It s not just about the environment

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1 Supply Chain Consultancy It s not just about the environment Sustainable Supply Chains Paul Goose discusses the need to take a wider, more integrated view of operations to ensure long term growth. A great deal has been written on sustainable logistics, with its focus on environmental benefits and cost reductions. However, key resources are becoming become scarcer, and consumers become more discerning. A great deal has been written on sustainable logistics, with its focus on environmental benefits and cost reductions. However, as key resources, become scarcer, and consumers become more discerning, Paul Goose discusses the need to take a wider, more integrated, view of their operations to ensure long term growth. Specifically, Paul considers: 1. What do we mean by sustainable supply chains? 2. What a sustainable supply chain looks like 3. Sustainability within Unipart 4. Sustainability across the extended supply chain 5. Collaboration across the supply chain 6. The benefits of a sustainable supply chain 1. What do we mean by sustainable supply chains? Increasing globalisation is driving us towards more extended supply chains with greater potential impact on both the environment and societies in low cost countries. In addition, the Ellen MacArthur Foundation 1 has identified an acceleration towards the circular economy, in which the principles of reduction, reuse and recycling are increasing elements of a more resilient and stable economy. As a result there is a growing awareness that we need to manage the resources we control, both environment and people, in a more sustainable way, not only in our own organisation but also in the wider supply chain. 1 of 6

2 In addition, a new generation of consumers are increasingly aware of global environmental and social issues and demand high standards of the goods and services they purchase 2. There are effectively two dimensions of sustainability, environmental and social, each representing key resources for the future that need to be managed carefully and with a long term view. This is illustrated in Figure 1. Figure 1. Long term economic sustainability requires both environmental and social responsibility. 2. What does a sustainable supply chain look like? Most organisations are not responsible for the end to end supply chain, but control a limited span, interacting with suppliers upstream and customers downstream. They can manage environmental and social issues within their own operation, but as shown in figure 2, need to work collaboratively with stakeholders up and down the chain to improve overall sustainability. The products and processes throughout the supply chain also affect sustainability and have a direct impact on the overall enterprise and the environment. We can influence this through product design and sourcing, facilitated by constructive stakeholder engagement. Figure 2. Sustainable supply chains require collaboration with both suppliers and customers. 2 of 6

3 3. Environmental and social sustainability within our own organisation This staff involvement is fundamental to identifying and implementing many of our environmental initiatives. However, it is also important for ensuring the continued development and long term capability of the workforce. Both of these elements are built into daily work activities. Environmental This covers effective management of environmental resources within the part of the supply chain that we control. It generally includes the management of energy, water, waste and transport, and covers the standards and processes defined in standards such as ISO Within Unipart we have addressed environmental management through a number of routes: Policy A clear policy identifies the key objectives and high level reduction targets for environmental resources, overall and in each division. Organisation Divisional and Site Champions are appointed who own the environmental agenda and manage local improvement programmes. Cross divisional forums are also in place, for example EMU (Energy Management for Unipart), where Champions, energy suppliers and external consultants meet in an open workshop to review latest technology, share ideas and develop standard methods. Communication and Engagement Employees are encouraged to improve environmental performance alongside business performance via daily team meetings that are used in the business to manage continuous improvement activity. Awareness is also raised through an annual Environment Week which runs across the Group. In addition, staff are encouraged to become involved in problem solving within the workplace where their contribution is formally recognised. Monitoring and Management Data is collected on all the key environmental indicators on a monthly basis, and performance reported to the Board. Environmental Champions set targets for each site, develop a programme to deliver the necessary improvements, and monitor performance. Reduction initiatives Site energy reduction programmes include improving existing processes or controls, investing in new technology e.g. automated energy management systems, or installing low energy lighting. Social sustainability Unipart has invested heavily over many years in the long term development of its staff. All employees are part of the Gate to Great programme, which enables them to develop their skills, and progress through the organisation in their own way and at their own pace. The culture of continuous improvement ensures that everyone, at all levels in the organisation, has an opportunity to contribute to the business and become engaged in its development. The result is a skilled, flexible and committed workforce that will enable the business to develop into the future as customer requirements and the business environment change. 4. Environmental management across the extended supply chain While there are a range of environmental initiatives that can be taken at specific stages in the chain, there are two factors which have impact across the whole the chain. Transport is affected by the configuration of the chain itself, e.g. the number of levels, and where those levels are located. Transport can be a much larger component of emissions for example if sourced from the Far East or America, than Europe. Network modelling can be used to optimise transport in the chain, thus reducing emissions and cost. Packaging is important for protecting the product and providing brand image, but emissions are generated in its manufacture, it creates waste, and it can have a negative impact on vehicle utilisation. We should consider the whole chain when designing packaging to minimise waste, recycle/ reuse where possible, and aim to maximise transport efficiency and cost. 3 of 6

