P2.2: Align Procurement Practices
CERES ROADMAP EXPECTATION
|Companies will address sustainability performance in procurement criteria and contracting|
Raising Industry Standards through Collaboration
Electronic Industry Citizenship Council (EICC) and the Global e-Sustainability Initiative (GeSI) member companies—including Apple, Motorola Mobility, Sprint and Dell, among others—are developing multi-stakeholder approaches to sourcing materials. For example, in April 2012, EICC and GeSI announced a new program focused on creating solutions for companies striving to eliminate conflict minerals from their supply chains. The new program will provide incentives to smelters that are sourcing conflict-free minerals and make it easier for companies to identify preferred suppliers.
Check out Roadmap in Action for more examples of how companies are implementing the Ceres Roadmap.
Companies can use procurement and purchasing to implement strong sustainability strategies across their supply chains. As with supplier codes, procurement policies should be aligned with a company’s corporate sustainability objectives and standards. The managers handling procurement should also be trained to assess the sustainability performance of vendors.
HOW ARE COMPANIES PERFORMING?
In the The Road to 2020: Corporate Progress on The Ceres Roadmap For Sustainability, we evaluated 600 of the largest U.S. companies on their progress towards meeting the expectations laid forth in the Ceres Roadmap for Sustainability using data compiled and analyzed by Sustainalytics. For this first report it was not possible to capture all of the data required to fully assess all of The Ceres Roadmap expectations. The indicator used to assess this expectation evaluates companies for formal policies and programs related to green procurement. Though a somewhat narrow assessment of the expectation, it does provide some interesting insights.
For this expectation, all 600 companies were evaluated. The companies included in Tiers 1 and 2, representing nearly 20 percent (113) of the 600 companies, have formal environmental procurement programs and policies in place, yet only six percent of companies (35) are in Tier 1 and have policies that require suppliers to adhere to environmental standards set by the company and give preference to suppliers with stronger environmental performance. Companies within the Footwear & Apparel and Food & Beverage sectors have significant opportunities to improve the sustainability of procurement decision-making; only three (of 11) Footwear & Apparel and three (of 26) Food & Beverage companies cite environmental procurement policies that meet the expectations described above for companies in Tiers 1 and 2.
Walmart is among those companies considering environmental criteria in purchasing decisions with its procurement policy calling for the elimination of 20 million metric tons of GHG emissions from its global supply chain by the end of 2015. Walmart is working with suppliers across more than 20 product categories to identify GHG reduction opportunities and launch new packaging projects. By the end of 2012, Walmart will require all of its direct import suppliers to source 95 percent of their production from factories that receive one of Walmart’s two highest ratings in audits for environmental and social practices. The question is whether these policies will result in on the ground performance improvements in Walmart’s vast supply chain of more than 100,000 suppliers.
Despite these aggressive targets, the company continues to be implicated in controversies related to violations of working conditions and labor rights in its supply chain. Questions remain about Walmart’s purchasing practices, which focus on lowering prices and aggressive production timelines, whether they exacerbate poor working conditions among suppliers and if the company’s auditing process is able to adequately capture violations. Walmart does disclose its scorecard addressing the outcomes of the audit programs, however it is difficult to assess the specific details upon which the audit ratings are based. There are concerns that the company is focused on environmental impacts and that key social impacts are not receiving needed attention. At the same time, however, Walmart has committed to providing suppliers with necessary training. This is an important commitment; without the relevant education and resources for implementing these changes, suppliers often believe they are left to choose between meeting environmental sustainability goals or making a profit.
Starbuck’s coffee procurement program is another noteworthy example of company action. Through Starbucks’ Coffee and Farmer Equity (C.A.F.E.) Practices, developed in partnership with Conservation International, the company is working to ensure that its coffee suppliers are meeting clear economic, social and environmental standards. Starbucks has set a target that by 2015 all of its coffee will be third-party verified or certified through either the C.A.F.E. Practices, Fairtrade or another externally audited system. In 2011, 86 percent of the company’s coffee met these standards.
A growing number of companies are also coupling procurement policies with commitments to improve sourcing practices for environmentally sensitive resources. One such example is the harvesting of palm oil—a product used in products ranging from chocolate bars to dish soap—which has been associated with significant loss of rainforests, as well as other related environmental impacts including decreased biodiversity and the contamination of ground water and soil. In response to these ecological impacts, General Mills has committed to source 100% of its palm oil from responsible and sustainable sources by 2015.
In the Technology Hardware sector, 55 percent of companies (15 of 27) are included in Tiers 1 and 2. Five companies—Apple, Hewlett-Packard, Xerox, Motorola Mobility and Western Digital—lead this sector with policies in place requiring suppliers adhere to environmental standards and also giving preference to suppliers with stronger environmental performance.
All 600 companies have been assessed for this expectation. Additional indicators and analysis is provided for nine priority sectors, covering 251 companies: Autos & Transportation, Financial Services, Food & Beverage, Footwear & Apparel, Retail, Technology Hardware, Technology Software & Services, Oil & Gas Producers and Utilities. Go to the Sector Performance section for additional analysis.
Click on a performance tier below to view more information on the priority sectors.