Sustainability in Global Supply Chains - Information and Guidance for Companies econsense Discussion Paper
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Sustainability in Global Supply Chains Information and Guidance for Companies econsense Discussion Paper
Publisher/Editor: econsense – Forum for Sustainable Development of German Business Oberwallstraße 24, 10117 Berlin Phone: +49 (0)30 – 2028 -1474, Fax: +49 (0)30 – 2028-2474 E-Mail: info@econsense.de Project management: Dr. Karsten Schröder 1st edition © 2013 by econsense All texts and images used in this brochure are protected by copyright. Any use of texts and images is only permissible after obtaining express permission from econsense. econsense is an association of leading, globally active com- objective of advancing sustainable development in business panies and organisations of German business specializing in and assuming social responsibility. The econsense project the area of sustainable development and corporate social group “Sustainability along the Supply Chain” has worked responsibility (CSR). Founded in 2000 on the initiative of the successfully for many years together with internal and external Federation of German Industries (BDI), the goal of econsense experts on the various challenges involved in the promotion of is to provide a dialogue platform and think tank, with the sustainable supply chains.
Sustainability in Global Supply Chains
Development of requirements
Summary
and expectations in supply chain
Many of the challenges and opportunities
management
associated with corporate sustainability cannot
be tackled by individual companies on their own – Corporate sustainability requires companies to take into
but only by collaboration along the global supply consideration the environmental and social consequences
chain. This co-operation requires a general of their core business operations as well as implement and
consensus on the key aspects of corporate maintain good corporate governance. This involves various
sustainability. aspects of corporate environmental protection, safeguarding
the interests of employees, and combating corruption, amongst
The members of econsense – Forum for Sustainable
other things.
Development of German Business – hope that
Corporate sustainability has already been incorporated on a
this brochure can contribute to foster this consensus
broad basis in transactions involving supplier selection and
and facilitate the dialogue on sustainability
co-operation. This is mainly attributable to the growing
along the supply chain.
awareness that the environmental and social challenges
The brochure presents the consensus of the associated with business operations along the supply chain
econsense members on the key aspects of corporate cannot be solved by individual companies but only via co-
sustainability in global supply chains. operation with business partners. Companies, and their
It is closely aligned with recognised international purchasing departments in particular, have to tackle this chal-
standards. The brochure is intended in particular lenge by working together with their suppliers to ensure that
for companies which have not yet established certain environmental and social standards are maintained
along the entire supply chain. Many suppliers are therefore
a systematic sustainability management system,
requested by their clients to verify their compliance with
with the aim of helping them to anchor sustainability
certain environmental and social standards. The information-
in their core business. For practical implementation,
gathering process frequently involves filling in questionnaires
however, companies should complement the or standardised exchange of data via online platforms. Such
guidance provided by this brochure with the more activities can mean additional work and expenses for sup-
concrete requirements of their business pliers, especially if they are not yet prepared accordingly.
partners and stakeholders.
Transparency and sustainability
‘inhouse’ and along the
supply chain
Many companies have been doing what they can volunta-
rily to fulfil their environmental and social commitments for
quite some time now. However, the willingness to tackle
these issues ‘inhouse’ as well as along the supply chain
has increased significantly in recent years in response
to evolving framework conditions (e.g. politics, changing
values, etc.) and strategic orientation of companies. These
developments are discussed briefly in the following:
Evolving framework conditions and expectations
of external stakeholders
• The environmental and social framework for business
has become much more stringent in recent years on all
political levels. For instance, companies are being assigned
increasing responsibility to ensure that their suppliers
comply with human rights conventions, (e.g. UN Guiding
Principles on Business and Human Rights, or ‘Ruggie
Information and Guidance for Companies 3Framework’) or the regulations governing the extraction of • Anchoring environmental and social principles within
natural resources (e.g. Dodd-Frank-Act) 1. Furthermore, the corporate strategy has in many cases proved to be an ef-
EU is planning to expand financial disclosure of medium fective measure for minimising risks for the company and
and large-sized European enterprises to “non-financial helping its business activities proceed more smoothly.
