Collaborating for a More Sustainable Supply Chain in Public Procurement, Pt. 3
Categories: Governance, Policy, Sustainability | Tags: gsa, Sustainability, sustainable supply chain, tim laseter
Making the Business Case
While the federal government is uniquely qualified to create an “Über community,” success depends upon the voluntary engagement of the business community. Does the Sustainable Supply Chain Community of Practice meet the hurdles of an economic business case for the practitioners?
Henry Ward, former Director of Global Supply Chain Sustainability at Dow Chemical, highlighted the most obvious advantage of the Community of Practice, and his motivation for attending the inaugural session: “This event brought together lots of stakeholder that I don’t normally interact with. I knew maybe 25 percent of this highly regarded group of thought leaders, so it was a great opportunity to learn.”
Guy Schweppe, Vice President of Enterprise, Mobility and Software Procurement at the $62 billion computing behemoth Dell shared his perspective after the community launch: “When you see the tiers of the government’s supply base and the complexity of the logistics networks… the impact of their moving to a more sustainable supply chain is staggering.” Previously, in July of 2011, Dell’s CEO joined EPA Administrator Lisa Jackson to release the National Strategy for Electronics Stewardship. The strategy outlines actions the federal government is taking to ensure the proper handling of its used electronics and spur the growth of the U.S. electronics recycling industry. Dell’s engagement in the community of practice furthers the company’s commitment to addressing “end of life” issues. “This is a tremendous opportunity for the government to learn from the lead- ing practices shared in the community to modify bids around sustainable solutions and take a more holistic view of lifecycle costs,” Schweppe added.
Verizon’s Chief Sustainability Officer and V.P. of Supply Chain Operations James Gowen shared the following: “The GSA’s goal of leading by example is very encouraging and will hopefully trigger sustainable practices throughout the government’s supply chain.” Gowen oversees $2.5 billion in annual spending and half a billion dollars in annual inventory as he works with Verizon vendors and business partners to drive sup- ply chain efficiency. He highlighted the value of gathering input and encouraging dialogue. “A ‘Community of Practice’ collaborative but strategic approach will allow the most valuable ideas and solutions to the challenging environmental problems we face today to rise to the top,” Gowen said. “With data.gov, we can expand our transparency, generate actionable data and engage a wider set of minds to improve the federal supply chain on a continual basis.”
Vice president of Commercial Products Supply for The Coca-Cola Company, Rick Frazier, echoed the sentiment, “This will accelerate the learning curve and reduce the cost of building sustainable supply chains. We have to always keep in mind sustainability is not ‘me’ winning, it’s about ‘us’ winning because sustainable supply chains have two key benefits: environmental (green) and operating efficiencies (lean).”
The business leaders clearly see the potential for the government to lead the way with an “Über community.” John Frey, Americas Sustainability Executive at Hewlett Packard, engages with customers to improve sustainability in information technology—one of the seven areas of focus for the U.S. government. Even though HP ranks among the world’s largest companies with $110 billion in annual revenues, 300,000 employees worldwide, and $60 billion in direct materials purchases, Frey rightly describes the federal government as the true “800 pound gorilla” that can have a massive, positive impact through its own practices as well as how it engages its suppliers.
But, an 800-pound gorilla can also be dangerous. At the forum and in our follow-up interviews the business leaders consistently emphasized the need for collaboration. Kevin McKnight, Global Director, Environmental, Health, Safety & Sustainability at aluminum manufacturer, Alcoa Inc. (a $26 billion company with 61,000 employees) offered the following advice, “…stay the course on the collaborative approach. Industry, work- ing side-by-side with government, can do a lot to help drive improvement and ensure progress toward a more sustainable future. I believe we will ultimately achieve so much more through collaboration than we could ever achieve through mandates.”
Furthermore, the possibility of an “Über community” with a focus on the seven high priority segments resonated with the business leaders—for example, Carolyn Woznicki, Vice President, Global Procurement & Supply Chain for Johnson Controls, Inc., who has responsibility for $9 billion in annual spending among 300,000 suppliers. Woznicki notes that while she is already engaged with multiple sustainability forums, there was no clear, single source for sector-specific information. She adds that even though some practices transcend industries, sectors such as building materials and food concession services (two of the seven selected sectors) clearly faced different priorities in achieving enhanced sustainability.
John Frey of HP underscored both sector focus and collaboration, noting that the electronics industry has been a leader in coming together as an industry to drive improvements in sustainability. HP took a collaborative approach like the current community of practice model. “We rolled out our sustainability requirements to suppliers including online citizenship reporting with a focus on capability building…rather than as a punitive system to root out non-compliant suppliers,” Frey explains.
Verizon’s James Gowen shared a collaborative success story from his organization: “We’ve created a Green Team with over 8,000 employee volunteer members in 20 countries, who are leading a multitude of great activities. As an example, together with our employees we’ve implemented an Energy Champion program saving 3 percent to 5 percent per facility. Leveraging the passion of our people has been a huge win for us.”
