MOST Analysis

Mission Statement

This workshop features a practical guide to continuous improvement, and can help companies to overcome challenges by offering practical guidance on how to develop a sustainable global supply chain process, based on the values and principles of the Global Compact. Featuring numerous examples of good corporate practice, the guide will assist companies in setting priorities for action that will lead to continuous supply chain performance improvement.

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Objectives

01. Developing Business Case: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
02. Establishing Expectations: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
03. Determining Scope: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
04. Engaging Suppliers: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
05. Role & Responsibilities: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
06. Industry Collaboration: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
07. Multi-Stakeholder Partnerships: departmental SWOT analysis; strategy research & development. 1 Month
08. Tracking Performance: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
09. Process Practices: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
10. Communicating Progress: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month

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Strategies

01. Developing Business Case: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
02. Establishing Expectations: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
03. Determining Scope: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
04. Engaging Suppliers: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
05. Roles & Responsibilities: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
06. Industry Collaboration: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
07. Multi-Stakeholder Partnerships: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
08. Tracking Performance: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
09. Process Practices: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
10. Communicating Progress: Each individual department head to undertake departmental SWOT analysis; strategy research & development.

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Tasks

01. Create a task on your calendar, to be completed within the next month, in order to analyse developing the business case.
02. Create a task on your calendar, to be completed within the next month, in order to analyse establishing expectations.
03. Create a task on your calendar, to be completed within the next month, in order to determining the scope.
04. Create a task on your calendar, to be completed within the next month, in order to analyse engaging with suppliers.
05. Create a task on your calendar, to be completed within the next month, in order to analyse roles and responsibilities.
06. Create a task on your calendar, to be completed within the next month, in order to analyse industry collaboration.
07. Create a task on your calendar, to be completed within the next month, in order to analyse multi-stakeholder partnerships.
08. Create a task on your calendar, to be completed within the next month, in order to analyse tracking performance.
09. Create a task on your calendar, to be completed within the next month, in order to analyse process and practices.
10. Create a task on your calendar, to be completed within the next month, in order to analyse communicating progress.

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Workshop Introduction

Workshop Objective

This workshop features a practical guide to continuous improvement, and can help companies to overcome challenges by offering practical guidance on how to develop a sustainable global supply chain process, based on the values and principles of the Global Compact. Featuring numerous examples of good corporate practice, the guide will assist companies in setting priorities for action that will lead to continuous supply chain performance improvement.

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Introduction

More and more companies are extending their commitment to responsible business practices to their value chains, from subsidiaries to suppliers. They do so not only because of the inherent social and environmental risks and the governance challenges the supply chain poses, but also because of the many rewards supply chain sustainability can deliver. Indeed, sustainable supply chain management can be a strong driver of value and success – for business as much as for society. By spreading good business practices around the globe, it has enormous potential to contribute to more inclusive markets and advance sustainable development in the spirit of the United Nations’ mission.

Today, UN Global Compact participants around the world are demonstrating leadership by applying the ten principles in their supply chains. However, developing sustainable supply chain programs that encompass all of the Global Compact’s four issue areas – human rights, labor, environment and anti-corruption – remains a daunting challenge for many.

Supply Chain Sustainability: This workshop can help companies overcome these challenges by offering practical guidance on how to develop a sustainable supply chain process, based on the values and principles of the Global Compact. Featuring numerous examples of good corporate practice, the workshop will assist companies in setting priorities for action that will lead to continuous performance improvement. We hope this workshop will encourage more businesses to embark on the journey towards more sustainable supply chains, thereby delivering tangible and lasting benefits to business, the environment and societies everywhere.