information” (i.e. environmental and social risks and oppor-
tunities). The objective of such measures is to broaden
the sphere of responsibility of companies to the supply
Sustainability in global supply
chain. It is expected that the regulatory framework will be chains: “Orientation aid” for
modified further in the near future in response to urgent companies
global challenges (e.g. climate change, natural resource
shortages, and demographic change). Companies of all sizes face the challenge of satisfying the
• Civil society / NGOs and media are closely monitoring the rising expectations with regard to transparency and sustaina-
environmental and social impact of business activities on bility. However, international and cross-sectoral processes
the national and international level. Actual or assumed and systems for the necessary exchange of sustainability-
deficits are frequently sanctioned with public criticism and related data along the supply chain are not yet available to the
the associated loss of reputation. In this situation it is not required extent.
enough for a company to merely point out that its activities These observations motivated econsense to develop a joint
are all being carried out on a “legal” basis. Companies are “orientation aid”. This “orientation aid” represents a consen-
now coming under increasing pressure to establish their sus of the econsense member companies on the key aspects
“legitimacy” (licence to operate) and their social accep- of sustainability in global supply chains which need to be
tance by virtue of their responsible actions. discussed and verified with suppliers in the context of sus-
• The expectations of financial market actors with regard tainability management. The content is closely related to
to corporate sustainability performance are growing con- recognised international standards such as the ILO Core
stantly. Because many investors consider the future viabi- Labor Standards (International Labor Organisation), the Ten
lity of a company to be associated with its attitude towards Principles of the UN Global Compact, and the OECD Guiding
environmental and social risks, the implementation of Principles for Multinational Companies.
a systematic sustainability management is already today The aim of the “orientation aid” is to establish a basic con-
rewarded by – for instance – lower cost of capital. sensus amongst large and smaller companies on corporate
• The purchasing behaviour of consumers has gained consi- sustainability in a global context, and to simplify dialogue on
derably in importance in recent years. New sales opportu- sustainability along the supply chain. In particular, it can
nities can be generated by fair and responsibly produced assist companies which have not yet established a systematic
products, whilst products which consumers associate with sustainability management system in integrating sustainability
high environmental and social costs are increasingly seen into their business activities.
as a burden on the market. Changing consumer behaviour The degree to which each of the elements is implemented by
has also an impact on upstream value chain steps since companies depends on various factors including the size of
procurement departments attempt to minimise the asso- the company, the particularities of the sector, and the require-
ciated environmental and social costs of purchased mate- ments of customers and stakeholders. The “orientation aid” is
rials and components. aimed at providing companies with initial information and
guidance which can then be complemented by more concrete
Strategic orientation of companies:
requirements tailored to the company’s business partners and
The rewards of corporate sustainability
stakeholders.
• Sustainability and responsible business conduct have a
The “orientation aid” includes five categories: three thematic
strong positive effect within a company. In fact, these
categories (environment, social and human rights, as well as
are among the key factors for the attractiveness of an
corporate governance) and two process-related categories
employer in the eyes of current (> motivation) and future
(management process, monitoring and results).
(> acquisition of new talent) employees – and therefore
for the company’s future competitiveness.
• Product development and marketing/sales can benefit
substantially from the integration of sustainability into
corporate strategy. Leading companies have demon-
strated how a focus on sustainability can stimulate 1 Section 1502 of the Dodd-Frank-Act of the US Securities and Exchange Commis-
innovation and create an impulse for developing new sion requires all companies listed in the USA to report on the extent to which their
products contain certain natural resources from the Democratic Republic of the
markets. Congo or neighbouring regions. Companies in other countries are also affected via
subsidiaries or customers listed in the USA which pass on the required verifica-
tion of origin to their suppliers.