While best practices and information sharing are valuable, Gun Shim of Pacific Gas and Electric Company, the utility serving most of the Northern and Central Californian, offered some words of caution. As Vice President of Supply Chain, he brings a pragmatic perspective. “I looked at data.gov and to be honest, there is so much data it can be overwhelming,” Shim says. “We will need to engage collectively to decide how to categorize, simplify, and make sense for the community.” Johnson Control’s Wozniak further elaborated on the need to do more than assemble raw data. “The community website needs to be leading edge, thought provoking: you should be able to get to data/areas of interest quickly.”
Both also reinforced the need to enable human contact. Says Wozniak: “We should be able to do more than just look at the website. Community members should be able to connect to the people who are add- ing the content, really building connection between the people.” Shim further upped the ante: “An in-person forum needs to supplement the online forum for the Community of Practice. There needs to be opportunity to come face to face!”
Dan Pleshko, Corporate Vice President of Global Supply Chain Operations for Lockheed-Martin, offered a counterview. Responsible for the overall supply chain strategy spanning this global aerospace and technology company with over $25 billion in spend and a team of over 4,000 supply chain professionals, Pleshko recognizes that you have to leverage peer-to-peer technology. “As advantageous as face-to-face networking is, it is at times not practical to gather all parties live to exchange best practices and work on solutions,” he said. “By glob- ally sharing non-proprietary supply chain sustainability data in an on-line repository, it gives the reader real-time access to true examples and testaments, in order to formulate his or her own strategy.”
Pleshko also highlighted how during 2010 and 2011 he shared best practices across 17 Lockheed Martin sites that collectively accounted for over 80 percent of the corporation’s total energy usage. “Each facility was evaluated based on current energy systems, plans, and performance,” he said. “We identified hundreds of energy-reduction projects that, once implemented, could potentially save over $25 million in annual costs and 161,000 metric tons of carbon dioxide emissions. More than 60 percent of these identified projects are either complete or underway.”
Kevin McKnight of Alcoa summarized the business case at the societal level this way: “Our world needs to become more sustainable. The United States has a significant role to play in helping the world to understand how we can all work collaboratively to get there. Private enterprise has been involved in the sustainability journey for a long time. At Alcoa, we started publicly reporting on our environmental performance in 1993. We set our first long-term (2020 and 2030) sustainability goals in 2000. It only makes sense for industry to collaborate with the U.S. government to ensure that we are leveraging all we know to accelerate the pace of sustainability in supply chains.”
Vision for the Future
The Sustainable Supply Chain Community of Practice has been recognized as a form of supplier engagement on the part of the government—a use of government “soft power” through public/private collaboration as opposed to the “hard power” of legislation and regulation. Just as leading companies have made a strong economic case for supply chain sustainability, so has the federal government in recognizing the cost savings associated with reducing supply chain inefficiencies and risks. By transparently highlighting existing sustainable supply chain practices in specific market sectors, it nudges federal suppliers into action and benefits from resulting cost savings.
Since the March launch, the Sustainable Supply Chain Community of Practice has been featured at several events hosted by organizations such as the Corporate Responsibility Officers Association (CROA), Institute for Supply Management (ISM), and the Association of Climate Change Officers (ACCO). Use of the community must be organic, with benefits self-evident to participants to drive their engagement. Looking forward, the initiative seeks to provide clear returns for government agencies in two primary ways:
1. Highlight Existing Government Assistance. Many federal agencies have programs that assist organizations in becoming more sustainable supply chain participants. The Environmental Protection Agency E3 pro- gram (Energy, Environment, Economy) helps small- to medium-sized manufacturers integrate practical, sustain- able approaches in their operations. The E3 program is an active participant in the Sustainable Supply Chain Community of Practice. Another EPA program, SmartWay, aims to reduce transportation-related GHG emissions by creating incentives to improve fuel efficiency.
2. Reducing Taxpayer Costs. For the government, contracting based on lowest price or “first-cost” may not capture the overall lower lifecycle costs of sustainable products and management approaches. This is especially true when additional costs are borne by government agencies in the form of costs associated with future energy, consumption, waste management activities, and adverse environmental and health impacts. Sustainable management practices by government suppliers—practices that include supply chain GHG management and inventorying—can help to reduce these overall lifecycle costs to government. The initiative will achieve these objectives by continuously reaching out to a vast network of stakeholders.
Clear Vision for Sustainability
Supply chain sustainability remains a nascent field. As such, the federal government—as well as other community of practice participants—will continue to engage, share, learn, and implement based on their engagement in the Sustainable Supply Chain Community of Practice. While the community must take time to learn, it also must set high standards. Jason MacIver, Director of Services Supply Chain for Dell, exemplifies the necessary attitude: “Sustainability touches every aspect of the supply chain. For example, we would not have thought of using bamboo or mushroom packaging 10 years ago. Today, more than 40% of our packaging content is from recycled or renewable content, and 75% of it can be recycled or composted at the end of its life.”
The Sustainable Supply Chain Community of Practice has passed the hurdle of bottom-line business case practicality while simultaneously setting a clear vision for moving forward in assisting government and industry alike in achieving sustainable supply chains. The 800 pound gorilla is using its power deftly—and the business world is applauding.