Dr Nick Murry asks if demands for data drive retail packaging procurement?
From collapsed factories to horsemeat scandals, supply chain related disasters seemed to be constantly in the headlines last year, closely followed by increasingly vocal demands for the retail industry to get its house in order. 2013 was also a year in which we experienced some extreme global weather events and people began to draw a connection between weather and climate change, underlined by warnings in the Intergovernmental Panel on Climate Change’s 5th Assessment report on the physical science, published in September. Earlier in the year, the World Economic Forum concluded that water scarcity was the second biggest global risk now facing the world, whist material resource scarcity moved up the business agenda, sometimes hindering the very solutions needed to address climate change.
In essence, plenty of risk and potential cost, as well as potential opportunity, embedded in companys’ supply chains. And nowhere is this more evident than in the packaging industry. Across almost every sector in which Ecodesk works – construction, pharmaceuticals, telecoms, IT and so on – understanding the footprint of packaging suppliers is high on the list of priorities. So what’s driving this?
According to a number of the large businesses we work with, understanding suppliers’ carbon, energy, water and waste data provides them with valuable insight into how sustainable and responsible they are in key areas. But it’s much more than this; in many cases, it’s becoming a key indicator of whether or not a supplier should be there at all. Understanding supply chain risk and efficiency improves continuity of supply, reduces exposure to reputational risk and provides an impetus for suppliers to optimise their operational costs and the cost of their services.
It doesn’t stop at carbon, energy, water and waste either. Additional information can be collected according to industry requirement. One of Ecodesk’s clients is interested in assessing suppliers on their sourcing of wood fibre and forestry products, for example. Suppliers can then be scored across the data sets, providing procurement teams with a powerful tool to assess existing and potential partners.
But before any of this can be addressed organisations need to see and understand where the risks, costs and opportunities lies and how they can influence them. This requires data and it requires that data to be reliable, comparable and transparent.
One of the problems most businesses have had to date – and packaging firms are no exception – is that supplier reaction to questionnaires has been variable and poor (perhaps not surprising given the numbers of requests many receive). Data collection has therefore been laboured, analysis constrained and businesses have failed to get a useful picture of their supply chain impacts, at least until now.
Supply chain footprinting, using datasets such as CEDA, can enable companies to get a quick and clear understanding of their supply chain impacts in multiple issue areas, including energy, carbon, water and waste, using product and service based industry averages. Customers can then drill down into hot spots in their supply chain to identify priority areas and react accordingly. Coupled with on-going supply chain disclosure on the same metrics, customers can benchmark suppliers’ performance against industry averages and track improvement over time.
It is the availability of tools and processes such as these that will increasingly enable businesses to realise the business benefits of promoting sustainability in their supply, including sharing the benefits of increased efficiency. Ecodesk’s partnership with the AIOE (run by the PMMI, the Association for Packaging and Processing Technologies) to promote sustainability data reporting within this industry, is a good example of how this is happening in reality.
Global brands such as Cadbury, Coca Cola, Kellogg and Kraft Foods are being encouraged by the AIOE to get their packaging suppliers openly reporting sustainability data and sharing it with customers. And increasingly only those suppliers that meet customer expectations in this area will be given repeat business.
As Governments, the European Union, the United Nations and the World Bank all push the ideal of increased transparency and sustainability reporting, it is the customer and supplier relationships that will ultimately drive change, with procurement teams holding the stick (and the reason to use it!) The onus is now on packaging companies to take advantage of the opportunity to drive this agenda in their own supply chains.