Listen to this 17-minute podcast about greener supply chains - courtesy of Sydney's Eastside FM and the Total Environment Centre.
"Whether you're a self-employed tradie or a huge development company - a revolution is sweeping the construction industry! Robin Mellon explains the online resources available through the Supply Chain Sustainability School covering the environmental and social impacts of waste, water, energy and more."
With thanks to Ruth Hessey from the Total Environment Centre / Eastside FM
This article first appeared online via the Property Council of Australia on 09 August 2017
Social impact, ethical practices and economic value are headlines of an expanding sustainability agenda, says the Supply Chain Sustainability School’s chief executive officer Robin Mellon.
Every business or service has a supply chain, whether you’re selling coffee, clothing or construction materials. In some cases, these supply chains are quite simple. But increasingly, especially in large industries like construction, supply chains are complex and frequently inscrutable.
Mellon says Australia’s property and construction industry faces five main areas of supply chain risk: governmental, regulatory, economic, reputational and environmental.
“Each of those risks will ebb and flow depending on your business, but as the scope of sustainability continues to grow, so do the risks.”
Shifting community expectations, investor demand for transparency and increasing pressure on corporations to demonstrate good corporate citizenship are just some of the factors influencing supply chain sustainability, Mellon says.
“While in the past our industry was focused on environmental sustainability, today we are considering more social and economic factors,” he says. These include modern slavery, social value and economically-sustainable business models.
A recent survey of members of the Supply Chain Sustainability School found 52 per cent of respondents thought sustainability was a more important issue in their businesses than it was 12 months ago, and 49 per cent have already begun to engage their suppliers earlier.
“Seventy-nine per cent of businesses now have a sustainability plan in place within their organisations. This may not mean much in itself, but compared with five or 10 years ago, this is a massive shift,” Mellon says.
A new worldwide guidance standard for sustainable procurement, ISO20400, was released in June 2017 and broadens the definition of ‘sustainable procurement’ to include economic and social factors, alongside the environmental. Mellon says the standard’s impact “will be felt through big business first, but will trickle down to all small businesses through our supply chains over time”.
Issues like modern slavery, which “few people were talking about five years ago” are starting to dominate discussions, he adds.
“There’s a massive and immediate reputational risk involved in discovering that the materials in your building were created through forced labour, for example.”
The 2016 Global Slavery Index estimated that 45.8 million people in 167 countries are in some form of modern slavery, a term that includes debt bondage, forced labour and human trafficking. An inquiry is underway into whether the Australian Government should establish a Modern Slavery Act, similar to that established in the United Kingdom in 2015 which requires companies with a turnover of more than AU$59 million to report on their compliance annually.
Big business in Australia is already backing the introduction of an Act, and Mellon says it will “drive changes in both business and personal behaviours”.
“When large companies with influence over extensive supply chains make changes, people listen. Whether we are talking about carbon, certification of materials or modern slavery, a large company can change an entire supply chain in one move.”
Mellon says he’s inspired by the work of some industry leaders, who are embedding social value into their decision making. He points to Mirvac, which surveys its suppliers annually – “whether they are providing toilet paper or legal services” – to ensure each meets its vendor code of conduct and aligns with the company’s broader social impact agenda.
“Big organisations wanting to include social value in their decision making have a huge ability to change things for the better,” he adds.
Mirvac’s Song Café in Sydney’s 200 George Street, which operates as a social enterprise with all profits supporting YWCA initiatives, demonstrates the social impact the industry can make on supply chains and local communities, he says.
Mellon also points to the work of John Holland, which is currently rewriting its sustainability strategy in light of the new international standard and best practice procurement examples, and which insists that every preferred supplier be a member of the Australian Supply Chain Sustainability School “so that everyone involved in a project can be speaking the same language”.
In the instant information age, any oversight, irresponsibility or malpractice down the line can be exposed and shared on social media in the blink of an eye. In this environment, companies can’t afford to be complacent, Mellon says.
His message is simple: “You can’t flip a switch and go from knowing nothing about sustainability in your supply chain to knowing everything. It’s a journey – and one we are all on. But there is free information out there to help people upskill – about energy and carbon, waste, biodiversity, sustainable procurement or modern slavery. If you learn just one thing a month, soon you’ll know a whole lot more.”
