edie roundtable: Driving renewables through the supply chain
Sustainability and energy management experts from some of the world's biggest businesses recently gathered in London for an exclusive roundtable hosted by edie and Smartest Energy, to explore how companies can reach out to supply chains to improve carbon performance.
In 2016, global supply chain emissions fell by 434 million tonnes - more than France’s total greenhouse gas (GHG) emissions in 2014. Change is being driven by companies that aren’t content with managing their own environmental impacts, but are keen to push the low-carbon agenda across supply chains.
Greater data management, increased willingness from business and pressure from stakeholders to mitigate climate impact has created an ideal set of drivers to push sustainability down into the supply chain.
But the complex web of supply chains has enough challenges as it is. In past year, high-profile scandals have emerged, linking modern slavery abuses and toxic chemical use to fashion retailers and deforestation to cocoa purchasers.
Compared with these reputational risks, is there a place in modern corporate social responsibility to “green” supply chains? Are suppliers even willing to change actions and behaviours to meet the wishes of their customers? And if so, how do companies stop this from becoming another tick-box activity and actually deliver a tangible transition?
Fourteen sustainability and supply chain professionals discussed these questions to highlight particular challenges around materiality and competition.
Carrot or stick?
The table agreed that confusion and complexity is being generated from the numerous supplier engagement schemes create by individual companies. PepsiCo’s global sustainability senior manager Richard Profit noted that “most of the leading supermarkets all have their own platforms” arguing that these should be issued by industry instead.
This is an area where Premier Foods Group has first-hand experience. The group signed up to WRAP’s Courtauld Commitment to reduce food waste by 20% by 2025. However, one of its suppliers last month asked it to adopt the Sustainable Development Goal (SDG) to halve food waste by 2030 instead. A difficult one to either meet or say no to.
Different needs and demands from different suppliers is also a challenge. Companies down the supply chain supply to numerous firms, and tailoring data to individual customers adds a layer of complexity. Even getting the same information or data requests from multiple customers at different times can be time consuming and complex.
That’s why global chemicals giant GlaxoSmithKline (GSK) has tweaked its supplier engagement forum from a guidebook to an engagement piece. The company has around 10,000 suppliers, and while only 350 are signed up to the forum, GSK’s supplier engagement manager Pamela Stathaki claims that it has built a stronger relationship as a result.
“The supplier platform is a drop in the water from our 10,000 suppliers, but you have to start from somewhere,” Stathaki said. “Suppliers are interested in being on the platform and reading the material, but not as interested in being active. I think they’re afraid of giving information around best practice to a potential competitor.”
GSK is using the forum as a “knowledge hub” to help suppliers drive down carbon. The firm runs webinars with specialists and offers performance certificates for suppliers that can show carbon savings to engage at a greater level.
At this point, Gavin Milligan, group sustainability director for William Jackson Food Group, suggested that utilising third parties could enable companies to engage with suppliers, without smaller firms having to worry that they are involuntarily sharing their best practices with other suppliers.
“We don't tell farmers how to farm, we convene farmers to tell each other how to farm,” Milligan said. “But in terms of what we can do, our approach is finding best practice in the value chain, not identified by us, but by the people that are doing it, and trying to get them to spread this without people feeling they're giving away the crown jewels of what they think makes them different.
“In terms of performance metrics, we're considering not actually getting involved ourselves, they don't have to tell us how and what they've done, a third party will do that. I don't know if it’s our business to delve into what they do in such detail. If they're going to provide evidence that they've done it, it will need to be through third party.”
Stathaki noted that GSK had tried this method before, but that suppliers have specifically called for greater involvement and dialogue with the company. Nestlé has also experienced the benefits of engaging with suppliers. The confectionary giant not only uses Response-Inducing Sustainability Evaluation (RISE) to map the key needs of individual farmers, but also engages with them through select training initiatives. Nestlé’s head of environmental sustainability for UK and Europe Andy Griffiths noted that their intervention programme for UK dairy farmers had a 100% sign-up rate as a result.
