Mega-Challenge: Radical Supply Chain Transparency
Andrew Winston in his new book ‘The Big Pivot‘ broke down the vast challenges of a fundamentally changing world into three mega-challenges:
- climate change
- resource constraints and rising commodity prices
- technology-driven demands for more (radical) transparency
On the third mega-challenge he laid out how companies can use openness to engage in real dialogue with their customers and their suppliers. Radical transparency creates a compelling rationale for greatly improving performance. It allows to stay competitive in an open world, make better products and improve working conditions.
Among the list of examples our collaboration with Walmart and TSC was mentioned as a leading showcase. Walmart now gains new transparency and insight into its upstream supply chain, improving the chances of not being surprised by disruptions, and a new form of collaboration with its suppliers.
Within the last couple of weeks we shared the stage with our collaboration partners Walmart and TSC three times. At the recent Walmart Sustainability Product Expo 2014 in Bentonville, and last week parallel at SAPPHIRENOW in Orlando and Sustainable Brands’14 in San Diego.
The goals Walmart set out are simple:
- to be supplied by 100% renewable energy
- zero waste
- sell products that sustain people and the environment
Here is the problem: While being the biggest retailer in the world with, 90% of Walmarts footprint is in the supply chain. (Walmart has 200 million customers, 100,000 Tier 1 suppliers, 2.1 million employees, and 10,000 stores)
Walmart is now generating a sustainability index per supplier per product category. The index is based on KPIs from The Sustainability Consortium (TSC), a multi-stakeholder group creating a new sustainability measurement system for the consumer goods industry. The TSC toolkits are accessible through the SAP store, and the SAP Product Stewardship network (SAP PSN) is the online network allowing the collaboration between Walmart and their suppliers to take place. Meanwhile more than 100 product categories are made available by TSC, and a couple of thousand suppliers already on-boarded using the network.
What is remarkable is that every Walmart professional buyer has sustainability goals based on index measures as part of his and her objectives, giving a real incentive to the buy-side as well as to the supply-side to constantly improve.
By the end of 2017, Walmart will buy 70 percent of the goods it sells in U.S. stores and in U.S. Sam’s Clubs only from suppliers around the world who use the index to evaluate and share the sustainability of their products. Walmart will also use the index to influence the design of its U.S. private brand products.
The first question that came up from the audience during the panel discussion at Sustainable Brands in San Diego: “What is holding us back to use this approach everywhere?”
Answer: Nothing. We need to spread the news, we need to explain why this is not only a value proposition for the buy side but also for the supply side. We need to show that everybody benefits from this approach. For the first time suppliers now have the opportunity to benchmark themselves against rest of the industry on sustainability data, and for the first time reuse of existing answers to surveys is possible. All partners have the intention to make this a movement across industries.
So we followed up with a Design Thinking session at Sustainable Brands ‘14 asking the questions:
- What if organizations of all sizes could source in a way such that 100% of the $5 trillion in global procurement gets sustainably sourced?
- Why $5 trillion? Because that is the current global commerce spend for sourcing and procurement (out of $12 trillion total global commerce)
- Why global procurement? Because for many industries the vast majority of their footprint lies in the supply chain. So if you want to make a difference, thats where you need to go.
We had retailers, suppliers, regulators and NGOs in the session. It was well received. Even the African Wildlife Foundation participated.
Back to the question: What is holding us back?