Are your Supply Chains Tiger and Orang-Utan Friendly?
Accounting for roughly 40% of vegetable oil production, palm oil is the most important vegetable oil worldwide. As a key commodity, it is an ingredient of a large range of products, including processed food, cosmetics, shampoo, and soap. A recent Greenpeace report reveals how palm oil supply chains are pushing Sumatran tigers and orang-utans closer to extinction (pdf). It becomes evident “that the palm oil sector is currently the greatest single driver of deforestation in Indonesia, accounting for about a quarter of all forest loss”. The report demonstrates that palm oil supply chains “are aiding and abetting the clearance of the Bornean orang-utan’s rainforest habitat and that of the even scarcer, critically endangered Sumatran tiger” and that “[t]hey have also been complicit in peatland destruction and depriving communities of their land and livelihoods”. How can research in the field of supply chain management help to recognize the true costs of palm oil production?
Human Rights in the End-to-End Supply Chain
“Certification programs have their merits and their limitations. With the growing availability of social media, analytics tools, and supply chain data, a smarter set of solutions could soon be possible”, as Robert Handfield and I argue in our paper, just published in Supply Chain Management Review. We believe that an evolution from company thinking to supply chain thinking will now help to make businesses more socially responsible: “Traditional solutions that focus just on a brand (e.g., Company A) or the labels used with the brand (e.g., a label saying that Company A’s product is ‘fair’) are being supplemented by solutions that recognize a brand’s network (e.g., Company A’s upstream supply chain) and reveal how all entities of that network are treated (e.g., an interactive map of the supply chain on a smart device)”. This transformation requires costly data, but becomes realistic as transaction costs are increasingly reduced due to new technologies, standards, and algorithms.
Wieland, A., & Handfield, R.B. (2014). The Challenge of Ensuring Human Rights in the End-to-End Supply Chain. Supply Chain Management Review, 18 (6), 49-51
Vanilla Sourcing in Madagascar
In a previous post, I demonstrated how Symrise creates added value beyond corporate boundaries by closely collaborating with vanilla farmers in Madagascar. Watch the following video, which highlights this approach from the perspective of Unilever, a buyer of Symrise’s aromatic compounds. The case is also included in an article I have written for Supply Chain Management Review about the interface between SCM and CSR.
Rethinking Corporate Social Compliance in the Supply Chain
Managers are increasingly under pressure to ensure that their products bear attributes like “fair”, “ethical”, “green”, or “social”. Hereby, it becomes clear that solutions cannot just be found in the manager’s company, but in the company’s end-to-end supply chain. This has led companies to audit every company along their global supply chains against the own standards, which resulted in a large volume of auditing. The Rana Plaza building collapse, however, tragically showed that this top-down approach seems to fail. Departing from this observation, a new EY report, Human Rights and Professional Wrongs (pdf), provides an excellent summary of the problem and a set of recommendations for improvement. For example, the authors recommend to use third-party certifiers and auditors more strategically, to prevent orders from factories that have not had their status assessed, and to maintain longer relationships with a smaller number of suppliers. These recommendations could help to sharpen a blunt sword.
The Science of Sustainable Supply Chains (Guest Post by Dara O’Rourke, UC Berkeley)
My guest post today comes from Dara O’Rourke. In his recent Science article, The Science of Sustainable Supply Chains, Dara argues that the field of supply chain management needs to significantly improve and integrate sustainability measurement systems and decision-support tools.
The science of sustainability measurement has progressed alongside efforts to advance supply chain traceability, impact assessment, and aggregation of data into sustainability indicators. Advances in life-cycle assessment (LCA) and product “footprinting” are increasingly being deployed in efforts to turn data into decision-support tools for global brands and retailers. However, the speed and dynamism of modern supply chains creates challenges for incorporating sustainability data into sourcing decisions. In addition, the use of divergent methodologies, data sets, and system boundaries have led to confusion across assessment initiatives. In order for these systems to generate accurate sustainability assessments, there is a need for consistent LCA inventory data and common data sets for up-stream activities; consistent life-cycle impact factors; better uncertainty analysis; localization of LCA data sets; modeling of nonlinear responses and ecosystem dynamics; and improved systems for valuing ecosystem services. Better data, decision-support tools, and incentives are needed to move from simply managing supply chains for costs, compliance, and risk reduction, to predicting and preventing unsustainable practices.
