P2.3: Engaging Suppliers
CERES ROADMAP EXPECTATION
|Companies will ensure that at least 75% of the company’s tier 1 and tier 2 suppliers and 50% of tier 3 suppliers meet the company’s standards for sustainability performance.|
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Integrating sustainability across entire supply chains requires not only polices and standards, but also ongoing monitoring, auditing and capacity-building. Companies that pursue these steps are better positioned to improve their overall sustainability performance and strengthen their long-term supplier relationships.
HOW ARE COMPANIES PERFORMING?
A key first step for companies addressing sustainability issues within the supply chain is to ensure that supplier-monitoring programs, which should be ongoing and consistent across the supply chain, have mechanisms for handling non-compliance and supporting remediation and capacity building. More than 70 percent of the 600 companies evaluated fall in Tier 4 for overall supplier engagement efforts. Yet within the priority sectors focused upon for this expectation—Food & Beverage, Footwear & Apparel, Retail and Technology Hardware—nearly 50 percent of companies (48 out of 97) have supply chain monitoring systems in place. Companies within the Food & Beverage sector dominate, with nearly 40% of companies in the sector (10 out of 26) included in Tier 1.
Companies such as Gap are also seeking external certification of suppliers against rigorous standards, such as SA 8000—a third party certification for supplier labor practices. Others are pursuing industry-specific certification schemes. For example, Hasbro’s facilities are certified by the International Council of Toy Industries (ICTI), which aims to ensure a fair, safe and healthy work environment for those employed in toy manufacturing.
Of the 97 priority sector companies evaluated, only 16 have programs in place to improve the environmental performance of suppliers; and just three—Hewlett-Packard, Walmart, and Xerox—have established supplier performance targets. In its 2011 sustainability report, Hewlett-Packard disclosed its efforts to gather GHG emission data from more than 90% of its first-tier suppliers by spend. The company also reports that more than three-quarters of its suppliers (by spend) have set sustainability performance goals.
With the majority of companies evaluated falling in Tier 4 for this expectation, there are clear opportunities for increased supplier engagement from companies across sectors. To ensure that sustainability is integrated throughout global supply chains, companies must also find ways of accessing not only direct suppliers, but also those that are more removed from their direct influence. One key strategy is to demonstrate to suppliers the potential business benefits that sustainability programs can have—whether they be related to finding efficiencies within manufacturing processes or maintaining a healthy and respected workforce.
Beyond education, leading companies are also finding ways to create business benefits through supplier incentives. Proctor & Gamble’s supplier environmental sustainability scorecard, created in concert with the company’s Supplier Sustainability Board which comprises more than 20 supplier representatives from across P&G’s global supply chain, is an example. Results of the mandatory scorecard factor into a supplier’s overall rating and affect the suppliers’ ability to do ongoing business with P&G. This provides a clear incentive for improved sustainability performance. P&G also uses the scorecard to position suppliers as innovators by asking them to submit ideas for sustainable innovation. In 2011, the scorecard generated new ideas from 38 percent of P&G suppliers that participated in the program.
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 to view more information on the priority sectors.
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