As sustainability and good environmental practices become the cornerstone of doing business in the developed world, the message from big-ticket retailers like Wal-Mart, Tesco, and IT majors like IBM to their army of suppliers of anything from apparel to computer hardware in India is becoming clear let’s together shape up or else.
For example, “IBM, which had a revenue of Rs 12,000 crore from its India office in 2008-2009, is clear that it would stop sourcing from the country if it comes to that (supply chains dont fulfill sustainability requirements),” says Wayne Balta, vice-president, Environmental Programs and Product Safety, IBM. But, he adds, the objective is to help suppliers succeed.
Suppliers, on their part, are taking cognizance of the emerging green order. Rahul Kulkarni of Mumbai-based Alliance Foods, an exclusive supplier for a frozen food category to Wal-Mart, says: “There would be a rethink from the perspective of capex/opex allocation to the introduction of newer technologies and management practices that need to be built in order to achieve a desirable environment-friendly standard.” He is just one of the 1,700-odd suppliers in India from whom Wal-Mart sources goods ranging from textiles to apparel, leather accessories, fine jewelry and houseware. Their number is likely to grow as the retailer pursues its aim to source goods worth $1 billion in a couple of years from the country.
Achieving these expectations is not like simply turning on a switch. It may take a little time. “Our objective is to help our suppliers build their own capacity to succeed with these responsibilities and to accept corresponding accountability,” adds IBMs Balta.
Appreciating the concerns of suppliers, Wal-Mart is focusing on educating them on the benefits of sustainability, communicating that greening the supply chain is not only good for the environment but also makes sound economic sense. Says Raj Jain, president, Wal-Mart India and MD & CEO, Bharti Wal-Mart: “Efficiencies in transportation, energy consumption and storage will reduce costs for wholesalers and retailers, who in turn, can reduce prices for consumers, thereby saving them money.”
While Wal-Mart is planning to cut emission of 20 million metric tonnes of greenhouse gases (GHGs) of its 100,000-plus global suppliers by 2015, IBM requires its 28,000 first-tier suppliers spread over 90 countries to follow a management system by 2011 to record how they are discharging their environmental responsibilities .
Wal-Mart has been watching sustainability practices of its suppliers for quite some time now. In addition to other environmental initiatives, the retailer is already working on developing a sustainable products index, which will be built on a survey of its one lakh suppliers worldwide, focusing on energy & climate, material efficiency, natural resources, and people & community. Stating that the survey responses will be accepted in good faith, the companys policy on sustainability supplier assessment points out: Violation of that good faith will be considered very serious by Wal-Mart.
“Similarly, IBM requires all of its global suppliers to define and deploy a formal management system for corporate responsibility and the environment that fits their business operations, to set voluntary goals for improvement and to measure corresponding performance, and to publicly disclose results,” says Balta. The first-tier suppliers are, in turn, expected to pass on the practices to their suppliers. Some have already started acting on those lines. Ranjini Poddar, president, Artech Information Systems, a first-tier IBM supplier, which operates out of America/India is planning to comply with the requirements: Now, were planning to do the same thing with our suppliers.
Wal-Mart and IBM are not alone. Companies like HP, Dell and Tesco are also pursuing the same path and engaging their suppliers on sustainability. HP has introduced a global goal to reduce GHGs to 20% below 2005 levels by 2013. Saying that they would achieve this goal by working within their own business and others, Neelam Dhawan, managing director, HP India, adds: “We have not only requested our first-tier suppliers representing more than 80% of our total product manufacturing spend to report company GHG emissions, but also started work with them to approach their suppliers in a similar way. Its important for HP because its aggregated supply chain GHG emissions are more than twice its own emissions from operations.”
Dell too is helping its suppliers reduce their emissions. Saying that Dell requires its primary suppliers to disclose emissions data and set improvement targets, Mahesh Bhalla, executive director and general manager, Consumer Division, Dell India, adds: “A suppliers volume of Dell business can be affected by the scores earned on these reviews.”
Similarly, Tesco, which is UK s biggest retailer, aims to become a zero-carbon business by 2050. Saying that they want to cut their own carbon footprint and help suppliers and customers do the same, a Tesco spokesperson says: Were working with the Consumer Goods Forum (a global network for shoppers) to reduce the carbon impact of consumer behaviour all the way through our supply chain by 30% by 2020 (to begin with). Tesco sources goods, mostly apparel and grocery, worth more than $300 million annually, from India .
And the trend seems unstoppable. Saying that Wal-Mart may be the most conspicuous among the big-box retailers that have been rattling their supply chains with tightening specifications in areas like the environment, John Elkington, founder of SustainAbility, a consultancy, which has worked with Wal-Mart, adds that many others are cranking up in this area and the trend would spread.
Looking into the future, Elkington, who has given the concept of triple bottomline of people, planet and profit, says: “Over time, it will be easier (for MNCs) to cascade tough requirements through supply chains to remote geographies than to incur the social and political repercussions closer to home. And market gatekeepers like supermarkets and other retailers alongside mainstream manufacturerswill bring more pressure (on supply chains) to bear over time, not less.”
Source: The Financial Express
Published on 21 May 2010