsible Steel- Phase 1
– Aimed at developing a clear measurable sustainability
certification process based on LCA principles and good
science, and embracing the whole steel chain
• Both projects were completed on time in May 2012
25
Steel Chain Footprint
Major Projects
Responsible Steel – Phase 1
27
Second, the world’s largest retailer:
History
• Committed to improving its environmental track
record in 2005 after environmental and social
concerns began to erode its reputation
• Environmentalists cited its stores as sources of air
and water pollution
• Labour unions blasted the company for offering
employees low wages and poor health care benefits
• Walmart stores stocked with thousands of low cost
products imported from developing countries with
low-wage workers and often poor environmental
regulations
Responses
2005 to 2013
• Increased energy efficiency
of US trucking fleet and
many buildings in USA,
Canada and China
• Required suppliers to
reduce packaging
• Stocked low carbon
products such as compact
fluoro light globes and
organic merchandise
May 2013:
Announces it will require its
(100,000) suppliers to evaluate and
disclose full environmental costs of
products
Plans to combine data on water
use, greenhouse gas emissions,
solid waste production, and worker
ethics into a database shared
worldwide, which can be used to
form the first index of a product's
lifecycle impact
Envisions lifecycle assessments will
provide data for product labels (e.g.
printed data on pesticide use,
distance travelled). Electronic
scanning reveals product history.
Reactions
"Consumers will be choosing
from good, better, and best.
That's when sustainability
becomes just as much a part of
the product line as safety is
now."
(Michelle Harvey, Environmental
Defense Fund consultant advising
Walmart on the index.
A sustainability label … “may
overwhelm consumers with
information”
"Half of the [community
members] around me are at or
near the poverty level. All the
labelling in the world won't make
a whole lot of difference even for
the good working people in my
community who care about
environmental issues,"
(Michael Maniates, environmental science
professor at Allegheny College in
Meadville, Pennsylvania)
From Sweden:
Max’s Hamburgers
Max’s Hamburgers is a family owned chain with 75
restaurants, 3000 employees. It is a major
sustainability award winner and has quintupled its
profits since 2003.
Sustainability
Principles 1-4
The Natural
Step
In a sustainable
society, nature is
not subject to
systematically
increasing:
How Max is changing their business to meet this principle.
Concentrations of
substances
extracted from
the earth’s crust,
•
•
•
All restaurants are powered by 100% wind energy.
Toys requiring batteries have been removed from kids’ meals.
All company vehicles are low carbon.
Concentrations of
substances
produced by
society,
•
•
•
No GMOs are used in Max products.
All used fry oil is converted into biodiesel.
High recycling rates (e.g. cardboard, food wastes, metal,
electronic equipment, etc.)
Degradation by
physical means,
•
•
•
All fish procured from well managed ecosystems (MSC-certified).
Most paper products are FSC-certified.
Reforestation through Plan Vivo certified projects in Africa.
And, in that
society, people
are not subject to
conditions that
systematically
undermine their
capacity to meet
their needs.
•
•
No use of transfats.
Product lines have been remade into the healthiest of the
industry (by 2005).
More than half of the restaurants have at least one staff member
with a mental disability.
Max leadership program includes sections on sustainable
leadership that are based on the FIRO theory.
Max has partnered with TNS’ Real Change program to research
social sustainability.
•
•
•
The key to Building Sustainable Supply Chains in
two propositions:
Treat the supply chain as one integrated
system
Within that supply chain integrate as many
of the features of the Sustaining
Corporation as are feasible