Many people are on the quest for the “perfect scorecard” for the suppliers to complete. The problem is that the big customer usually cannot tell the valid scorecards from those that are poorly completed. This will pose risk to their operations. Bob Pojasek presents several solutions in the interview below.
Scorecards and Scalability to Implement Across Supply Chain
The gorilla of all scorecards is the Walmart Sustainability Initiative Scorecard with the now famous 15 questions. There are different numbers out there but a lot of people believe they have 100,000 first tier suppliers and the number goes up exponentially after that. Bob has done roughly 30 or 40 supplier scorecards for companies.
Typically you have a first tier supplier really strong in the food and apparel, which have gotten more scrutiny than some of the other industries. (at least the ones Bob has been involved in) You are typically dealing with an apparel factory in China or some other developing country.
This is particularly prevalent in retail For example, Proctor and Gamble has a scorecard that is mandatory for all suppliers. There is a good number of them out there now. Most of the retailers have their own.
Bob's fear is that there is the search for the 'perfect scorecard'. The poor people in the supply chain are getting multiple scorecards. They are getting besieged by scorecards and they are all different. It takes an awful amount of effort. A lot of them, especially at the factory level in developing countries have no idea how to fill them out. As a result, they retain a consultant. It is usually a very small consulting firm, a sole proprietorship or something small. Bob is fearful that some of the scorecards are done incredibly well and some are probably done quite poorly. There are probably none in between.
For the retailer or end-customer like an IBM it is a problem because it poses risks to them. If they think the supply chain is in good shape and some of them are not. All of a sudden they start having price and delivery problems which are a big risk to the company.
Part of Bob's thinking is that you can certify all of the people that fill these scorecards out, but this probably won't happen. There are a lot of feelings as to whether any of the certifications programs out there are really any good.
Alternatively, you could have a deployment of a large number of people with one group. For example, Intertek does a lot of the social responsibilities and human rights. They go out and you have some amount of uniformity of deployment. Good, bad or indifferent, at least they are consistent. The risk can be scaled within that.
One of the things you might want to do is have a firm go out and help the company fill out the scorecard. It would be like capacity building. The next year the company could do it themselves. You might have some auditing and insurance of that over time. This way you would have a lot more consistency.
Bob thinks the suppliers really do need some help and understanding about what they are doing. When you give them a good idea which will help them be a stronger company you can see the smile on their face. At the end of the day, this is what everyone (suppliers, customers and ultimate consumers) want.
What companies are seeking in terms of sustainability solutions for the supply chain
There were two models over the years, especially in the electronics industry and going way back, there were companies like Intel and the older computer companies which don't even exist anymore.
A team of people at some location would go out and visit the suppliers. They would try to be helpful to them. A lot of times it was like technical assistance because they saw it was a good investment, especially as they started cutting down the number of suppliers. The risk goes way up of course if the suppliers left don't succeed.
Audit the suppliers to conform. If they don't conform they are dumped.
Bob always felt the former procedure worked better because it is a two way street. Suppliers really need to know why and how to conform. They need to know why it is important to the customer. It is also important to the customer on the other side to understand the issues the supplier is dealing with. Some of them can be pretty unique.
Bob felt for some reason we didn't see much in between. He thinks we see that now. Everything is on analytics and informatics and other funny IT words we have. It is all about data and numbers. Are we really thinking about the processes and the people that are behind the data and numbers? Are we really looking at leading indicators about developing employee engagement and developing process improvement, or are we simply dropping the suppliers that don't come up with the results?
This really pushes people to be thinking about how they are reporting the results, though you wouldn't want to say 'stretching' the results a little bit. Results are really important and need to be looked at but you really need some longer term thinking. In the sustainability area they use a global reporting initiative which really is a lot of short term thinking.
Helping suppliers is longer term thinking because if you help a supplier you are more likely to keep and work with them. Obviously, they will also be more loyal because they recognize that investment. Over the long term it is a good thing but it is not a model that all of the customers would choose.
Bob has seen it a lot in the electronics industry and he thinks we will see a lot more of it in the retail industry.
It is not an esoteric thing. It is not about altruism but a real practical thing. If you think of the suppliers and what they are doing you will see:
Operational Issues: They are using resources to make products or provide a service. Why aren't they looking at resource productivity just like they look at worker productivity? How hard is this water working for you? How much do we get out of our energy? How much do we get out of these materials? If you make a bad product, you throw it away or you recycle it which creates another waste. If I made all good product the first time I will use less resources and save a bundle of money.
Reputation Issues: You have the social well-being of your workers in the community that you are in. Obviously, if the community doesn't like you they can make life miserable for you. This will cost you a lot of money to overcome.
Vitality Issues: The vitality of having a healthy community economically and a healthy facility economically. Keeping your customer financially fit.
To Bob, sustainability is these 3 things. You cannot separate them.
You can't just worry about climate change, or just focus on environmental sustainability. Everything matters, big time.
A lot of people on the climate change see it as hedging against the volatility of energy cost as we are seeing our gasoline prices will probably go to record levels by May of this year.
If people look at it as a practical thing and take down the slogans and banners, Triple Bottom Line and all of those slogans which no one really knows what they mean. Instead look at it from a business point of view of environmental stewardship, social well-being, economic prosperity and how they relate to each other. Every company is doing that. Some are doing it better than others. Very few are calling it sustainability but that is what it is.
Everyone needs to get practical about it and if you run your business very well you are probably doing sustainability.
About Bob Pojasek
Bob Pojasek has been a consultant and a teacher for roughly 40 years. He participated in the first Earth Day in 1970 during his senior year of school. This changed his life and brought him into the environmental field. In 1992 he was attracted to the Earth Summit which took place in Rio de Janeiro and he actually did attend the Rio +5 Conference five years after the main event. Bob has been practicing sustainability since that time.
Bob has been teaching for about 15 years at Harvard University. He teaches 2 courses in sustainability. They are distance learning courses and he caps his enrollment to about 130 students in both classes. He usually has people from around 20 countries. Bob also consults full time. Teaching is an adjunct position. He works for quite a large Fortune 300 engineering firm. Bob has only been with the company for 4 months and he came from a firm with 27 people to the current firm with 27,000 people.
Bob finds that a lot of his work in sustainability revolves around the supply chain, especially with the big retail companies with large supply chains. Retailers are really trying to hedge against volatility, especially in energy and materials costs and possibly water in the water stressed areas. Much of his work prior to joining his current company has been with the people in the supply chain trying to conform with the mass of scorecards and other devices which have been put their way. Bob has been helping filling them in and putting programs in place to make their customers happy. At the same time they have the same goal in terms of trying to reduce the volatility, especially price volatility within their own operations. It makes them more stable and makes their customers quite happy.
Robert B. Pojasek, Ph.D.
Shaw Environmental and Infrastructure Group
100 Technology Center Drive
Stoughton, MA 02072
617.589.4121 Office Direct