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Three Big Supply Chain Trends for 2011, Part 2

Tensions between countries are often mirrored in the competing “technical cultures” of product and corporate sustainability.

In 2010 several companies embraced the sustainable product as compelling on many levels, because the concept implies a link directly with the consumer experience: It offers choice, the engine of market-driven change, and therefore potentially competitive advantage if consumers or customers choose the more sustainable product; and it mobilizes a holistic value chain perspective requiring designers and sustainability professionals to look at the entire product lifecycle if they are to take informed action and support valid claims to the market.

On the other hand, several high-profile product manufacturers came out squarely against a product focus, making the case that there is a rather obvious reputational risk if a company introduces a “green product line” while failing to address sustainability in all its operations. Consumers are baffled by sustainability information and, in fact, by any “excessive choice” at the product level in general (hotly debated with research articles for and against this hypothesis). Finally, they argue that measuring individual product sustainability is too time consuming and complex to even consider as a credible exercise on any scale.

These supposedly competing perspectives should, of course, be complementary and hence should find strong resolution in 2011. The most often quoted of the “barriers” to assessing product sustainability is the belief that it must involve multiple lengthy lifecycle assessments. Companies with very large product portfolios understandably baulk at the cost and time required for this but then sometimes falter at how to address this crucial dimension of their sustainability profile in a credible and rigorous way.

Happily, there are now several robust approaches, which have mobilized the lifecycle modeling capabilities and lifecycle inventory data, and then connected these to the product design process. The result is a reusable, flexible, but technically rigorous lifecycle model that puts the controls directly in the hands of the designer. This “democratization of sustainable design” was a major theme of the 2010 Life cycle Assessment and Product Design European Conference in December, and I expect it will go a long way to enabling a new wave of product sustainability activity in 2011.

Once cultural and technical differences have been resolved, we can always count on that enduring theme of corporate life: departmental divisions. Little surprise then, that in 2010 we still had corporate social responsibility departments dealing with social issues and environmental departments dealing with the greening of products and sustainability. These two tribes would then place their requirements before other departments, like procurement, which would have to attempt some kind of integration.

Worryingly, the green and the social agendas often failed to find common cause unless it was at the most basic level of compliance. Some exceptions were found but often in the most complex and challenging cases: In 2010 the OECD published its “Draft Due Diligence Guidance for Responsible Supply Chains or Minerals from Conflict Affected and High Risk Areas,” to give brands some guidance on how to approach the risks of sourcing minerals from conflict zones where artisanal mining results, not just in environmental abuse, but also in extreme social dislocations, often including appalling abuse of civilian populations. This issue also showed how sustainability issues can rapidly escalate into potential scarcity of supply problems if left unresolved, as the threat of banning minerals from these geographies raised its head amongst politicians.

Seeds of integrating social, environmental, and commercial dimensions were sown in some organizations in 2010 with the appointment of senior champions for sustainability, variously called “Chief Sustainability Officers” or “VPs of Sustainability.” These roles unite the skills, experience, and authority to join up the elements of this smorgasbord of issues in a way that has been sorely lacking to date. It will be exciting to see in 2011 how the new crop of these leaders deals with bringing together the three legs of the triple-bottom-line stool. At worst, they will simply avoid adverse tradeoffs among the agendas, but hopefully they will be able to identify real synergies among environmental, social, and commercial agendas.

One wonders, for example: Which organizations will take major new investment decisions about the location of new production sites in their supply chains based on careful consideration of both social and environmental impacts? Which suppliers will harness new technologies to increase productivity and grow new, higher-level skills in their employees? Who might tackle the increasingly stinging issue of scarcity of supply of specific elements in a way that mobilizes the social and environmental agendas at the same time?

Maybe you have seen some of these things already in the past, but if you see them again in the early months of 2011, be sure to give them a nudge in the right direction.

3 comments on “Three Big Supply Chain Trends for 2011, Part 2

  1. DataCrunch
    January 13, 2011

    Paul thanks for the article.  What do you think will be the catalyst for companies to implement widespread sustainability initiatives in the next 3-5 years?  Will it be more companies like Wal-Mart who have their Sustainability Scorecard as a guideline and rating system for their suppliers, or do you see something more drastic like Cap and Trade or some kind of industry or government compliance?  Would be interested to get your insights, as I am not sure consumers will be requesting or demanding it for quite some time in enough volumes to force the issue.

  2. Paul McNeillis
    January 14, 2011

    Dave thanks for this: I think your key word here is “implement”. While I recognise the value of initiatives like Wal-Mart's to act, as you put it, as a catalyst, the question is: what do they catalyse? I believe they draw management attention to the issues; they demand a mastery of information and data; and they ask searching questions within an important core business funtion of procurement. In that sense I fully support them. However even when these, cap and trade, in Europe consumer demand and in the UK Energy market reform and other cumulative market incentives are present there is one common ingredient in all successful implementation: leadership. To date I have still seen nothing more powerful and few if any substitutes. Just look at the correlation between companies winning the sustainability awards like Unilever and the level of senior sponsorship – its usually the CEO. Someone somewhere in authority within the company must “get it” and do what good business people always do: strategise, innovate; create value and compete in the new context. Without this no amount of catalysts will move a company.

     

     

  3. Ms. Daisy
    January 18, 2011

    Paul;

    You are on point regarding the key to business successes and sustainability. It is the leadership and the quality of the management team. There are three levels to the concept of a product, the core product, tangible product, and augmented product. The core product is the most essential and always provided in some tangible form. The emphasis on the core product as the sustainable product in the absence of a leader that gets it like Steve Jobs is simply a hype.  The leader that is able to pull all the organizations' product lines (core product, tangible products, and the augumented products) to prominence under a strong management that gets it is the one that will demonstrate sustainability. The leader must be able to evaluate each component of the marketing mix to better understand products. 

    I get the fact that the main objective of marketing a product is to influence the target population’s behavior by offering services and/or benefits that are attractive and affordable. But the tactical components of a succesful marketing mix (the product, promotion, and price) under clear and effective leadership is the organization's key to adapting to its environment and remaining competitive. 

    The concept of sustainability that is wrapped around a core or sustainable product and the idea of a catalyst is unclear to me. he organization that will thrive with the uncertainities in the external environment, is one that maintains an internal environment which has a cultural system that demonstrate high levels of flexibility, adaptability, and is responsive to changes in the external environments. It is also the organization that maintains the tangible product in association with the core product in a manner that allows the organization to be portrayed as prominent thereby gaining a wide audience, especially if the products are geared towards the audiences needs.

     

    T

     

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