Back in July I took a look at the main areas of supply chain risk, how they might affect your organisation and what questions you should be asking about your supply chains.
Now it’s time to consider some of the opportunities around your supply chains and what you need to be doing in 2017. It’s easiest to group these opportunities into three areas: knowledge, direction and communication.
Firstly, you need to be aware of what you know and don’t know about your supply chains. Many organisations know the large companies they deal with most frequently but that’s about it; they have little idea about the smaller companies that supply to those larger ones. So it’s time to start finding out what’s in your control and what isn’t; then you can maximise improvements over the things within your control and maximise influence over the things outside your control.
Many organisations already have Supplier Questionnaires, which are undertaken annually, that ask a range of questions from basic (‘Does your company have an environmental policy?’) to more complex (‘Does your company encourage local community work and commit to making a positive impact on the local community in which they operate?’). These questionnaires not only allow organisations to find out about the companies they do business with, and indicate levels of knowledge on strategic topics, but send a clear message to suppliers about the issues that are important or rising in importance. Take a look at Mirvac’s recently-released Annual Supplier Report 2016 as an excellent example.
Don’t forget that your influence often counts more than you think. As Sam Walton, founder of WalMart, famously pointed out, “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” If companies through your supply chain don’t want to answer questions, to reduce emissions in line with your targets or to align themselves with your strategy, it may be time to spend your money somewhere else.
To manage complex and international supply chains many leading companies, including Supply Chain Sustainability School Partners across Australia, are implementing supplier qualification programs that ensure that they only do business with suppliers that share their own values; programs can include regular checks and audits that look at supplier issues from basic compliance to energy and emissions, materials and waste, health and safety, human rights and child labour, and more.
You can also make sure your organisation’s risk matrix reflects your supply chain risks and levels of understanding on how you’re managing and minimising them including sustainability from climate change and climate extremes to social sustainability and modern slavery, and from community resilience to financial resilience. Be aware of what leading organisations are doing in this space; for example the City of Melbourne, in collaboration with the 32 metropolitan Melbourne councils and associated partners, now have the Resilient Melbourne Strategy. There are many great examples out there of organisations collaborating to achieve change and minimise risks collectively.
Now that you’re getting more comfortable with what you know and don’t know, it’s time to clarify your direction. If you know where you are now, do you know where do you want to be? Take a look at the strategies of leading organisations around topics such as sustainability, supply chain efficiency or resilience, and start setting some goals and targets with a medium- to long-term. These will help you set your direction and, in turn, help with shorter-term objectives. Don’t forget that learning is a constant process, not a binary situation (you know nothing / you know everything). Getting to know your supply chain and your suppliers will take time, but the environmental, social and economic opportunities they hold are multiple.
Greater direction can also mean increased collaboration between teams, between business units and between aligned organisations to make sure that you’re not just minimising your risks but identifying opportunities; the NSW Office of Environment and Heritage’s Sustainability Advantage program does just that by looking at opportunities to collaborate to achieve greater efficiency and benefits, materially and strategically.
So 2017 holds great opportunities for you to set direction for your supply chains, since:
Now that you know more about your supply chains and have a sense of direction, it’s important to be clear about where you’re going, both to staff and suppliers. For a start, both staff and suppliers will need a good sense of the purpose and the context; why you are doing this and why it's relevant. Regular internal and external communications need to encourage transparency through your supply chains, not just so that efficiency can be improved but so that areas of weakness can be identified. It’s also important to show how fast and how much the industry has changed over the past ten years, and how it will continue to change. Change is, in fact, perhaps the only constant. And with increased knowledge and a clearer sense of direction, it’s time to communicate more openly with suppliers.
In terms of context there are multiple ways of framing this discussion, from the high level Sustainable Development Goals or the intentions of the 2015 Paris Agreement to your organisation’s own monthly, quarterly or annual targets. The seventeen Sustainable Development Goals, also known as the Global Goals, were announced at the UN Sustainable Development Summit in New York in September 2015 and include 169 targets to achieve sustainability by 2030; these were discussed in more detail at the recent SCGA16 Conference in Sydney. The goals provide a framework for businesses to align their strategies with sustainable development by increasing the focus on their social and environmental performance and impact while still generating economic rewards.