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Practical Steps Towards Achieving Supply-Chain Sustainability

Supply chain sustainability is increasingly recognized as a key component of corporate responsibility. Managing the social, environmental and economic impacts of supply chains, and combating corruption, makes good business sense as well as being the right thing to do. However, supply chains consist of continuously evolving markets and relationships. To navigate this complex terrain, we offer a few baseline definitions and practical steps that companies can take toward progress, using the United Nations Global Compact principles as the basis to work toward supply chain sustainability. What is Supply Chain Sustainability? Supply chain sustainability is the management of environmental, social and economic impacts, and the encouragement of good governance practices, throughout the lifecycles of goods and services. The objective of supply chain sustainability is to create, protect and grow long-term environmental, social and economic value for all stakeholders involved in bringing products and services to market. By integrating the UN Global Compact principles into supply chain relationships, companies can advance corporate sustainability and promote broader sustainable development objectives. Why is Supply Chain Sustainability important? There are numerous reasons why companies start a supply chain sustainability journey. Primary among them is to ensure compliance with laws and regulations and to adhere to and support international principles for sustainable business conduct. In addition, companies are increasingly taking actions that result in better social, economic and environmental impacts because society expects this and because there are business benefits to doing so. By managing and seeking to improve environmental, social and economic performance and good governance throughout supply chains, companies act in their own interests, the interests of their stakeholders and the interests of society at large.

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What Steps Can A Company Take?

This workshop outlines practical steps companies can take to achieve supply chain sustainability and presents examples to inspire action. The recommended steps summarized below are based on the Global Compact Management Model, which is a flexible framework for continuous improvement for the mainstreaming of the Global Compact into strategies and operations. The steps described below and throughout the guide are not linear. Rather they represent complementary actions that companies can take in order to achieve more sustainable supply chains. In addition, there are three principles for successful supply chain sustainability management – governance, transparency and engagement – that are essential to every step of the model.

Commit:Develop the business case by understanding the external landscape and business drivers; Establish a vision and objectives for supply chain sustainability; Establish sustainability expectations for the supply chain.

Assess:Determine the scope of efforts based on business priorities and impacts.

Define & Implement:Communicate expectations and engage with suppliers to improve performance; Ensure alignment and follow up internally; Enter into collaboration and partnerships.

Measure & Communicate:Track performance against goals and be transparent and report on progress.

This workshop is intended to help companies, both those who are new to and those experienced in supply chain sustainability, to apply the Global Compact principles throughout their supply chains and to integrate sustainability into their business strategies.

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Supply Chain Sustainability Defined

In today’s globalized economy, outsourcing business operations doesn’t mean outsourcing responsibilities or risks—or that a company’s responsibility ends once a product is sold. Leading companies understand that they have a role to play throughout the life-cycle of their products and services. Supply chain sustainability management is key to maintaining the integrity of a brand, ensuring business continuity and managing operational costs. It is also an important aspect of the implementation of the Global Compact principles. Working Definitions “Sustainability” definitions vary. For the purposes of this guide, the definition encompasses the business role in addressing environmental, social (human rights and labor) and corporate governance issues, as covered by the Global Compact’s ten principles. “Supply chain sustainability” is the management of environmental, social and economic impacts, and the encouragement of good governance practices, throughout the lifecycles of goods and services. The objective of supply chain sustainability is to create, protect and grow long-term environmental, social and economic value for all stakeholders involved in bringing products and services to market. Through supply chain sustainability, companies protect the long-term viability of their business and secure a social license to operate.

Supply Chain Sustainability & the United Nations Global Compact

The Global Compact encourages participants to engage with suppliers around the ten principles and to advance sustainable development objectives as part of their commitment to the Global Compact, and thereby to spread good corporate citizenship practices throughout the global business community.

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The 10 Principles of the Global Compact and Supply-Chain Sustainability

Human RightsPrinciple 1: Businesses should support and respect the protection of internationally proclaimed human rights; and Principle 2: make sure that they are not complicit in human rights abuses.

LaborPrinciple 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; Principle 4: the elimination of all forms of forced and compulsory labor; Principle 5: the effective abolition of child labor; and Principle 6: the elimination of discrimination in respect of employment and occupation.

Companies have a responsibility to respect human rights. The baseline responsibility is not to infringe on the rights of others. In addition, business can take steps to support and promote the realization of human rights, and there are good business reasons to do so.

Labour conditions in offices, in factories, on farms and at natural resource extraction sites such as mines, particularly in the developing world, often fall significantly below international standards and national regulatory requirements and can lead to serious human rights abuses. Businesses should strive to uphold international labor standards within their supply chains, including the right to freely chose employment, the freedom of children from labor, freedom from discrimination and the freedom of association and collective bargaining.

