Becoming a Transformational Company: Supply Chain and Industry Engagement
I had the privilege of attending Canadian Business for Social Responsibility’s (CBSR) recent webinar on the “Transformational Company: Supply Chain and Industry Engagement.” Senior leaders from CBSR, Hemlock printing, and Mountain Equipment COOP compellingly described how becoming a transformational company could be a real strategic advantage.
A transformational company goes beyond applying Corporate Social Responsibility (CSR) to a company’s own operations. In a broad industry survey three-dozen thought leaders were asked what constitute the 19 qualities of a transformational company. I will describe a few of the qualities that stood out.
Being a transformational company means - “Taking responsibility for your value stream both upstream and downstream, and across regions and sectors”
At the last CBSR summit 100 CSR practitioners were asked what was required to leverage transformation. They informed that in order to do so companies had to work with their supply chain, work with their peers, and even their competitors. And, its not only CSR practitioners who advocate transformational action by companies either. Based on 2010 research by McKinsey & Company, 94% of CEOs said companies were being held accountable for their value chain.
So what are the advantages to breaking out of the company silo and reaching out collaboratively to suppliers and other interested groups? Research conducted in 2013 by Virescent, a sustainable supply chain management consultancy, of North American procurement managers revealed a number of key benefits:
Improved sustainability performance of the supplier
Improved sustainability impacts of the product
Improved risk management
Improved supplier relations
Maintain access to resources and materials
Meet customer requirements
Improved supplier due diligence
The case of Hemlock Printers, a mid-sized Burnaby B.C. printing company, provided specific insights on the importance of working closely with its supply chain to turn sustainability into a competitive advantage.
For Hemlock supply chain management is a time intensive and critical aspect of their business performance. More and more its customers want to know how the paper it uses is made; everything from grades, and product data like carbon data (Embedded carbon footprint per lb of paper) etc.
Hemlock sometimes has to dig deep for the info it needs. Questions as specific as if pulp and paper was sourced from Mountain caribou habitat have come from environmentally conscious buyers. For this type of information it would look to an NGO as a source.
Governments would also like companies to close the loop on their materials and provide greater details on the attributes of their products. British Columbia has currently tabled multi-materials legislation to achieve this.
In order to meet the growing demand for green paper products and metrics, Hemlock’s CEO sent a formal letter to its paper suppliers requesting that they increase the Forest Stewardship Council and post-consumer content of their products.
Being a transformational company means – “Collaborating within your industry, even with competitors – as well as across sectors to encourage systematic industry change”
An example that illustrates this concept well in my mind is the Canadian Boreal Forest Agreement (CBFA) that achieved peace between the forest industry and environmental organizations in Canada. It is the world’s largest conservation initiative.
19 major forestry companies operating in Canada came together and agreed to suspend logging operations on almost 29 million hectares of boreal forest caribou habitat. By working together these 19 companies assured that all could benefit reputationally without giving up ground competitively between them. In return, a coalition of environmental groups concerned with protecting Canada’s Boreal forest agreed to stop boycotting the 19 forest companies involved.
The suspension of forestry activities by industry gives the signatories an opportunity to work together on a number of initiatives, while a similarly large area remains accessible to companies. These include developing action plans for the recovery of caribou in specific areas and producing ecosystem-based management guidelines that participating companies can use to improve their forestry practices.
Common benefits of industry collaboration and standards include:
Leveling the playing field – so companies can address wider issues without suffering competitive disadvantage
Pre-empting government legislation
Saving time and money, and avoiding duplication
A consistent public message – so responsible companies can avoid being tarred by the same brush as laggards.
In conclusion, the trend towards more responsible sourcing and product attribute transparency shows no sign of slowing. Unsustainable practices by suppliers in the value chain are more likely than ever to turn buyers off your products and have regulators tighten the screws on you. More and more companies are working together to achieve common sustainability goals. In this business environment, becoming a transformational company is a real advantage.