4Sustainability in Global Supply Chains
„Orientation Aid“
for Corporate Sustainability
Thematic categories Process-related categories
Social issues and Management Monitoring
Environment human rights Governance process and results
• Environmental • Social standards • Management • Management • Certification
protection and working roles and systems
• Documentation,
conditions responsibilities
• Climate • Escalation and monitoring and
protection • Health and • Management development pro- reporting
safety pledge cess in case of
• Resource • Sanctions
violation of rules
efficiency • Social impact • Anti-corruption
measures • Employee
• Hazardous trainings
substances
• Passing on of
• Plant and principles to the
transport safety supply chain
Environment Additional information:
This category is concerned with the protection of the envi- ProgRess – German Resource Efficiency Programme
ronment, the climate and natural resources. www.bmu.de/fileadmin/bmu-import/files/pdfs/allgemein/
• Corporate environmental protection includes aspects application/pdf/progress_en_bf.pdf
such as the implementation of environmental guidelines, re- UN Global Compact: Caring for Climate
cycling systems, pollution prevention, and barring unautho- (Voluntary initiative for companies)
rised materials from products and production processes. www.caringforclimate.org
• Corporate climate protection includes aspects such as Carbon Disclosure Project
defining targets and measures for the reduction of green- (Initiative for publishing information on e.g. greenhouse
house gas emissions. gas emissions and water consumption)
www.cdproject.net
• Resource efficiency in the handling of materials, energy
and water requires the development and implemen- REACH (EU chemicals directive)
tation of targets and measures for saving and recycling www.echa.europa.eu/web/guest/regulations/reach
resources (reduce, reuse, recycle). European road map for a resource-efficient Europe
• The use of hazardous substances requires careful identi- www.ec.europa.eu/environment/resource_efficiency
fication, storage and handling, as well as measures to re- WBCSD Greenhouse Gas Protocol
duce the use of toxic substances. (Standard for recording greenhouse gas emissions)
• Plant and transport security is concerned with authorisa- www.wbcsd.org/work-program/capacity-building/ghg-
protocol.aspx
tions and clearly regulated responsibilities, as well as the
definition of clear instructions for specified normal opera-
tion of all installations.
Social issues and human rights Additional information:
This category addresses the responsibility of companies with ILO Core Labor Standards
regard to employees as well as society as a whole. www.ilo.org/global/standards
• Maintaining social standards and working conditions in- ILO Occupational Safety Programme
cludes aspects such as complying with minimum wage www.ilo.org/safework
levels and regular working hours, as well as measures to
UN Guiding Principles on Business and Human Rights
avoid and sanction violations of human rights (including www.business-humanrights.org
child and forced labour), and discrimination against em-
ployees with respect to ethnic origin, skin colour, sex,
Information and Guidance for Companies 5religion, political opinion, national origin, or social back-
ground. Companies should orientate their conduct to codes UN Global Compact: 10 Principles
of ethics or standards such as the ILO Core Labor Stan- (Voluntary code and initiative for companies)
dards, the UN Guiding Principles on Business and Human www.unglobalcompact.org
Rights or the UN Global Compact. BMU – Brochure on Risk Management and CSR
(in German)
• Responsible occupational health and safety includes that
www.bmu.de/fileadmin/bmu-import/files/pdfs/allgemein/
workplaces satisfy legal requirements and the usual in-
application/pdf/broschuere_csr_veranwortung_bf.pdf
dustry standards.
• The impact on the social environment can be determined
and improved by measures such as undertaking regular
risk and acceptance assessments and by implementing
appropriate measures.
Governance Additional information:
This category deals with the responsibility of senior manage- BME Code of Conduct and Compliance Initiative
ment for anchoring sustainability in a company’s core busi- www.bme.de/Code-of-Conduct.44959.0.html
ness activities.