In addition, workers at times suffer from other labor rights abuses, including excessive work hours, degrading treatment by employers and inhibited movement. In order to avoid complicity in abuses, businesses should seek to ensure that they do not cause the rights of workers and others affected by their supply chain to be infringed upon, including the right to freedom of movement, freedom from inhumane treatment, the right to equal pay for equal work and the right to rest and leisure. The rights of all peoples to work in safe and healthy working conditions are critically important as well.

Companies can also begin to address human rights (including and beyond labor conditions) alone or by working with partners to promote a broad range of human rights such as gender equality and access to education and health.

EnvironmentPrinciple 7: Businesses should support a precautionary approach to environmental challenges; Principle 8: undertake initiatives to promote greater environmental responsibility; and Principle 9: encourage the development and diffusion of environmentally friendly technologies.

Environmental impacts from supply chains are often severe, particularly where environmental regulations are lax, price pressures are significant and natural resources are (or are perceived to be) abundant. These impacts can include toxic waste, water pollution, loss of biodiversity, deforestation, long term damage to ecosystems, hazardous air emissions as well as high greenhouse gas emissions and energy use. Companies should engage with suppliers to improve environmental impacts, by applying the precautionary approach, promoting greater environmental responsibility and the usage of clean technologies.

Anti-CorruptionPrinciple 10: Businesses should work against corruption in all its forms, including extortion and bribery.

The significant corruption risks in the supply chain include procurement fraud and suppliers who engage in corrupt practices involving governments. The direct costs of this corruption are considerable, including product quality, but are often dwarfed by indirect costs related to management time and resources spent dealing with issues such as legal liability and damage to a company’s reputation. Companies that engage with their supply chains through meaningful anti-corruption programs can improve product quality, reduce fraud and related costs, enhance their reputations for honest business conduct, improve the environment for business and create a more sustainable platform for future growth.

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The impact of Sustainable Development upon Global Supply-Chains

By virtue of their ongoing business relationships, every company makes direct economic impacts through payments to employees, suppliers and governments and indirect economic impacts through monetary flows throughout supply chains and beyond. Companies which make their supply chains more economically inclusive can support further economic development through for instance job creation and increased incomes. Economic development has secondary impacts on socioeconomic development and the environment and is therefore a critically important aspect of sustainability.

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Executive Summary

Supply-Chain Sustainability

Developing the Business Case

The first steps in developing a supply chain sustainability program are to evaluate the business case for action and understand the external landscape. These efforts will help identify the highest priority supply chain issues for your company, evaluate risks and opportunities and build the internal support to move forward.

There are many compelling reasons for taking action to improve social and environmental impacts throughout the supply chain. Many companies are driven by their corporate values and culture to address sustainability issues. For these companies, the fact that supply chain sustainability is the right thing to do and is a driver of social development and environmental protection helps create internal buy-in and commitment. Many companies also identify specific business drivers for supply chain sustainability. The business case for a particular company depends on a variety of issues including industry sector, supply chain footprint, stakeholder expectations, business strategy and organizational culture. Supply chain sustainability management practices that respond to multiple drivers can maximize the value to business.

Managing Risk

Companies can protect themselves from potential supply chain interruptions or delays associated with suppliers’ human rights, labor, environmental and governance practices by ensuring suppliers have effective compliance programs and robust management systems covering all the areas of the Global Compact Principles. For companies who have a single source for key inputs, managing risks is also critical to ensuring continued access to those resources. Increasingly, customer and investor expectations are driving companies toward more responsible supply chain management. Strong management of social and environmental issues can help companies address reputation risks. Finally, companies also use supply chain sustainability to ensure that their suppliers can adapt to anticipated strengthening of environmental regulations, extended product responsibility legislation and to reduce potential future liability.

Example: Westpac, an Australian bank, has used advertising campaigns and sponsorships to link the company’s brand to social engagement, environmental protection and sustainability. Westpac recognizes that many of its social, ethical and environmental impacts reside as much in its supplier relationships (or the ‘supply chain’) as in its own activities, and that managing supply chain sustainability is important to protect the company’s reputation and brand value. Risks associated with supply management include negative publicity, damage to a company’s reputation and actual losses of customer base. Westpac carefully manages these risks through a defined supply chain management practice.