Tick box spectre
While dedicated training programmes have proved fruitful, German chemical company BASF’s head of sustainable development Geoff Mackey warned of the “spectre of tick-box exercises” when it came to companies reaching out to supply chains.
“Our organisation runs across a wide range of industries and value chains. The platforms are growing and we’re finding that the majority of [supply chain] requests for information go away when we ask them what they think they want,” Mackey said.
“An awful lot of requests are driven by marketing simply ticking boxes to say they did communicate with their supply chain. It’s a nightmare scenario.”
One potential solution around tick-box scenarios was offered by industrial maintenance and management group Jacobs’ director of sustainability Alan Hendry, who suggested that challenge-based procurement exercises could be used to actively get suppliers to engage.
These types of activities are common in the public sector, where councils ask businesses and suppliers for ideas around issues such as green infrastructure. According to Hendry, these result in interest from companies that otherwise wouldn’t normally engage.
Of course, there are other ways to remove complexity from supply chain engagement, although some hinge on a willingness to work with competitors. GSK is part of the Pharmaceutical Supply Chain Initiative, whereby suppliers only have to fill out one survey, which is then shared across the industry to all competitors.
With companies keen to drive renewables uptake into their supply chain to reduce carbon, the need for better data management has become apparent. BT’s head of sustainable business policy Gabrielle Giner noted that CDP had been a real driver for better disclosure from suppliers in this area.
“We're a long-standing member of the CDP supply chain and its really valuable for us,” Giner said. “It's one of our key priorities to get as many key suppliers as possible to report for CDP. We see that as a journey for suppliers and how they start thinking about sustainability and climate change. We can monitor and see what's happening.”
Analysis from CDP, developed in partnership with BSR and the Carbon Trust, shows that only 22% of responding companies currently engage with their suppliers on carbon emissions and 16% engage on water use. However, as PwC’s head of sustainability measurement and reporting Jon Hampson revealed, quantifying carbon in the supply chain is a huge challenge.
“We were quite naive when we started with CDP,” Hampson said. “When we first started out, we thought it would be helpful to understand how much carbon was in our supply chain and where the hotspots were. Over the years, the data hasn’t been consistent enough to act on it. Our aspirations changed from acting on the data, to using CDP as a catalyst for change for our suppliers, to encourage them to engage with us.”
Hampson, a supply chain consultant for 10 years before his current role, revealed that using CDP has seen 86% of PwC’s top 100 suppliers disclose climate-related information, but that the firm still doesn’t know how much carbon is in its supply chain.
Even if better data capture does identify areas for improvement in the supply chain, sustainability is just one part of the relationship between buyer and seller. Stathaki noted that GSK had to be careful how much it “pushed” sustainability onto suppliers, due to potentially disrupting procurement relations with suppliers that were usually driven by price.
Addressing energy efficiency and carbon as a cost reduction to appeal to procurement has worked for companies like BT, while Sainsbury’s senior sustainability manager for property David Merefield noted that the supermarket has “in-depth sustainability scorecards” for each supplier function.
Sainsbury’s has reduced absolute carbon emissions by 20% since 2005, despite business growth of 40% – this includes the purchase of Argos. Merefield revealed that this was “purely based on a commercial need” but that supplier sustainability was balanced with cost aspects.
Fortunately for Coca Cola European Partners (CCEP), the sustainability department’s relationship with procurement is more embedded than most. CCEP was formed in 2016, as a result of the combination of Coca-Cola’s three main bottlers, including Coca-Cola Enterprises.
Because Enterprises was already focused on sustainability, the formation of CCEP enabled sustainability to be placed into other departments. A sustainability member sits within the procurement team, and CCEP’s associate director of corporate responsibility and sustainability Megan Mitrevski Dale explained how this had placed sustainability alongside cost when assessing procurement.
