Improving supplier business models

How is it done, and what are the results?

Tobias Webb, Stakeholder Intelligence

Why help suppliers improve? • Companies under increasing

pressure on supply chain ethics • Horsemeat scandal, Bangladesh

factory fires, slavery disclosure rules, Uzbek cotton campaign, all driving business action

• Audits only have limited value • Supplier engagement today has

much stronger business case

What do we mean by ‘improve’? • Achieve goals by alternate

means. For example: • To stop factory fires, teach

managers how to run a better factory

• Brands using “lean” to achieve ethical gains: Better management = less accidents

Innovative factory engagement training

So what’s the business case? • Factories with better

management have fewer ethical breaches = less bad headlines

• Fields with better management are more productive: More units…

• Reputation with NGOs and Media stakeholders improves

• Employees stick around! (China)

Dole Foods uses SA8000 to improve productivity

Golden Agri Resources • Large controversial Indonesian Palm

Oil Company • Campaigned against by NGOs • Struck deal with pressure from

Nestle, Unilever, with Greenpeace and TFT

• Committed to zero deforestation footprint & RSPO membership by 2015. Won back customers.

• Share price rose as a result “No deforestation” commitment: Now extended to pulp & paper Sister company APP in Feb 2013

Coca-Cola Enterprises • EU bottling/distribution arm of

Coke. • Engages suppliers, holds annual

awards, encourages eco-innovation, offers support

• Shares results and best practice • Reducing supply chain impact

year after year: Cutting carbon, emissions and costs

Waitrose, UK supermarket • Assisted vegetable supplier Barfoots

• Barfoots reduced waste by 30,000 tonnes, Removed 3000 tractor journeys from local roads

• Anaerobic digestion plant offsets 3200 tonnes of carbon per annum

• Ultra violet light technology eliminated the use of water during sweetcorn cleaning

PepsiCo cuts carbon & water • PepsiCo: Helped farmers with direct

rice seeding in India cut water by 30% and carbon by 70%

• Engaging farmers in EU to reduce carbon footprint

• Drip irrigation only 1% of global irrigation, yet highly efficient

• Clear business case to improve roll-out of drip irrigation: Cuts water use

Direct rice seeding saves resources

Conclusions • The business case is slowly evolving • Most companies still see suppliers as

a cost, not an opportunity • Only a few understand that

engagement is better than audits • Audits cheap: Engagement less so • Precise financial results hard to find.

Ethical/environmental gains clearer

Audits have limited value

Conclusions • Pilot projects/case studies have

delivered excellent results • Scaling these and sharing

knowledge is a major brand challenge

• Technology seen as major solution: Better, smarter systems

• Innovation coming from emerging markets: India, Turkey, China etc

Tesco: Funding supplier technical training

Conclusions: How can big business help? 1. Access to technical

knowledge 2. Best practice sharing 3. Financing 4. Longer term contracts 5. NGO partnership

brokering

PepsiCo’s Icrop technology helps farmers

Want to know more?

This presentation is part of the online CSR training course “Getting to Grips with CR” which can be found at http://www.getting-to-grips-with-cr.com and

features more than 100 training videos and discussions on global CSR for members.

The course is currently taking place with 70 managers around the world

taking part. The next version will begin in September 2013. For more info or to sign up contact: Stefan.Jensen@stakeholderintel.com