Dara O’Rourke is a professor of Environmental Science, Policy, and Management at the University of California, Berkeley. He is the co-founder of GoodGuide, Inc. which recently launched PurView, a supply chain sustainability data platform for retailers and brands. You can follow Dara on twitter @DaraORourke.
O’Rourke, D. (2014). The Science of Sustainable Supply Chains. Science, 344 (6188), 1124-1127 https://doi.org/10.1126/science.1248526
The Story of a Fair Mouse
If you believe that today’s post is about little rodents that behave equitably, then you have most probably not heard about NagerIT’s project to build fair computer mice. (Although the German term “nager” translates literally as “rodent”.) NagerIT took supply chain transparency to an extreme, disclosing the entire supply chain of their Fair Mouse (pdf) on their website, thereby highlighting suppliers with unknown details on working conditions. The Fair Mouse project reveals how difficult it can be to produce a product that is 100% fair: NagerIT admit that they stay with “the problem of the mining of the metals (except solder tin) and the assembly of the remaining components, which [they] still can not obtain from alternative (fair) suppliers”. However, a good start has already been made. The story of the Fair Mouse is, of course, a little like the story of the Fairphone, recently presented here by its founder.
Ethical Supply Chain Management
Ethical supply chain management is among the most neglected areas of our field. One of the issues covered by ethical SCM are animal rights, which are not covered by social supply chain management, a closely related area. An interesting application of ethical SCM comes from KAT, the Association for Controlled Alternative Animal Husbandry, “the inspection body in Germany and neighbouring EU countries for the scrutiny of eggs from alternative forms of hen rearing (free-range, barn and organic rearing)”. The system helps to put visibility into the supply chain. According to KAT, “[v]irtually all eggs offered for sale on the German market in the food retail trade bear the KAT inspection label”. You can, for example, use the code 0-DE-1234567 to test the system and will then be able to see pictures of the farm and also a map. “What is on the egg?” has also been released as a free app for mobile phones.
CDP Supply Chain Report 2014
The Carbon Disclosure Project (CDP) “is an international, not-for-profit organization providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information”. Written by Accenture, the CDP Supply Chain Report 2014 has now been published. Its subtitle, Collaborative Action on Climate Risk, indicates the direction of the report’s journey. Indeed, the report, which is based on data collected from 2,868 companies responding to a supplier information request in 2013, builds on “a wealth of data on how suppliers and their customers are collaborating to drive down carbon emissions, mitigating water risk, seizing opportunities, and building revenue and brand along the way”. It turns out that “[s]uppliers report that both climate risk and opportunity are at high levels” and that “consumers are becoming more receptive to low-carbon products and services”. Moreover, suppliers “realized savings of US$11.5 billion from emissions reduction investments […], down from US$13.7 billion in 2012”.
Climate Extremes Will Challenge Our Supply Chains (Guest Post by Anders Levermann, PIK)
In his recent Nature article, Climate Economics: Make Supply Chains Climate-smart, Anders Levermann argues that supply chains need to adapt to extreme weather. He discusses this topic in the following guest post.
Extreme weather events are likely to intensify the more greenhouse-gases we emit – and these extremes are more than just a local risk. Links in global economic chains and world markets mean that flooding or heat-waves in one place can have repercussions elsewhere. Extreme rainfall and typhoon Yasi paralyzed the world’s fourth largest coal exploration site in Australia in 2010/11. Coking coal prices went up by 25% in 2011. In order to estimate the impact of climate change on our society we need to understand both future weather extremes and our global economic network. In Potsdam we recently set up a website to collect and analyze this data. Everyone can register and contribute expertise. In a similar fashion as Wikipedia we hope to gradually generate a global community that creates a system of checks and balances to obtain an up-to-date database of high quality and detail to induce a global adaptation of our supply chains. For news follow @ZEEANit on Twitter or register at zeean.net.
Anders Levermann is a physics professor for the dynamics of the climate system and co-chair of the research domain Sustainable Solutions at the Potsdam Institute for Climate Impact Research.
Levermann, A. (2014). Climate Economics: Make Supply Chains Climate-smart. Nature, 506, 27-29 DOI: 10.1038/506027a