“Sustainability is part of the contracts that our tier one suppliers sign,” she said. “They have to report on their carbon reductions and then we work with them to drive down impact. It's not us going to procurement saying we need to do this, it's already built into the process.
“While cost is always the main driver, it has the same weighting in terms of making a purchasing decision as cost and value. It's not an either or, it’s an equal choice.”
Embedding sustainability across other departments proved a viable way for Interface to introduce its ambitious Mission Zero sustainability strategy, and the successor strategy, Climate Take Back.
Climate Take Back aims to “bring carbon home and reverse climate change”. Interface’s vice president and global chief innovations officer Nigel Stansfield claimed that the success of the strategy hinged on its ability to bring other companies under its scope.
Stansfield revealed that a 50% reduction in Interface’s global energy footprint had facilitated investment into renewables. Climate Take Back will also build on the success of Mission Zero’s ability to extend its strategy into the supply chain.
“We defined seven different methods to achieving our goals and three platforms on our initiative related to supply chain,” Stansfield said. “We work with the Cambridge Institute for Sustainability Leadership (CISL) doing education about suppliers and picking the areas of biggest impact – driving renewables into their business and driving fossil fuels and raw materials out.”
To date, Interface uses 92% renewable energy across all manufacturing sites – some of which are run by suppliers. The flooring company is now approaching suppliers to help them adopt the mindset that carbon can be used as a raw material to improve the carbon sequestration of the products it produces.
Renewable energy buyers club
Of the 14 companies represented at the roundtable, BT, CCEP, Interface and Nestlé are all members of the Climate Group’s RE100 commitment to source 100% renewable energy by a set date.
While larger companies have the capital to be able to back these types of commitments, companies lower down the chain may not have the understanding or the ability to implement these types of transitions. Roundtable chair Haydn Young, director of consulting and training sustainability consultancy GAIA asked how corporates can drive the renewables agenda into the supply chain.
“Some of our farmers and smaller suppliers can almost feel excluded from renewables,” Nestlé’s Griffiths said. “It's there, but they can be too small to engage in effective buying arrangements. There needs to be something that would make [renewables] much more accessible for those organisations that feel they’ve been left on the periphery.”
One potential solution that seemed appealing across all sectors was the creation of a buyers club for renewable energy. Members of the roundtable were in agreement that creating access to renewable energy for suppliers would enable large corporates to better manage their Scope 3 emissions, which derive from the supply chain.
Following an open question to the table from the Chair, delegates began to map out a potential scenario that would boost this access through a buyers club for renewable energy. An ideal scenario would see the formation of a pan-industry group of corporates that purchase renewable electricity to allocate/sell back to their supply chains.
Both CCEP’s Mitrevski Dale and PepsiCo’s Profit were in agreement that the brands likely shared some of the same suppliers, and that a buyers club would allow them to share some of the benefits.
“The companies would have to be in your supply chain, because you’re giving them access to your group,” Profit said. “They get the benefits for their scope 2 emissions, which has a knock-on benefit for our scope 3 emissions. We can then say with certainty that our suppliers have saved a certain amount.”
PepsiCo updated its sustainability plan in 2015 to account for Scope 3 value chain emissions, although “much of the business is trying to get its head round” the new data set.
Premier Foods Group was one of the companies represented at the roundtable which is in the middle of a supply chain, and the Group’s environmental management and compliance coordinator Lee Haughton was in agreement that a buyers club would give suppliers access to renewables at a reduced cost.
“I think it’s a fantastic idea,” Haughton said. “I've tried engaging with our procurement to go 100% renewable, but its more money, and we won't go down that route. If there was a way for us to share it down the food chain, without it costing anymore and saving us money, why would you not do that?”
Delegates were in agreement that the allocated electricity would have to be sourced from the same grid, and also noted there would likely be backlash and lobbying from brown energy generators. The roundtable also warned that a buyers market could reach “critical mass”, whereby suppliers were given too many options to source renewable energy from different groups, which could confuse and dissuade some.