This is relevant because businesses will be the single most important driver for the delivery of the Global Goals, say almost 49 per cent of CEOs in a recent report by Accenture Strategy and the United Nations Global Compact. UN Global Compact Executive Director Lise Kingo explained that “the adoption of the SDGs gives companies a clear and universal roadmap to make global goals (relevant to) local business.”
According to the report, 70 per cent of CEOs see the SDGs as a clear framework for businesses to structure their sustainability efforts, and even more (87 per cent) view the Goals as “an essential window of opportunity to rethink and reset approaches to sustainability”.
All signs indicate that 2017 will be the ‘Year of the (More Sustainable) Supply Chain’. Are you ready?
Excerpts from this article first appeared online in Sourceable on 11th December 2016.
Recently I was fortunate to moderate a panel at the Sydney Architecture Festival entitled, appropriately enough, ‘Where does your stuff come from?’; the topic of one of my recent Sourceable articles and the core of my work leading the Supply Chain Sustainability School. Despite being the same day as the AFL Grand Final, the session drew a good crowd and promised to be an interesting exploration of the supply chains behind everything from foundations to furniture to fashions: http://www.sydneyarchitecturefestival.org/program/where-does-your-stuff-come-from
But what happened next was unexpected; whilst I thought I knew which direction the speakers and conversation would take, I was wrong. Each of the four panelists was asked to introduce themselves and outline what they do, what they’re passionate about, and why it would matter to them where their ‘stuff’ (materials, resources, skills etc.) comes from. Preliminary introductions unfolded smoothly. And then, surrounded by beautiful furniture and great minds, we disappeared into a fascinating world of stories. Stories of Aboriginal design, the links between sustainability, beauty, spirituality and function in boomerangs and buildings, heirloom products, handprinting and restorative development, and the development, evolution and skills behind the knowledge, routine and physical jobs around NSW.
Speaking in the session were designer, artist and film-maker Alison Page, architect and sustainable development advocate Caroline Pidcock, furniture design curator, storyteller and our host at the CULT showroom Richard Munao, and business strategist, design thinker and jobs-for-the-future advocate Tony Stephens. A gender-balanced panel – well played Sydney Architecture Festival!
Alison outlined concepts of design from an Aboriginal perspective, noting the materials used, the traditions embraced and how communities each have a unique cultural identity and spirituality that needs to be reflected in the built environment. Caroline talked of handprinting; where a range of positive business impacts from best practice products to sustainability programs can balance an organisation’s footprint. Richard referenced the importance of authenticity and longevity in design, particularly in the creation and passing down of heirloom products and pieces. And Tony spoke of the importance of the skills and narratives within engineering, architectural and technical services here in NSW and the need to build on infrastructure investment domestically and expand internationally; whilst the Jobs for NSW initiative focuses on fast-growing SMEs and start-ups, the real ‘wicked problem’ is how to transition regional SMEs away from older industries and into newer ones. Their challenge is to create 150,000 new jobs in the four years to March 2019, and these need to be sustainable, lasting jobs.
The session also focused on the issue of beauty, and how we need a bit more of it in all our lives. I’ve said many times that the buildings we love will last forever; Sydney’s Bourke Street Public School, the Brisbane Arcade and Adelaide Town Hall aren’t just functional structures but places of beauty and inspiration, brimming with stories of their development and survival, and for this reason they will be maintained, repaired and truly loved.
With CULT’s stunning furniture and design around us, and conscious of Alison Page’s words about Aboriginal design blending function, beauty, spirituality and sustainability, we also examined increasingly popular rating tools such as the Living Future Institute Australia’s (LFIA’s) ‘Living Building Challenge’. LFIA Board member Caroline Pidcock explained how the design and architecture fraternity is embracing the concept of not only doing ‘less bad’ but developing buildings with a positive, regenerative impact. The Living Building Challenge recognises and rewards buildings around not only categories of their Place, Water, Energy and Materials use, but also themes of Health and Happiness, Equity and Beauty – including elements of Spirit, Inspiration and Education.
