Missing Links: Next Generation Sustainable Supply Chains

June 2006 Volume IV Number 3

Net Contents
I. Network Presentation
Key Learnings
Perspectives

II. What’s New

III. The Women’s Network for a Sustainable Future
The Concept of the Network
Contact Information
Sponsorship Opportunities

I. Network Presentation
A big thank you to those who took the time to attend WNSF’s luncheon panel on May 16, 2006 entitled: “Missing Links: Next Generation Sustainable Supply Chains” hosted by Pfizer, Inc in New York City. The session featured speakers from Pfizer, PricewaterhouseCoopers LLP (PwC), and Time Inc. The panel discussed new pressures to proactively manage the impact of corporate product or process throughout the supply chain in innovative ways.

Key Findings

  • Corporations have been working to address risks associated with their business practices from suppliers (direct or indirect) to consumers, for decades.
  • In recent years supply chain management has moved beyond simple environment, health and safety compliance.
  • Companies are now under growing pressure to engage suppliers (both direct and indirect) in a more comprehensive way (e.g., Pfizer is working with its indirect suppliers of paper, furniture, and other items to procure “greener” products).
  • An increasingly popular tactic is partnerships with others facing similar risks to create “first mover” advantage (e.g., Time Inc is working with communities to expand certified forests).

Perspectives
Moderator: Ann Goodman, Executive Director, WNSF.

Speakers:

  • Elizabeth C. Girardi Schoen, Senior Director EHS Strategic Partnerships & Planning, Pfizer
  • Megan DeYoung, Senior Associate, Sustainable Business Solutions, PricewaterhouseCoopers LLP
  • David Refkin, Director of Sustainable Development for Time Inc.

Ann Goodman introduced the panel by reminding the audience of increasing pressures on companies to account for not only their own processes but also for activities of others with whom they do business, pointing out that panel speakers represent companies in many ways at the forefront of this challenge.

Elizabeth C. Girardi Schoen, Pfizer
Ms. Girardi Schoen said Pfizer, a $51 billion company dealing predominantly with human health care, has been managing EH&S issues for decades. While initially the focus was mainly the company’s own internal operations, Pfizer has been more recently looking to better manage risk throughout its supply chain.

As a member of the UN Global Compact, Pfizer is obliged to “embrace, support and enact, within its sphere of influence, a set of core values in the areas of human rights, labor standards, the environment and anti-corruption,” Ms. Girardi Schoen said. In addition, the company has adopted the Institute for Supply Management’s (ISM) principles on social responsibility. From these commitments stems Pfizer’s EH&S Supplier Model which first assesses the imminent risks associated with the company’s own operations and then focuses on compliance, risk and quality of direct suppliers. Pfizer has also been working on others supplies to seek greener alternatives that also save money such as paper and furniture suppliers.

Ms. Girardi Schoen then outlined the steps taken by Pfizer to manage its supply chain. First, EHS colleagues partner with sourcing colleagues who work with key suppliers. A review of some key suppliers’ ability to comply with EHS requirements is carried out. The company may identify ‘greener’ alternatives for some goods and or services or investigate supplier factories to learn how “lean & green” operations are. Based on these assessments, recommendations are provided to the supplier to improve operational and cost efficiency. Lastly, EHS capacity has been developed in low-cost producer countries.

In 1991, Pfizer created three guidelines dealing with: Management of Contract Manufacturing & Research Standard, Waste Management, and Environmentally Responsible Packaging. In 2002, it carried out an office supply analysis, a building renovation analysis and a building services analysis with a pilot test of office suppliers and services being performed in 2003. In 2004, Pfizer joined US EPA’s Green Supplier Network and initiated several projects, including an analysis of business travel, and a green building analysis and tool design. Among other things, during 2005 and 2006, Pfizer’s EHS Procurement Activities include the following:

  • Formalized EHS support structure and standardized roles and responsibilities
  • Recycled paper implementation in the US
  • Capacity building – China focus
  • Global Citizenship Principles
  • Food services contract
  • Green building standard
  • Individual folding cartons, bottles and cartons
  • Waste bid project and recycle work
  • Personal protective equipment
  • Supplier screening questionnaires, supplier information, and minimum criteria.

