Greenwashing is a practice that is deceptively used to promote the perception that a company’s policies or products are environmentally friendly. It becomes prevalent when there is pressure being exerted on suppliers to demonstrate green practices and they can’t produce. However, when the talk turns to greenwashing, companies also recognize that they have to look at their own sustainability practices—because it’s hard to talk the talk if you aren’t walking the walk yourself. The good news is that companies that encourage their suppliers to adopt sustainability practices are also doing it themselves. They are learning in the process that the road to “green” is best traveled when companies collaborate and work together—even when they are competitors.

Sustainability initiatives that “walk the talk”

Some of the best news for global sustainability is hidden in the internal work that major players are doing to reduce the carbon footprints of their businesses.

•  Mattel’s new sustainability principles focus on three fundamental steps to advance sustainability, including maximizing post-consumer recycled content where possible; avoiding virgin fiber from controversial sources; and seeking to increase the percentage of fiber that is certified by a credible third party. “We are committed to advancing the use of sustainably sourced paper and wood fiber across our business, beginning with packaging,” says Lisa Marie Bongiovanni, VP of corporate affairs at Mattel.

•  Philips began last year to request its suppliers to demonstrate their compliance to the Philips Regulated Substances List and had its 1,300 largest suppliers committed by August 2011.

•  Walmart instituted a supplier scorecard for sustainability that is upping the ante for its suppliers in the area of green practices.

“This is a societal issue, and the initial internal challenge is always engaging the culture of the company,” says Deni Albrecht, leader of sustainability at Kenco, a privately held 3PL.

Albrecht says that the hurdle for green practices is more difficult in distribution and warehousing than it is in manufacturing. “In warehousing and distribution, we are a ‘pennies’ business,” he explains. “We have to adopt new practices more gradually to recognize ROI (return on investment) because the ROI also tends to build at a slower pace than it does in other industries. When we perform ROI, we take into account our annual savings from the adoption of a green practice, and we divide this by the final installed cost of the solution. The other element in this is the 35 percent tax credit that we can also presently gain from green technology investment. The present availability of these tax credits and utility company rebates has helped to add urgency to many of our projects.”

Kenco engages in a prolific recycling of the basics, but Albrecht acknowledges that this may be the easiest step of the entire process.  “We have moved forward to where some of our facilities are now closer to state-of-the-art green practices by installing modern lighting systems,” he says. “One of these facilities is computer-controlled to where you can turn off up to 250 zones in the warehouse from your iPad.”

Still, the warehousing and distribution industry sees a different type of low-hanging fruit for sustainability than manufacturing does. “In manufacturing, you can also include lifecycle design and tooling strategies in your sustainability practices,” says Albrecht. “In contrast, warehousing is almost a service industry. The low-hanging fruit in our industry is anything that can be used to save energy, so our credo almost has to be ‘a penny saved is a penny earned.’”

Meanwhile, in the transportation industry, Pitt Ohio is focusing on making sustainability a key company differentiator.  “As a company engaged in transportation, we are measuring our carbon footprint and have established target goals for improvement,” says Geoff Muessig, CMO and EVP. “This carbon footprint is comprised of 12 percent infrastructure carbon and 88 percent rolling stock (trucking) carbon, so the focus over the past five years has been on improving the fuel efficiency of our fleet. We also have made improvements to our infrastructure by installing energy-efficient lighting and flushless latrines. In 2012, we will install solar panels on one of our terminals.”

One of the things Pitt Ohio has done is to replace inefficient trucks with trucks that have better fuel efficiency. “We have retrained our drivers in areas like shifting and braking to enhance fuel conservation,” says Muessig. “We have also installed on-board monitors that give us performance scorecards on the trucks and their drivers.”

Additionally, Pitt Ohio has diversified its fleet with different sizes of trucks. Instead of using tractor-trailer trucks for most of the hauling, it has reduced the number of tractor-trailer trucks and has replaced them with sprinter vans that are more economical to operate. “We focus on matching the right-sized shipment to the right-sized truck” says Muessig. “If we use tractor-trailers, we want to batch multiple shipments on a truck to conserve energy.”