And behind all of these themes were woven the stories – those stories of buildings we love, stories of materials and their sources, stories of crafts and traditions, and stories of history and heritage. The conclusion? That whether we’re talking developments, designs, dresses or desks, people are showing more and more interest, and attaching more and more value, to the stories behind their production.
Mass-produced items may be cheaper and easier to obtain, but there are rarely stories behind them; there is rarely a connection. Heritage pieces, crafted items, carefully sourced materials and truly sustainable developments hold more stories, and the market value of these is growing around Australia. More to the point, Australia’s ability to tell these stories (and to verify them) will stand us in increasingly good stead worldwide. The value of these stories lies in their ability to show the ‘provenance’ or chain of custody of the item or service, the demonstration of awareness of the supply chain, the emotional involvement which often outweighs any economic drawback, the knowledge that a higher quality product will last longer and therefore be a better long-term decision (“buy cheap, buy twice”), the awareness that something is line with our own inherent principles and, to be blunt about it, the ‘bragging rights’ that come with such a choice.
So the panel, audience and I got to a conclusion, confirming that there is a growing demand for stories, beauty and quality, as well as a better blend of all three. As architect Richard Buckminster Fuller pointed out so accurately many decades ago, “When I'm working on a problem, I never think about beauty. I think only how to solve the problem. But when I have finished, if the solution is not beautiful, I know it is wrong.”
[Excerpts from this article first published in Sourceable online on 2 November 2016.]
BACK TO SCHOOL: Lucy Dixon of Supply Chain Digital interviews Robin Mellon of the Supply Chain Sustainability School.
The Supply Chain Sustainability School was launched in Australia in 2015 to raise sustainability knowledge and competency along construction and infrastructure supply chains. Here, Lucy Dixon talks to CEO Robin Mellon on how the School supports small-to-medium enterprises, providing e-learning, information and face-to-face training for construction and infrastructure suppliers, contractors and service providers.
Why do you think sustainability is important in the construction supply chain?
It’s funny how the term ‘sustainability’ means such different things to different people; if I asked you whether it was important for your organisation to have a ‘sustainable business model’, you’d say that it was essential. But for many people ‘sustainability’ is still a luxury, a nice-to-have, an extra or even an inconvenient chore. I think sustainability, in all its meanings, is about making sure that your organisation can sustain itself in the short-, medium- and long-terms. That includes using resources efficiently, maximising opportunities while minimising costs, managing risks properly and ensuring that your business is resilient and your supply chains aware. Environmental, social and economic sustainability are now becoming intertwined, so opportunities to manage each one in a better way must be seen as opportunities to do better business.
How are Australian construction companies embracing sustainability?
There are many Australian construction companies that are fully embracing sustainability, completing ‘World Leadership’ Green Star-certified (GBCA) buildings and communities, ‘Excellent’ Infrastructure Sustainability-rated (ISCA) projects, using Good Environmental Choice Australia (GECA) and Global GreenTag-certified products and services, and accessing the multiple free resources offered by the Supply Chain Sustainability School. These are the best in the industry, such as Stockland with its sustainable diversified property leadership or John Holland with innovative high-performance engineering, construction and services solutions; such commitments to completing sustainable projects in sustainable communities within a sustainable business model will leave a lasting legacy. However there remains many large and small construction companies across Australia for whom sustainability is only a very small part of what they do, and within which sustainability is not seen as relevant to procurement teams, project managers or principals. Those are the organisations who will not have a resilient business model in ten years’ time.
How can the construction industry use sustainability as a driver for innovation within the supply chain?
A sustainable organisation – one that is truly economically, environmentally and socially sustainable – is one that uses its supply chain as a catalyst for innovation. An informed organisation regularly looks along its entire supply chain for areas of opportunity (how can we be more efficient, more streamlined, more resilient?) and areas of risk (what could go wrong, harm us, damage our reputation, impact upon the environment, hurt us financially or, worst of all, injure our people?). So the desire to be more environmentally sustainable, using less resources for example, can become a driver for innovation; how can we achieve the same outcome using less materials with fewer touch points. The desire to be more socially sustainable, ensuring that modern slavery touches no link of your supply chain for example, can become a driver for innovation; how can we get the buy-in of every person, internal and external, to promise that levels of global slavery are reduced. Supply chains are becoming a point of strategic difference for organisations since they offer a change to reduce costs, risks, waste and environmental impact whilst increasing competitive advantage, knowledge and social benefit.