Megan DeYoung, PWC
As businesses seek to improve their cost competitiveness and expand globally, their supply chains are becoming more vulnerable to disruptions, adding another element to risk for companies, Ms. DeYoung said. Since “risks affect a company’s entire supply chain,” from suppliers to customers, in order to adequately manage these risk companies must improve “capabilities in their supply chain,” she said.

Ms. DeYoung described the two types of risk businesses usually face. The first is macro or environmentally driven risk which encompasses:

  • Natural and pathological disasters (earthquake, SARS, etc),
  • Infrastructure (power outage, computer virus attack),
  • Government action/regulation (new/changing regulations),
  • Political/social issues (political unrest),
  • Terrorism/war (Sept 11 attacks),
  • Economic disruptions (commodity prices, interest rates, etc). The second business risk is supplier- or supply chain-specific and involves:
  • Operational failure (accident, quality issues),
  • Demand volatility (technology change, etc),
  • Lack of visibility and control procedures (demand),
  • Financial stability (bankruptcy),
  • Security/intellectual property protection (security breach, counterfeit products),
  • Legal and regulatory compliance (non-adherence to contract requirements),
  • Labor issues (union strike, child labor),
  • Environmental issues (groundwater contamination, etc).

To demonstrate PWC’s Supply Chain Risk Management approach (picture below), Ms. DeYoung presented a case study that applied the PWC Supply Chain Risk Management Diagnostic to a major retailer. The objective of this project was to evaluate the company’s supply chain risks, or “events that could prevent the company from achieving its supply chain and overall business objectives.” A risk self-assessment was also administered to identify strengths and improvement opportunities. Recommendations were then developed.

The first part of PWC’s diagnostic evaluation involved interviews conducted with supply chain managers to explore the following areas:

  • Dismantling supply chain capabilities
  • Establishing supply chain capabilities
  • Procuring goods and services
  • Developing the supply chain strategy
  • Terminating supply chain relationships

PWC diagnostic covers the following areas of the value chain:

  1. Supply Chain Strategy
  2. Procure Goods and Services
  3. Establish Supply Chain Capabilities
  4. Operations
  5. Logistics
  6. Quality Management
  7. Social and Environmental
  8. Customs
  9. Tax
  10. Information Technology
  11. Terminate Relationships
  12. Dismantle Capabilities

For each module, interviewees answered 6 to 60 questions that had six potential answers:

  • No (risk rating = 5)
  • Almost No (risk rating = 4)
  • Neither Yes or No (risk rating = 3)
  • Almost Yes (risk rating = 2)
  • Yes (risk rating = 1)
  • N/A – Not Applicable (question removed from the total tally)

With this approach PWC was able to calculate the a total module score, indicating the level of risk faced by the retail company in each supply chain area

David Refkin, Time Inc.
Time Inc, the world’s largest magazine publisher with over 150 titles, said Mr. Refkin, is a part of Time Warner, the world’s largest entertainment company with $44 billion in revenues. Publishing magazines such as Time, Life, Fortune, People, and Sports Illustrated, Time Inc alone brings in almost $6 billion in annual revenue.

The issues faced by a magazine company, said Mr. Refkin, range from:

  • Forestry which encompasses certification, endangered forests, and supply issues
  • Manufacturing which includes pulping and bleaching
  • Magazine production ranging from issues of “basis weight”, printing, and distribution
  • Recycling which depends upon recovery and recycled content
  • Energy use focusing on minimizing usage and reducing GHG emissions.

Paper purchasing is the magazine company’s main concern, Mr. Refkin pointed out. The company purchases over 600,000 tons of paper annually from 53 mills, 26 located in US, 13 in Finland. The main wood baskets affecting Time Inc. are located in the US (Maine, Wisconsin, Minnesota), Canada (Quebec, British Columbia), and Europe (Finland, Scotland, and Russia).

Time Inc’s approach to sustainable development includes: reporting the company’s activities in an annual report, working with communities to secure certified forest wood, and incorporating transparency into forest management in Russia. Overall, said Mr. Refkin, sustainable development is seen as a business opportunity.