IDW PS 980
• The management responsibilities for anchoring sustain- (Testing standard for compliance management systems)
ability in the company’s core business must be clearly www.idw.de/idw/portal/d589242/index.jsp
defined. This includes aspects such as appointing an exe-
World Economic Forum – Partnering Against Corruption
cutive responsible for CSR and sustainability. (Corporate anti-corruption initiative)
• A key role is also played by an unequivocal management www.weforum.org/issues/partnering-against-
pledge to assume social and environmental responsibility corruption-initiative
and fighting corruption. Transparency International
• Fighting corruption successfully requires the establish- (NGO focusing on transparency and corruption
ment of effective systems and the implementation of prevention)
suitable measures on all levels. www.transparency.org/topic/detail/private_sector
Management process Additional information:
This category focuses on the processes and systems involved in
ISO 26000 (Corporate Social Responsibility Guidelines)
corporate sustainability management. www.iso.org/iso/home/standards/management-
• A systematic sustainability management is supported by standards/iso26000.htm
management systems, standards and guidelines. ISO 26000 OHSAS 18001 (Occupational Health and Safety
provides a comprehensive overview of corporate sustain- Management System)
ability (without being a certifiable standard). With respect www.ohsas-18001-occupational-health-and-safety.com/
to environmental issues, environmental management sys-
ISO 14001 (Environmental Management Standard)
tems such as ISO 14001 or comparable systems have www.iso.org/iso/iso14000
proven successful. Management systems such as OHSAS
18001 or comparable standards cover occupational health EMAS (EU Eco-management and Audit Scheme)
www.emas.de/meta/english-summary
and safety aspects. Risk management systems have also
proven helpful in this context. SA 8000 (Social Accoutability)
(Standard for social and working standards)
• Escalation and development processes can provide assis-
www.sa-intl.org/
tance when deviations from the standards defined by a
company are identified. This includes the development of
systems and instruments for undertaking regular auditing
and correction measures.
6Sustainability in Global Supply Chains
• Doing business responsibly and sustainably requires
the involvement of the whole workforce and can be pro- BMU – Brochure on Risk Management and CSR (in
moted by measures such as employee training on the German) (see chapter “Social affairs and human rights”)
environment, social affairs, codes of conduct, safety
and conduct during emergencies. Regarding “supply chain”:
• Purchasing departments play a central role in corporate Business Social Compliance Initiative – BSCI
www.bsci-intl.org/
sustainability management. Sustainability principles spe-
cified by a company can be successfully transferred to UN Global Compact – Sustainable Supply Chains
organizations along the supply chain by taking into consi- www.unglobalcompact.org/Issues/supply_chain/index.
deration environmental and social aspects when selecting html
new and developing established suppliers.
Monitoring and results Additional information:
This category addresses the monitoring and documentation BMU Risk Management and CSR (in German)
of corporate sustainability. (see chapter “Social affairs and human rights”)
• In addition to internal monitoring with the help of suitable Global Reporting Initiative (Voluntary reporting standard)
processes and systems, verification of a sustainability www.globalreporting.org
management system can in many cases be provided by
EFFAS-DVFA (Voluntary reporting standard)
certificates and verifications. www.effas-esg.com
• Reporting on sustainability in a company’s core business
German Sustainability Code
has proven in many cases to have positive internal and ex- (Voluntary reporting standard)
ternal effects. However, it requires a continuous internal www.nachhaltigkeitsrat.de/en/home
and external documentation of relevant measures, targets
UN Global Compact “Communication on Progress”
and metrics.
(Voluntary progress report)
• Credible and efficient sanctioning of violations against www.unglobalcompact.org/COP/index.html
standards and procedures defined by a company can be
Carbon Disclosure Project
guaranteed by establishing suitable systems and processes (Investor initiative for publishing greenhouse
on all levels of the organization. gas emissions)
www.cdproject.net
Practical implementation
This “orientation aid” is intended to provide companies a customers are specifically looking for in terms of sustaina-
starting point to develop their own sustainability strategy and bility and pass this information on to the responsible officers
to successfully meet the increasing expectations with regard within the company. The purchasing department should talk to
to transparency. If an appropriate strategy is already in place, suppliers about complying with environmental and social
the “orientation aid” may provide a useful benchmark of rele- standards in order to minimise reputational risks and interrup-
vant aspects. tions in the supply chain.
The references and links listed in this “orientation aid” refer to Informing their customers, employees, as well as the general
detailed information on the individual sustainability aspects. public on concrete activities undertaken to enhance sustaina-
In addition, business associations and sustainability initiatives bility and minimize negative external effects has proven bene-
can provide assistance to interested companies. ficial to many companies. The publication of sustainability
Close co-operation with business partners along the entire reports is a particularly useful measure in this context.
supply chain is crucial for the development and implementa- econsense is available for discussions with interested com-
tion of appropriate sustainability measures. The sales and panies and institutions on the aspects of corporate sustaina-
marketing department, for instance, should monitor what bility presented in this “orientation aid”.
Information and Guidance for Companies 7You can also read