Muessig says that driver habits are huge. “We estimate that they impact our fuel efficiency by roughly one-tenth of every gallon of fuel saved,” he says. “In other words, for every gallon of fuel efficiency we gain, one-tenth of that gallon is the result of fuel-efficient driving behavior. Fuel-efficient driving is something each driver can do every minute of the day.”

Muessig speaks of the Prius effect (named after the Toyota hybrid car), in which the driver gets real-time feedback about fuel consumption from the car’s dashboard instrumentation. “Studies show that drivers will adjust their behaviors when they have access to real-time feedback,” says Muessig. “Right now, we have a weekly scorecard that we review with our drivers, so we are not at that point yet—but we are discussing it.” In 2012, Pitt Ohio will test trucks that run with compressed gas and electronic forklifts for its 21 terminals.

Efforts in the transportation and distribution industries benefit large-scale consumer products companies like Procter & Gamble (P&G), which has its own sustainability practices and began looking at greening its plants and business operations back in 2002.

“We have a long-term green vision for ourselves that includes powering our plants with 100 percent renewable energy,” says Jeff LeRoy, a P&G external relations manager. “This vision includes emitting no fossil-based carbon (CO2), placing no waste in landfills, and using 100 percent recycled materials in product packaging. By the year 2020, we expect to be at a point where 30 percent of the power for our plants comes from renewable power, and less than 0.5 percent of our manufacturing waste goes to landfills.”

LeRoy says that P&G recently constructed its first wind turbine in a plant in the Netherlands. The plant now receives 17 percent of its power from wind. P&G is also looking at deploying solar power.

“We consider ourselves to be science-based, so we looked for raw materials that were environmentally friendly for the products that we produce for consumers,” says LeRoy. “The question we were asking ourselves was ‘where can we make the biggest impact?’ We knew we couldn’t do this alone, so we began to work with our network of over 75,000 global suppliers.”

Promoting sustainability with suppliers

Because they know that they cannot meet their sustainability objectives alone, many companies are now engaged with their suppliers to improve sustainability throughout the supply chain.

Mattel’s goal is to have 70 percent of its paper packaging composed of recycled material or sustainable fiber by the end of 2011. It has already stated that it will show preference whenever it is feasible for fiber certified by the Forest Stewardship Council (FSC).

A global team is taking steps to communicate and implement the company’s expectations with suppliers. Bongiovanni also says that Mattel will take steps to encourage its suppliers to pursue appropriate chain of custody certification for their own operations, and that progress toward sustainable sourcing goals will be reported through the company’s Global Citizenship Reports.

“We also work with our suppliers on green initiatives in steps that are all along the production lifecycle,” says P&G’s LeRoy. “We recognize that it is essential to work closely with our supplier base, because our suppliers touch our products in many ways.”

LeRoy says that P&G’s approach to its suppliers was a participative and a collaborative one. “We didn’t want to approach our suppliers by giving them a green directive,” LeRoy says. “Instead, we wanted to begin the process by asking them how we could all work together to deliver greener products. We began this process by initially enrolling 12-20 suppliers several years ago to provide input into the process.”

Much like Walmart, P&G developed a sustainability scorecard. “We developed a cross-industry scorecard on green practices that was sufficiently flexible so it could work for everyone, and we began to deploy it,” says LeRoy. “Our suppliers were very encouraged.”

P&G’s scorecard asks questions about the sustainable practices of its suppliers. “The first year, over 400 of our suppliers participated in the scorecard program and 81 percent of them returned completed scorecards,” says LeRoy. “We asked for input during this process, and 40 percent of our suppliers gave us input. By the second year, we had over 600 suppliers enrolled in the scorecard program. We are still computing the results from year two, but I can say that we are very pleased with our supplier response….We have participants in our supplier green scorecard from every geographical area of the world, although there is probably more engagement in this area in the European countries.”

Pitt Ohio’s Muessig says that his company is also beginning to look at its customers’ sustainability practices. Pitt Ohio has also developed a proprietary customer carbon footprint calculator that enables an LTL shipper to measure the carbon footprint of its LTL shipments.