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Realizing Efficiencies

A focus on realizing efficiencies in the supply chain can reduce your company’s supply costs while also reducing the environmental footprint of your supply chain, including energy, water and natural and synthetic material use, as well as improving worker health and, motivation, and productivity. Benefits include:

• Strong labor and health and safety practices which may result in cost efficiency and improved productivity

• Increased understanding of key processes in the supply chain, including natural resource management and extraction, logistics and manufacturing, which enables better management and stewardship of resources

• More efficiently designed processes and systems which reduce required inputs and lower costs

Productivity and efficiency initiatives require a full understanding of the different steps of the supply chain and the key social and environmental impacts and cost drivers. By addressing the root causes of issues through strong communication capabilities, in-depth understanding of business drivers and sustainability trends and shared assessments and priorities for improvement, companies can drive improvements and derive the benefits.

Creating Sustainable Products

Collaboration with suppliers on sustainability issues can foster product innovation. Companies embarking on such initiatives have added new features and performance characteristics to existing products and even generated new products. For example, sustainable products may result in fewer negative environmental impacts than traditional products or have improved end of life collection and disposal options. It is also possible for the sustainability of products to be a differentiating factor and to lead to increased sales for some companies.

Example: Ahlstrom Osnabrück, a Finnish wallpaper company, began to develop products based on the Forest Stewardship Council’s standard in the late 1990’s after a large customer in the United Kingdom announced its commitment to source products that adhered to the FSC standard. By 2010, all of Ahlstrom Osnabrück’s pulp suppliers were certified to either the FSC or the Program for the Endorsement of Forest Certification (PEFC) standards, and the company has 12 manufacturing sites with FSC Chain-of-Custody certification, allowing the company to meet increased marketplace demand for certified sustainable forest products.

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Establishing Expectations

Companies should also invest in understanding the expectations of their stakeholders including national and local governments, workers’ and employers’ organizations, nongovernmental organizations (NGOs), advocacy and activist organizations, academic and issue experts and community groups, as well as suppliers themselves.

Moreover, companies can also benefit from seeking input from customers and investors. Customer and investor demand is a primary driver for many supply chain sustainability programs, and insights from these stakeholders can help shape programs to ensure that they create the maximum return for the company. Engaging stakeholders early and regularly in the process of designing a program can help companies identify relevant standards and approaches to sustainable supply chain management. Some stakeholders are knowledgeable about, and sometimes even involved in the development of, different codes of conduct and certifications for suppliers. Examples include the Kimberly Process for jewelry, Forest Stewardship Council Certification for wood and paper products and the SA8000 for responsible labor practices across industries.

They can help you evaluate the credibility of different options and identify which might be relevant inputs for your company’s program. Emerging risks and opportunities in supply chains. From customers and employees to activists and NGOs, stakeholders are often the first to identify emerging environmental, social and economic issues in the supply chain. Companies who engage early and regularly with stakeholders have the opportunity to take a proactive approach to these issues and to partner with stakeholders rather than discovering the issues through an activist campaign. Early identification of issues through stakeholder engagement can also help companies take early leadership in comparison to peers. See Chapter 8 for more detail on multi-stakeholder collaboration.

Example: In developing its code of conduct, Westpac consulted its Community Consultative Council, suppliers and NGOs. The company included feedback from organizations such as the Australian Conservation Foundation, Australian Consumers’ Association, Australian Council of Social Security, Finance Sector Union, Human Rights, and Equal Opportunity Commission. Westpac listened and responded to the issues raised by these groups. The company also established a Sustainable Supply Chain Management (SSCM) Policy Review Committee where internal and external stakeholders’ perspectives on SSCM can be heard and used to improve its processes.

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The importance of Investors and Customers as stakeholders in Supply-Chain Sustainability

Customers and investors are increasingly expecting that companies understand and manage impacts in their supply chains. Investors want to ensure that companies are aware of and are mitigating key risks affecting their supply chains. In addition, they are interested to know how companies are creating value from supply chain sustainability. Consumers and business customers are also encouraging companies to more closely manage their supply chains. In particular, some consumers are seeking more sustainable products; while business customers may include supply chain sustainability in their supplier selection criteria.