4 Carbon foot printing can help us understand where emissions are being created in the supply chain, and therefore where to focus our improvement effort. It is possible to use estimates to help prioritise areas of improvement, for example: Carbon footprints can be estimated using conversion tables (e.g. DEFRA) to calculate the CO2 equivalents from gas, electricity and fuel usage. Models (e.g. linear regression) can be built from accurate carbon footprints for individual products which can be used to predict carbon footprints for a range of similar products This analysis not only saves costs but also offers environmental benefits. 5. Collaboration across the supply chain. Consumers are increasingly concerned with the social and environmental impact of the products they buy. Revelations about issues such as child labour or environmental exploitation can have a major impact on company image and turnover. There is evidence that ethically sourced products can command a premium price of up to 20% 2, 3. Therefore managing social and environmental conditions across the supply chain is becoming increasingly important. Many businesses are now adopting an ethical stance and want to ensure that suppliers conform to their own standards. Companies such as Nestle, Apple and retailers in the clothing sector are particularly vulnerable to such issues and work hard with their suppliers to ensure that their operations are acceptable to consumer s expectations. By working collaboratively with stakeholders in the supply chain they have proved that they can improve sustainability of their businesses in the long term. This approach is best illustrated by Unilever. The global Unilever Sustainable Living Plan aims to reduce the environmental impact of its entire product range by 50%, source 100% of its agricultural raw materials sustainable, and assist a billion people to improve their wellbeing and general health. We are making sustainability a key part of our growth, it is our vision, and more then that, it s the heart of our strategy, and more then that, it is our business model 4. It is therefore in a business best interests to work with suppliers to improve both reliability and efficiency of supply chains, as well as social and environmental standards. Businesses should be clear what standards are required and communicate these to suppliers via a code of practice. Suppliers policies will be tested by questions covering environmental management, employee rights and health & safety. To sustain performance, these standards need to be assessed regularly, either through a supplier development process such as Unipart s Ten (d) to Zero for key suppliers or a lower overhead process such as self-assessment for other suppliers. The key is to develop long term relationships with both suppliers and customers in the supply chain, in which there is benefit for both parties, and which establish the groundwork for sustainable development. Design for a sustainable future The sustainability of a product will be affected through its design and manufacture. For example: The number of manufacturing operations can be reduced Operations can be co-located to reduce transport Products made easier to manufacture, thus reducing defects Increasing the recycled content in the manufacturing process Make it easy and safe to handle during transit Products can also be developed to reduce environmental impact throughout their life. For example: washing powder that requires a lower temperature, low energy lighting, electric vehicles that reduce pollution and CO2 and Insulation that reduces energy usage. Again, this approach both reduces cost and enhances brand image. We should consider the whole life cost of a product, including its whole life environmental impact. This includes understanding the decision points at which the product can be repaired or components recycled before final disposal as illustrated in the figure on the next page. 4 of 6

5 Figure 3. The whole life cycle of a product There are various options to think about in increasing product life: Extend product life through design Make it easier to repair Enable components to be recyclable Actively manage life e.g. through a repair loop Various opportunities also exist to provide supply chain related services which promote or enable good environmental practice: Repair services, including managing repair loops Re-use/recycling e.g. through re-assembly from non-functioning units, or recovery of reusable components Waste management; maximising opportunities for recycling through waste segregation and aiming for zero landfill Reverse logistics e.g. to bring back old equipment for reuse or recovery, or clear recyclable waste from sites 6. What are the Benefits? Responsible organisations are looking to create an enterprise that contributes to environmental and social sustainability and is economically sustainable for the long term. To achieve this they need to ensure benefits for a number of stakeholders: Customers and consumers Customers increasingly expect a moral dimension to the goods and services they buy and are prepared to pay a premium where these expectations are met. Environment Using fewer resources - fuel and energy - reduces both carbon emissions and cost. Employees Provision of safe and secure working conditions, together with employee development and engagement helps develop a long term basis for a successful business. Shareholders The above helps build a sustainable enterprise delivering value for the long term through reduced costs, improved brand image, and confidence that we conform to legislation. In Conclusion The normal challenges in managing quality, cost and delivery in supply chains are not going to go away. Indeed, they are likely to intensify as consumers are offered more choice in their purchasing decisions. However, to remain in business for the long term, it is not possible to ignore the sustainability agenda and its impact on managing two key resources, environmental and social. More importantly, customers and consumers of the future will demand it. Failing to rise to these challenges runs the risk of adversely affecting the long term economic viability of our organisations. 5 of 6

6 Unipart Expert Practices As the consultancy arm of Unipart Logistics, Unipart Expert Practices (UEP) provides supply chain consulting services to a wide range of public and private clients. Our aim is to transform supply chains by developing and enabling both staff and managers to implement best practice in their organisations. Our goal is sustainable and continuous improvement. (UEP has particular areas of expertise in inventory management, stock integrity and supplier relationship management. UEP s clients include ICI Paints, Vodafone, EDF Energy, Finlays Tea, James Walker, Honda, Honeywell Holts as well as internal clients within the Unipart Group). About the Author Paul is a supply chain consultant who is experienced in managing business and process change in major organisations. He has delivered practical operational improvements in Rail, Utilities and Construction sectors, and has a special interest in sustainability. If anything in this article has resonated with you and you would like to discuss the subject further you can contact Paul on or +44 (0) References 1 The Ellen MacArthur Foundation. Toward the circular economy. org/ 2 Green Brands. WPP. 3 The Chartered Institute of Purchasing and Supply. Ethical Sourcing, Organisations and Brands. 4 Paul Polman, CEO of Unilever, quoted in Logistics manager. June Sustainability driving growth at Unilever. For more information contact: Unipart Expert Practices Unipart House, Garsington Road Cowley, Oxford OX4 2PG Tel: +44 (0) or visit our website: 6 of 6

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