Managing Sustainability Aspects of Supply Chains By William R. Blackburn

1. Managing Sustainability Aspects of Supply Chains By William R. Blackburn 18th Annual EHS Management Forum National Association of EHS Management October 13, 2010 Indianapolis, IN

2. Why the increased focus on sustainability in supply chains? WHY? • Public perception of big company responsibility for supply chain • Consumer sensitivity to ethical behavior of producers • Extent of environmental and social impact (risk) • NGO focus and reach, global e-communications • Opportunities for greater supply chain efficiency • Legal compliance (e.g., EU RoHS, WEEE, Packaging Directive) • Sustainability as a company strategy; search for sustainable products

3. Sustainable Products & Services • Improve the efficient use of natural and economic resources along the product life cycle • Provide greater respect and accommodation for the needs of people and other living things along the product life cycle

4. General Definition of Sustainability“The 2 Rs” R R Values-driven management based on--- • Respect: for people and other living things • Resources: the wise use of economic and natural resources —for the purpose of sustaining and promoting the long-term well-being of the organization and society (including the environment).

5. Growing Global Multistakeholder Consensus on SR/Sustainability Scope

6. Tyco Supplier Social Responsibility Principles • Environment, health & safety • Diversity • Human rights, labor practices • Ethics, conflicts of interest, non-corruption • Financial responsibility, recordkeeping • Legal compliance

7. Home Depot Supplier Social & Environmental Responsibility Program • Access to audit • Age requirements • Forced labor • Wages and working conditions • Discrimination • Emergency planning • Environment, health and safety • Freedom of expression and association • Fraud prevention

8. Duke Supplier Code of Conduct • Environment, health & safety stewardship • Ethics • Diversity • Transparency; involvement of, respect for individual • High performance • Win-win relationships • Initiative, leadership • Legal compliance

9. Walmart Supplier Sustainability Assessment Questionnaire • Energy & climate • Waste & water • Safety, labor and human rights compliance • Community development investment in source locations • Sub-supplier oversight: • Locations, traceability • Guidelines on environmental compliance, labor practices, product safety • Pre-evaluation of production quality & capacity

10. The Conference Board Study Participants

11. Risk Based Approach: Prioritizing Suppliers • Spend • Hazard of supplied product • Product scrutiny (e.g., children’s products, medicines) • Historical performance (e.g., toys in China) • Regulatory coverage (e.g., food products, EU packaging & electronics) • Importance of supply; availability of alternative sourcing

12. TCB Study: Approach to Supply Chains • Requirements or guidelines document (supplier codes of conduct by 8 of 11) • Evaluation process • Questionnaires (Bx, BMS) • Self assessments (DC, JP) • Expert site evaluations (BMS, Ab, CC, Av, JP, CC, Bx) • Data systems (Ab-Forsite, Bx-InSight) • Downstream collaboration (Av-spas, CC-bottlers) • Communications and networking forums (Bx, JP) and CSR awards (JP)

13. Motivating Suppliers • Rewards and recognition • More business • Greater access to customer, further assistance • Improved productivity, efficiency, performance

14. Best Practices Among Supplier Programs • HP • Supplier policy, code of conduct, and social & environmental responsibility agreement • Supplier questionnaires for corporate and facility levels • Self assessment followed + audits by HP/external experts + action plan tracking and trends reporting + training and tools • Major suppliers have own program for their own subcontractors • Nike • Publicizes supplier names and locations • Emphasizes lean manufacturing • Supplier centers for learning (pilot) • Supplier performance index (2012)

15. Best Practices Among Supplier Programs • Walmart • Lifecycle data from suppliers for sustainable product index • Supplier self assessment + assessment webinars, training + third-party audits and certifications • 12 sustainable value networks (includes packaging) • Supplier energy efficiency goal • Marks & Spencer • Website, workshops • Over 60 supplier-related sustainability commitments • Model factories for shared learning (Bendix in Sri Lanka) • Monthly newsletter

16. Supplier Program Collaboration • Ethical Trading Initiative (companies, unions, NGOs) • AIM Progress (consumer goods sector, esp. N. Am, EU) • Apparel, Mills & Sundries Working Group • Beyond Monitoring Working Group (misc. industries) • Business Social Compliance Initiative (retail, brand, importing, trading sectors) • Electronic Industry Citizenship Coalition • Global e-Sustainability Initiative (IT and communications sectors) • Global Social Compliance Programme (esp., retail, clothing, food sectors) • The Sustainability Consortium: Measuring and communicating sustainability impacts of consumer goods (Walmart, HP, J&J, P&G, Dell, General Mills, NGOs, academics, et al.)

17. Ongoing Issues • Supplier issues • Excessive hours ( due to customer ordering practices) • “Living wage”, nonpayment of workers • Coaching workers on audit responses; bribing auditors • Traceability, hidden noncompliant subcontractors • Company (customer) issues • Procurement dept. perception of business value • Audit fatigue; auditing vs training/coaching around root causes • Supplier management systems (Adidas, HP, IBM) • Supplier network as strategic asset vs low-cost source

18. Some Resources • Company websites and collaborative programs • US EPA (Green Supplier Network for lean & green; Smartway™ for transportation, ) • UN Global Compact Advisory Group on Supply Chain Sustainability • Business for Social Responsibility (BSR) • Portal for Responsible Supply Chain Management (HP, Volkswagen, L’Oreal, Titan) • Working conditions codes and monitoring: • Social Accountability International (SAI) • Fair Labor Association (FLA) • Worldwide Responsible Apparel Production (WRAP)

19. The Sustainability Handbook— The Complete Management Guide to Achieving Social, Economic and Environmental Responsibility (See www.WBlackburnConsulting.com )