What can smaller construction product manufacturers/service providers do to ensure they don’t miss out on becoming part of a sustainable supply chain?
There are a few priorities here, centred around knowledge, control and time. To begin with, nobody is expecting smaller firms to be instant experts on sustainability themes, but they do need to demonstrate a basic awareness of the key issues. Since these basic building blocks of sustainability education are available for free on the Supply Chain Sustainability School website (www.supplychainschool.org.au) there are fewer and fewer excuses for not knowing what’s going on. There’s a wealth of free knowledge and diverse learning options available, with the school adding more every month. The school will help organisations find out what they know, what they don’t know, what they really should know, and how they can access more information. Secondly, small organisations often feel that while they have control over their own staff they have little sway over the multiple links through their supply chains. But as Sam Walton, founder of retail giant Walmart, said: “There is only one boss – the customer – and he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” Every small company has the ability to start asking questions; where things are made, and how; whether things are certified or verified, and if not why not; or whether companies around them have policies around vendor conduct, modern slavery or recycling of materials. So asking questions, and exercising as much control, influence and inspiration as possible to ensure supply chains become more sustainable is good. Ultimately, taking your business elsewhere may result in better triple bottom line outcomes. And finally, smaller businesses are not expected to be instant experts, but setting a target with a medium-term range will be a good way to encourage improvements over time. For example, committing to improve sustainability knowledge on set topics by the end of next year, with a few relevant metrics, would be a good starting point. Regular, frequent, small steps towards improved knowledge are so much easier, cheaper and less time-consuming than being forced to take large, sudden steps when government regulation or smarter markets catch up with you. And, of course, the Supply Chain Sustainability School can help with regular re-assessments of knowledge, and in turn recommend further sustainability learning options.
What do you think is the biggest challenge, particularly in Australia, of embedding sustainability into the construction supply chain?
The biggest challenge is the prevalence of short-term thinking, rather than medium- or long-term thinking. I totally understand the pressures behind current project deadlines (and budgets), financial year accounting and modern electoral cycles, but these are all examples of short-term influences. When a building, community or infrastructure project is going to be around for 50-100 years (or hopefully more, depending on quality!), why would the deciding factor be whether a lower-performance product can be obtained $5,000 cheaper? Especially when the lifetime of environmental, social or economic benefits will probably far, far outweigh it. So many of the ‘arguments’ for sustainability, whether around solar panels, water tanks, better materials, energy- or water-saving initiatives, focus on medium-to-long-term paybacks. Which means we have a fundamental discord between decision-making priorities and lasting benefits. This isn’t something we can ‘fix’ immediately; it’s going to take multiple movements, and understanding around issues such as performance-based specifications, life cycle assessment (LCA) and whole-oflife analysis, social sustainability and non-political infrastructure delivery to really change how we design, construct, operate and recycle fit-outs, buildings, communities and infrastructure. It is rare that short-term fixes eventuate into long-term satisfaction, especially with low levels of supply chain knowledge. And this knowledge, or lack of it, is a growing risk. According to deloitte in its 2016 Chief Procurement Officer (CPO) survey, whilst ‘procurement risk is on the increase’, cost reduction remains the top priority for CPOs and ‘62 percent of CPOs do not believe their teams have the skills and capabilities to deliver their strategies’. These figures are echoed in this year’s Hackett CPO study, which shows that although ‘market risk is increasing’, the top priority for 2016 is still to ‘reduce and avoid procurement costs’.
How does the Australian approach to sustainability measure up to that of other countries?
There are wonderful, awe-inspiring, magnificent parts, and then there are shameful, embarrassing, cringe-worthy elements to Australian sustainability approaches. In some respects Australian cultures are very much aligned with sustainability; the essence of vast distances, scant resources, extremes of climate and relatively few people spread across the world’s driest inhabited continent seems to align with the core tenets of sustainability. I’ve seen many buildings and communities that play to these strengths; making best use of the water, energy, resources, biodiversity and environment, as well as the technologies developed to help overcome labour shortages and extremes of climate. But in other regards, the way in which Australians don’t recycle much (despite having to import so many things), don’t capture much rainfall (despite being the driest inhabited continent), don’t ride-share very much (despite the number of single-occupant car trips made) and don’t capture much solar or wind power (despite the numerous hours of sunshine and wind) is just humiliating.
