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Posts tagged 'environmental impacts'

Full product transparency: The future of reporting

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Good corporate reporting is based on the principles of accountability and transparency. When reporting on sustainability, this transparency is greatest when focused at product level. After a decade of corporate responsibility (CR), FPT heralds a new era for reporting. With many – and often most – environmental impacts occurring outside a company’s boundaries, extending reporting from the narrow confines of a company’s own operations to the wider effects of the products it sells demonstrates superior accountability. This is the ultimate in transparency. It is also of greater relevance to most stakeholders, who are more interested in a company’s products than its facilities.

Accountability across the whole value chain

So forget reporting at company level. Classic CR reporting is too narrow in focus, and it misses too much. Environment sections of reports are usually limited to the immediate impacts of a company’s operations, perhaps with a nod to managing impacts in the supply chain. By extending reporting to include the impacts of products throughout their lifecycle, companies can demonstrate transparency and accountability across the value chain.

A supermarket should take accountability for the products that go through it, not just its buildings

Which environmental impacts, for instance, should a retailer be account- able for – and report on? The environmental impact of a supermarket extends well beyond the doors of its stores to include the impacts of all the products it sells. These occur before and after the products enter and leave the stores – in their production, their use and their disposal. Yet conventional corporate reporting would largely ignore anything that happens outside of the store, apart from a few cherry-picked case studies.

By taking accountability for the impacts of products across their lifecycle, retailers can gain a much better idea of their overall impact on society – and of the type of products they might want to sell. Arguably, it was this kind of approach that led the do-it-yourself retailer B&Q to stop selling patio heaters. A traditional CR approach would not have registered the significant environmental impacts of patio heaters in their use phase. Ikea is now assessing its products based on a sustainability product scorecard to assess the lifecycle impacts of its products, including waste, energy and water from their use in customers’ homes.

A traditional corporate report might pick out one or two products as case studies and look at their impacts, but what about the rest? If a company produces EPDs based on lifecycle assessment for all its products, this can reveal its overall impact much better than any CR report. An EPD takes into account the ingredients of a product, the methods of its production, and the full environmental impact of each stage of its lifecycle.

If we apply the supermarket approach to other sectors, we can see a different level of debate about who should be accountable for what. What about a private equity firm owning various companies? Rather than ticking some boxes and sending back a meaningless Stanford Research Institute-type questionnaire, private equity firms could report the overall impact of each of their companies based on the products these companies sell or make. This would be possible if those companies all produced EPDs for their products. The same thinking would apply to project finance.

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How full product transparency will revitalise managing sustainability in the supply chain

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How full product transparency will revitalise the bureaucratic approach to managing sustainability in the supply chain

The conventional approach to exercising corporate responsibility in a company’s supply chain is to draft a company supplier standard and then audit for compliance using that document. The process often begins with a questionnaire and is followed by audit visits to suppliers judged to be the highest risk. The better programmes also include an offer of ‘capacity building’ for suppliers – in other words, they provide training and support to help them raise and maintain their standards.

Positive and usually well-intentioned as this course of action is, the impact is inherently limited by the narrow scope of the dialogue and the teacher–student nature of the relationship. It might work well when addressing very problematic issues (such as child labour), but telling suppliers what they shouldn’t be doing misses an opportunity to foster their talent for commercial advantage and innovation.

The flaws of the 700-question supply chain questionnaire

The questions below are from a real example of a supplier questionnaire I was asked to fill in by a corporate customer. Let’s look at how little each question actually drives real environmental performance:

1. Does your organisation have an environmental policy in place?

Any company can write up a policy in a couple of hours, but this doesn’t mean the policy is being implemented or monitored. Policies by themselves don’t drive performance, so the creation of an environmental policy will not necessarily have any impact on the products you are buying from your suppliers. For non-sophisticated audiences, it looks so good to say that 80% of your suppliers have an environmental policy. But in reality it means next to nothing.

2. Does your organisation have an environmental management system (EMS) in place?

ISO 14001 and EMAS are management systems, not performance systems. They just require an organisation to have a policy, comply with legislation, determine its impacts, and have targets. There is no link with performance. The other issue is the scope of these management systems. In general, they have a purely internal focus – they don’t include the raw materials used to make products, nor do they look at the use phase impacts of those products. If your suppliers have an EMS in place, this provides little assurance that the products they are supplying have less impact on the environment than any others.

3. Has your organisation identified the specific environmental impacts associated with the products, services or works it provides and taken steps to minimise them?

The supplier can just answer ‘Yes, we have identified them’. But how do you know that the issues it has identified are the biggest and most important ones? The supplier can also respond with any amount of corporate spin – cherry-picking some initiatives from the fringes and thereby allowing itself to look good.

4. Does your organisation observe legislation with regards to environmental issues?

Shouldn’t this be taken for granted?

5. Does your organisation communicate its environmental policy to its suppliers?

What demonstrable impact can be gained from sending a piece of paper full of generalities to suppliers? It would be far better to ask suppliers for radical innovations on the issues you want to improve.

6. Does your organisation check the environmental policy and performance of its staff?

Even if your supplier does this, how much of a difference will it have on the products you are buying?

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