Dealing with greenwashing

Even with these sustainability efforts in place, there are still suppliers that lag in participation—or even lie about it. Pierig Vezin, CEO of Wethica, a company which conducts long-term social responsibility audits for clients, says it is absolutely unrealistic to expect suppliers to measure up to client companies’ standards. “If you ask a factory to be 100 percent compliant,” he says, “You ask it to kill itself.

“There is really a faking business,” he continues. “You have some buyers who want to buy fully compliant factories. You have some factories that have become experts in making fake documents, in teaching the workers how to answer the auditors. And you have some auditing companies that have become expert at the way to say things that leads [to] ‘ok this factory is compliant,’ even if they haven’t said it really.”

To counter this “fact of life,” many companies engaging their suppliers in sustainability discussions are also making an effort to do so in a non-threatening and collaborative way that recognizes some of the challenges that suppliers face.

“We have been asked, how do we know that people are being honest about their green efforts?” says P&G’s LeRoy. “The answer is not a black and white one, because the dialogue is just between the suppliers and us. There are no third parties looking at data to determine where things are. But we have noted that when suppliers are not making progress, that they tell us—so it doesn’t sound like they are exaggerating or try to bolster up green practices when the practices aren’t there.” 

LeRoy says that when suppliers fail to proceed with sustainability, it is reflected in their scorecards, which are owned by Purchasing and not by an internal environmental manager. “This puts teeth into what we are trying to accomplish in the area of supplier accountability for sustainability,” says LeRoy. “When Purchasing meets periodically with each supplier, and the supplier can demonstrate his sustainability progress, that’s great. If the supplier says he was really unable to move forward, then our response is to ask how we can help.”

“The fact that we are involved in our own sustainability program gives us a leg up when we talk to our suppliers about greenwashing, going green, or any other topic related to sustainability,” says Kenco’s Albrecht. “We work with our suppliers and will also act on any greenwashing incidents that we become aware of.”

Best practices

Best practices for promoting and achieving sustainability in the supply chain are still emerging, but there are several that appear to be gaining both traction and results:

A scorecard with “teeth”

Working with suppliers to create scorecards and then performing periodic assessments of vendor sustainability by using the scorecard appears to really work—especially if Purchasing, which owns the relationship with the supplier, is running the show, and vendor sustainability practices are part of the overall supplier rating system that the company uses.

“Our scorecard really counts,” says LeRoy of P&G. “Each year, each of our suppliers receives a one to five rating score from us. The score is based off of a series of key performance indicators (KPIs) that P&G defines. Included in these KPIs is supplier green performance. Because green practices are incorporated into our supplier rating systems, our green initiatives, where our suppliers are concerned, have ‘teeth’ in them. They can make a difference as to how well a supplier scores in our [overall] evaluation system.”

Collaboration

While metrics can powerfully factor into any supplier’s scorecard on sustainability, nearly every company with a supply chain to run maintains that it is far more effective to get their suppliers engaged and involved with sustainability than to force or mandate the issue. Supplier involvement strengthens business partnerships. It also makes suppliers less defensive when it comes to sharing facts and issues that might stand in the way of a supplier’s sustainability efforts.

Attainable goals and measurable results

Scorecarding, maintaining metrics, and ROI formulas that are capable of tracking and delivering on sustainability investments help both companies and their suppliers. If you can’t ultimately see the benefits in dollars and cents as well as in social goodwill, it is hard to sustain sustainability.

Education

Sustainability is an emerging field. We have just begun to learn about the impact of driver habits on fuel consumption and of the variable costs of packaging. To sustain sustainability, companies and their suppliers should commit to continuous education in new sustainability practices as they become known—so they can determine which of these practices can make a bottom-line impact for the organization at the same time that it delivers environmental and societal benefits.

“In the end, this is more than moving plants to renewable energy or reducing waste to landfills,” says P&G’s LeRoy. “We are pursuing sustainability because it is the right thing to do.” wt