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Establishing A Vision

Having a clear vision and objectives for your company’s sustainable supply chain programme will provide direction for your strategy and help to define your company’s commitment. A vision will be a helpful yardstick in evaluating the success of the programme and in identifying areas for continued improvement.

It is important that the development of the company’s vision and objectives are championed from the top of your company. This is critical to ensure the success of the program. Moreover, to ensure support from company leaders, it is important for executives and senior managers from all parts of the business related to the supply chain should be consulted in this process and have a say in the development of the company’s vision. Companies should consider how they can include representatives from supply management functions such as procurement and operations as well as corporate responsibility, design, marketing, logistics, quality assurance, compliance, legal, human resources and environment, health and safety functions in creating the vision, as each of these functions will have a role to play in the implementation of the sustainable supply chain program. For smaller companies, it is equally important that leaders agree on the vision for sustainable supply chains.

The output of the process should be a statement of vision and commitment. As you develop the statement, consider what is motivating the company to invest in sustainable supply chain management.

Are you driven by:

• Customer demands and concerns?

• NGO and activist claims over practices in your supply chain that affect your brand and reputation?

• Investor inquiries to understand how you are managing supply chain risk?

• Non-compliance with regulations and standards that is preventing you from doing business?

• Rising costs as a result of increased demand for and reduced supply of natural resources?

• Pressure from your industry peers who are also developing sustainable supply chain programmes?

• The company’s culture of strong emphasis and performance on sustainability?

• Business interest in addressing macro issues in the environment and society to ensure long-term sustainability of operations?

It is also important to define specific objectives and potential barriers or risk events affecting their achievement. What is the company hoping to achieve through a supply chain program? What are some long-term outcomes you want to work toward? How will a sustainable supply chain support your company’s business strategy? Objectives can vary widely, including: strategic business goals (e.g. creating long-term value for the company), operational business goals (e.g. saving cost by reducing wasted energy and materials), goals to improve your company’s reputation (e.g. wanting to change stakeholder opinions of your company), and compliance-based goals (e.g. ensuring activities meet all applicable laws and regulations). Based on the business motivations and objectives, you can craft a vision statement that reflects what you consider long-term success for a program. The vision for your company may change over time. As you become aware of issues and begin to understand and gain experience, it may become necessary to “reset” the vision.

Example: Grupo Arcor, a food products and confectionery business based in Argentina, faced a growing number of requests and inquires from clients, credit institutions, governments and business chambers about the company’s supply chain and sustainability. As a result, the company created a Supplier Social Responsibility Program, founded on a vision to integrate Grupo Arcor’s CSR Policy into its supplier relationships. Its specific objectives are: To align suppliers with the company’s CSR practices and supplier contractual policies; To guarantee minimum common standards in the company’s production and management processes based on sustainability; To increase and improve Grupo Arcor’s supply sources while favoring the economic inclusion of vulnerable groups with productive activities which are normally excluded from the competitive market. The program has three main strategies: awareness and training; progressive CSR incorporation into the supplier recruitment policy; and specific responsible purchasing projects.

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Establishing Expectations

As you begin to solidify your vision for supply chain sustainability, an important next step is to translate expectations into a clear set of guidelines that will provide direction to suppliers and internal colleagues. At a minimum, you should expect suppliers to comply with national laws and to take proactive measures to avoid environmental and social harm.3 Overview of Codes of Conduct Codes of conduct are critical to establishing and managing expectations for both customers and suppliers. They create a shared foundation for sustainability, from which supply management professionals, suppliers and other actors can make informed decisions. For many companies, a supplier code of conduct is a natural extension of corporate values statements and seen as an affirmation of existing expectations rather than a new set of requirements. When developing codes of conduct, there are a number of international standards that should also be consulted and referenced.

The Global Compact principles outline each of the areas that need to be covered for a code of conduct to be considered comprehensive. Many companies will find that other companies in their industry have already created joint codes of conduct. These codes are designed to minimize the burden on suppliers by reducing the number of standards with which they must demonstrate compliance. They are also intended to streamline the process of conducting joint audits of suppliers and to reduce the effort required of companies to design their own codes. However, there is a risk that joint codes do not address all the issue areas of the Global Compact or will not meet specific concerns for your business.

Your company should consider whether adoption of one of these joint standards will receive the full support of e