From MiBiz , Published 26 April 2015
West Michigan OEMs have started to spread their first-hand knowledge on sustainable business practices throughout their supply chains to help shorten the learning curve for their suppliers.
But that sharing of best practices can come with a catch, as many OEMs have started mandating their suppliers adopt many of the same processes and develop reporting procedures to track their efforts or face the possibility of losing their existing contracts and future business.
While many low-hanging sustainable business practices helped firms stay ahead of regulations and focus on eliminating wasteful processes, more sophisticated measures are now becoming a necessity for companies of all sizes that do business with the automotive and office furniture industries, among others.
“There are larger impacts that are being had when companies mandate sustainability. That’s most obvious among local manufacturers,” said Dan Schoonmaker, director of the West Michigan Sustainable Business Forum (WMSBF). “I think suppliers are definitely trying to forward their own initiatives, but for the most part, they’re marching to the beat of what those customers demand.”
The problem: While suppliers may be faced with increased demand from their customers to enact sustainability practices, many of them lack the resources or the capacity to adopt those practices on their own.
That’s led WMSBF to create a pilot program with the Grand Rapids-based Sustainable Research Group LLC , whose CEO, Bill Stough, proposed the project. The program is dedicated to educating current professionals in companies that don’t emphasize sustainability practices with the hope that they will then have the tools to begin a program within their organizations, Schoonmaker said.
“On my end, it’s providing an access point to conversations that have become fairly sophisticated at this point,” Schoonmaker said. “There’s a significant amount of internal knowledge about sustainability practices, and it can be daunting to start these efforts up.”
While the details of the program were still being worked out at the time this story went to print, WMSBF plans to include approximately 15 students in its inaugural class, Schoonmaker said. The class will participate in a series of classroom activities, guest speakers and tours of sustainable facilities over the course of a year.
Schoonmaker expects that most of the participants in the program will “self identify” within their companies and reinvent their current role to be more focused on sustainability. The program is also open to professionals who work in all types of industries.
The philosophy of carving out sustainability positions for employees who currently work in other areas of the company has its merits, said Eric Saigeon, sustainability manager for the USA and Canada at Intertek Testing Services NA , a global product testing facility with offices in Grand Rapids.
Before graduating from Aquinas College ’s Sustainable Business program in 2012, Saigeon worked as a sustainability intern in the company’s furniture division. Seeing the increased demand for sustainability practices among the companies whose products Intertek tested, Saigeon crafted a proposal to join the organization full-time as the North American sustainability manager for its internal operations. He was later promoted in May 2013.
At the time, the company had one staff member across its entire global operation that worked in sustainability, he said. Two years later, most of Intertek’s largest customers have expanded their requirements for sustainability beyond their supply chain and are now expecting all companies that help take their product to market to have sustainability programming in place.
“We’re getting more requests to be in accordance with their values,” Saigeon said. “I think that’s going to increase and that there’s going to be more need for companies that weren’t previously part of the sphere to be in there.”
Supply Chain Accountability
As OEMs continue to push sustainability down the supply chain, they are engaging in new ways with those suppliers to help meet the requirements and institute new programs.
To help its suppliers meet its benchmarks, Herman Miller Inc. (Nasdaq: MLHR) assigns a handful of its supply chain management team to spend about a third of their time to assist key outside partners in implementing sustainability programs, said Gabe Wing, director of safety and sustainability at the Zeeland-based company. At times, Herman Miller’s suppliers share their own practices.
“It’s definitely a two-way street,” Wing said.
Herman Miller recently collaborated with a local web development group to create a portal that would allow suppliers to enter sustainability-related data efficiently into a database. The new method takes the place of maintaining spreadsheets and will allow Herman Miller rapid access to the data. It also decreases its response time to address any issue that crops up along the supply chain, Wing said.
The furniture company incorporated its new Earthright standards in 2014, outlining the company’s direction for the next decade. Those standards have since become the benchmark for its supply chain partners, Wing said.
“We learned that if we wanted to move the needle on sustainability, we had to have our supply chain involved,” Wing said. “Now, most of our sustainability efforts take place along the supply chain.”
The new goals include achieving zero waste across all facilities, consuming 50-percent less water and cutting energy intensity in half, among others. Currently, 75 percent of the company’s direct suppliers have adopted the Earthright goals in practice, but haven’t committed to achieving them in the same 10-year period, Wing said.
A supplier’s performance in sustainability metrics accounts for 20 percent of its total evaluation with the company, Wing said. If those expectations for sustainability are not met or if the supplier scores too low, it is not eligible for new business.
Those strategies on top of its internal procedures translate into a six-figure cost savings for Herman Miller, Wing said, declining to disclose the exact figure.
“We figured out how to pursue this in a way that makes sense for our business. This is not a philanthropic exercise. It’s about driving growth,” he said.
Pressure From Above
It’s not only pressure from OEMs that’s driving sustainability down the supply chain. Retailers such as Wal-Mart, Target and Kohls all require companies with products on their shelves to fill out detailed sustainability score cards, said Dave Aupperlee, senior product safety and regulatory affairs manager for Bissell Inc. in Grand Rapids.
“We’ve found that our bigger retail customers are instituting sustainability programs and are pushing them down to us,” Aupperlee said. “If you take someone like Wal-Mart with their hundreds of thousands of suppliers, their scale makes even the smallest changes with suppliers significant.”
In particular, the larger retailers have stressed a focus on greenhouse gas emissions and Bissell has filtered similar requirements down to its suppliers, Aupperlee said. The company also regularly audits and monitors the amount of waste its suppliers send to the landfill and their water and energy use.
“We are encouraging them to look for reduction because that’s how we’re going to meet our goals,” Aupperlee said.
But unlike in the furniture industry, retailers have a “patchwork” of sustainability requirements for various consumer products and lack a specific program that would make Bissell’s due diligence and benchmarking more efficient, Aupperlee said.
Currently, the Association of Home Appliance Manufacturers (AHAM) has developed the closest framework for universal sustainability standards, Aupperlee said. The organization created end-of-life, energy use, emissions and other requirements for home appliances based on a variety of product categories.
Overall, OEMs and retailers will likely continue to require companies to adopt increasingly stringent sustainability standards as they look to shed excess expenses from the supply chain and meet consumer demand for green products, sources said.
“You want everyone in your supply chain to be efficient,” Wing of Herman Miller said. “The more value we can deliver to our shareholders, the better it is for us. It’s a no-brainer to invest in our suppliers.”
For additional reading regarding sustainability and the supply chain, please refer to the following links:
The Need to Optimize an Organization’s Supply Chain
Benchmarking Climate Change Performance Across Supply Chains
Join the Growing Supply Chain Trend on Voluntary Carbon Disclosure to CDP
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