And how does construction measure up compared to other industries?
I have been fortunate enough to travel extensively over the past decade, looking at other countries’ efforts in the built environment sustainability space. There are many countries doing extraordinary things through their building, infrastructure, supply chain and procurement sectors. Germany has made some amazing advances in energy efficiency and renewable energy production, with buildings that reflect this (see DGNB). Across Latin America there are some great examples of infrastructure being completed to best practice sustainability principles, such as the Mato Grosso do Sul State Road Transport Project in Brazil, in which application of more sustainable approaches to erosion control saved about US$46 million, or the roadbuilding project through a valuable biodiversity corridor in the Gran Chaco region of Argentina that included special wildlife crossing/ connectivity points with eight underground and three canopy wildlife crossings. The UK has been targeting more sustainable supply chains throughout construction and infrastructure, with the original Supply Chain Sustainability School launched in the UK in 2012 by Action Sustainability with the groundswell of activity around the London Olympics. And the procurement practices in the USA have shifted tremendously around the changes specified by the US department of defense, whose small and steady improvements in sustainability criteria send massive ripples through US and global procurement and supply chain networks. In fact, the US Department of Defense’s (DoD’s) Sustainable Product Purchasing program states that ‘the department’s vision of sustainability is to maintain the ability to operate into the future without decline either in the mission or in the natural and manufactured systems that support it. dod embraces sustainability as a means of improving mission accomplishment’. However Australia is definitely leading the way in ‘putting it all together’, especially within the construction sector. Maybe it’s that with a (relatively) small population it’s possible for innovation to spread quickly, maybe it’s that with eighteen different climate zones there’s no ‘one-size-fits-all’ approach and so project teams learn to adapt their own unique solutions. Overall I’ve seen Australian projects assembling the energy, water, materials, emissions, waste, transport, innovation, biodiversity, health and safety, education, workplace and social solutions in a way that creates truly world-leading developments.
Can you give a few examples of Australian companies you think are doing great work in this field?
Three good examples of organisations doing great work would be Mirvac, Laing O’Rourke and Sustainability Victoria, each of whom are Founding Partners of the School. Mirvac is one of the leaders with its ‘This Changes Everything’ strategy, engaging businesses with Vendor Codes of Conduct and Supplier Annual Reports, and engaging people with its ‘House with No Bills’ initiative and diverse community projects. Laing O’Rourke is investing heavily in innovation through its Engineering Excellence, digital Engineering, Product & Process Innovation, R&d and Skills & Education initiatives. And Sustainability Victoria, the Victorian statutory authority that facilitates and promotes environmental sustainability in the use of resources, has produced an amazing range of services and advice for households, schools, communities, businesses and local governments. These organisations are the ones writing the future of where and how we do business.
With thanks to Lucy Dixon of Supply Chain Digital.
Article reprinted from http://www.supplychaindigital.com/magazine/sliderIssue?id=84
(Article first appeared in Sourceable on 1st June 2016)
Over the past few months, since stepping into the role of Chief Executive Officer at the Supply Chain Sustainability School, I’ve been asking a few questions about Australians’ knowledge of their supply chains.
Not just questions like “do you know where your stuff comes from?” but “how much do you think your suppliers know about their environmental impacts?” and “can you tell me what your ‘supply chain’ looks like?”
So whilst the school exists to provide the building blocks of free sustainability education to the construction and infrastructure sectors, I’ve been asking about supply chains in general – which country things come from, what modes of transport have been used, and which products (if any) can actually verify their supply chain. For many organisations, the lack of knowledge is startling, and this is an area of major risk. I believe Australia is faring pretty poorly in this area.
As outlined in EY’s recent report, Let’s Talk Sustainability, “the last decade has seen an increase in external scrutiny over how large corporations engage with their supply chains. While the origins of this stem from the well-known ‘sweat shop’ exposés of the 90’s, the scope of issues has evolved considerably in recent years. A long list of disasters and shocks from the collapse of Rana Plaza in Bangladesh, appalling tin mines in Indonesia and the horsemeat scandal in Europe has exposed the inadequacy of traditional supply chain governance. While many international companies have been working to implement and improve their supply chain management approaches, Australian companies have lagged behind.”