Time Inc.’s first sustainability report, published this year, highlights some of the company’s key results, including:

  1. Establishing a paper purchasing policy and helped form the Paper Working Group (an alliance of major paper purchasing companies)
  2. By the end of 2006 procuring 80% of paper from certified sustainable fiber.
  3. By 2005 reducing the weight of the paper that four weekly magazines (Time, People, Sports Illustrated, and Entertainment Weekly) are printed on by more than 8%, demanding less wood and reducing the company’s’ pressure on forests.
  4. Working with International Paper and the non-profit National Recycling Coalition to initiate a program to promote magazine recycling. Dubbed, ReMix–short for the slogan “Recycling magazines is excellent,” the program since its start in 2004, has resulted in an increase in recycling by 10.8% in Prince George’s County and 22.8% in Boston.
  5. Sponsoring a carbon footprint study measuring the amount of greenhouse gases (carbon dioxide, methane and nitrous oxide) released by every aspect of the lumber, paper and magazine industries – from the harvesting of wood to the “final fate” of the magazine (whether it is recycled, dumped in a landfill or incinerated). Since 1999, Time has not bought any paper bleached with chlorine gas.

Mr. Refkin also highlighted lessons the company has learned in its journey thus far, including:

  • Understand The Issues – Get a broad range of opinions
  • Find Paradigm Pioneers – Look for transferable learnings
  • Get On The Ground…And Out of The Office – Talk to those directly impacted
  • Transparency And Honesty matters- Even if it hurts
  • Reward LeadershipFind Responsible NGOs To Collaborate With – They’re out there
  • Set Stretch Targets – Progress doesn’t happen without them

II. What’s New

  • The next WNSF panel, “Missing Links: Next-Generation Sustainable Supply Chains,” to be hosted by Pfizer Inc., will be held from noon to 2pm at Pfizer, 235 E. 42 St., NYC. Featured will be speakers from Pfizer, Time Inc. and PriceWaterhouseCoopers. To register, go to: http://www.wnsf.org. Look for email invitations!
  • By popular demand following the success of the February roundtable, Deloitte and WNSF plan to collaborate on a series of sessions on metrics. Slated to being next fall, each session would focus on a key aspect of sustainability metrics (community, people, environment, economy). Look for emailed invitations and an announcement on the WNSF website!
  • Read WNSF’s thoughts on businesswomen and social issues in ‘Women on the Edge,’ in the December ‘05 issue of Jungle MBA magazine (jungleonline.com).

III. The Women’s Network for a Sustainable Future
The Concept of the Network

The Women’s Network for a Sustainable Future (WNSF) provides a forum for businesswomen to congregate, reflect, and act on the convergent issues of corporate social responsibility and sustainable development. Through meetings, training and simple electronic support tools, WNSF facilitates the exchange of experiences and best practices, building a community of businesswomen who can serve as powerful change agents for corporate responsibility sustainability in the US and internationally.

The Women’s Network for a Sustainable Future is a 501c3 organization. Gifts are tax deductible.

For more information, please contact:

Ann Goodman, Executive Director
Women’s Network for a Sustainable Future
Please direct inquiries to: info@wnsf.org

Board of Directors:

CHAIR: Kathy Robb, Esq., Partner and Head of Environmental Practice, Hunton & Williams; Dianne Dillon Ridgley, Director, Interface Inc. Board; Karen Flanders, Director of Sustainability, Coca-Cola Co.; Joanne Fox-Przeworski, Director, Bard Center for Environmental Policy, Bard College; Ann Goodman, Executive Director, WNSF; Sarah Howell, Director, Corporate Communications, BP; Michele Kahane, Special Projects Director, Center for Corporate Citizenship, Boston College; Clair Krizov, Executive Director of Environmental and Social Responsibility, AT&T; Joyce La Valle, Senior Vice President, Interface Inc.; Anita Roper, Director of Sustainability, Alcoa Corp.; Deborah Sliter, Vice President of Programs, National Environmental Education & Training Foundation.

This issue of Net Notes was written by Monika Kumar and edited by Ann Goodman. WNSF thanks founding sponsors AT&T and the Ford Foundation for their generous support.

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