So few people actually know where their things come from, whether those are consumer goods or construction materials. Many have indicated that supply chains are ‘the next big opportunity.’ So what are some issues of price and risk, and what are the next steps you can take?
When it comes to price, there are many who simply think that ‘cheap is good’ and in some cases that can be right. If Farmer A is selling apples at the market more cheaply than Farmer B because there is a glut of apples on those trees right now, that might indeed be good. But often something cheap is cheap for a reason – because you are not actually paying the real price for it. The labourer who’s working long hours in poor conditions is paying for it through low or no wages, the natural environment is paying for it because of the pollution left behind that might be so hard to restore, or the owners of the natural resources are actually paying for it because of price-fixing.
So it’s time to start asking a few uncomfortable questions. Why is something cheap? It could be because the supplier has managed to achieve maximum efficiencies in every aspect of what they do, or it could be because there’s something ‘not quite right’ in some parts of the production line. Do you want to know? Can you afford not to?
This knowledge, or lack of it, is a major risk. According to Deloitte in their 2016 Chief Procurement Officer (CPO) survey, whilst “procurement risk is on the increase,” cost reduction remains the top priority for CPOs and “sixty two per cent of CPOs do not believe their teams have the skills and capabilities to deliver their strategies.” These figures are echoed in this year’s Hackett CPO study, which shows that although “market risk is increasing,” their top priority for 2016 is still to “reduce and avoid procurement costs.”
So decisions are made primarily on price, not on long-term suitability, knowledge of supply chain implications or exposure to risk. Is that the reality of business today? But whilst both of these surveys show the major focus on cost-cutting, procurement teams are struggling with organisational strategies and market risks are increasing.
But take heart that there are some great examples of small, medium and large businesses looking through their supply chains to redefine what best practice means to them. Sydney-based clothing label We Are Harper knows where everything is made, with products certified by the Fair Wear Foundation. Good Environmental Choice Australia (GECA) member Solopak has been examining every link in their supply chain, particularly around its Earth Renewable cleaning products. And Mirvac is forging ahead with Vendor Codes of Conduct, Procurement Policies and an annual Supplier Report. What can you can do right now? Well, start with three things:
Start asking questions about your supply chains. These can be simple, yes/no questions, or more complex ones.
Find out what you know and what you don’t know, and discover the amazing free and paid resources that already exist. The Supply Chain Sustainability School is one, providing free sustainability education online. The School gives you access to over 250 free resources, and you can complete a free and confidential self-assessment to identity your company’s strengths and weaknesses.
From there, you’ll be provided with a tailored action plan to help grow your knowledge and shift behaviours in areas that affect not only your supply chain, but your industry sector. You’ll be able to track your progress, receive the regular school newsletter, complete follow-up self-assessments, re-assess your action plan, provide feedback to the school on new topics you want to learn about, and attend free events run by the school and its partners.
There is also valuable information from agencies such as Sustainability Victoria who provide a range of services and advice and Construction Skills Queensland.
It’s time to verify your supply chain, and you can start by engaging with third party certification schemes that verify products and materials such as GECA orGreenTag GreenRate, finding out more about the Steel Stewardship Forum or Forest Stewardship Council (FSC), or certifying your development using Green Star or infrastructure project using the Infrastructure Sustainability rating tool.
Depending on who we are, what we do, where we live and how we work, we might not have a whole lot of choices in our lives. But we can certainly start to make more active choices around the things we buy, the food we eat, the materials we use, and the purchases our organisation makes.
Can you look me in the face and tell me you know where the timber in your building came from? Can you assure me of the conditions within the factory where your shoes were made? Can you promise me that the water used in your production process was in line with your organisation’s environmental targets?
It’s time we took a closer look at the supply chains that get everything to us, from our morning coffee to our evening meal, and from the clothes on our back to the buildings and infrastructure that underpin our lives.
Robin Mellon is one of Australia’s experts on sustainability in the built environment and is determined to leave the planet in a better shape than it was when he found it. Robin believes in a Better Sydney – better buildings, better communities and a better quality of life.