Beyond Supply Chains; Empowering Responsible Value Chaines_WEF&Accenture, 2015.01

Industry Agenda

Prepared in collaboration with Accenture

Beyond Supply Chains Empowering Responsible Value Chains

January 2015

© World Economic Forum2015 - All rights reserved.

No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system.

The views expressed are those of certain participants in the discussion and do not necessarily reflect the views of all participants or of the World Economic Forum.

REF 070115

ContentsForeword

Executive Summary

Responsible Supply Chains – Why Act Now?

Responsible supply chains: Challenge and opportunity

A new type of responsible supply chain

Empowering Responsible Supply Chains

A framework to empower responsible decisions

A blueprint for triple advantage

Leaders on triple advantage

Implementation, prioritization, business case

Beyond the Business Case – Committing to Human Rights

Paying above the living wage – A deep dive

Recommended actions for corporations and governments

Conclusions and Outlook

Methodology

Acknowledgements

Endnotes

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3Empowering Responsible Value Chains

ForewordWorld Economic ForumSupply chains are vital to both business and the economy. Therefore, supply chain decisions determine to a large extent the success of companies and nations. Furthermore, the design and management of supply chains have major implications for the well-being of society and the environment. In this respect, the key challenges range from implementing new technologies to reduce the dependency from fossil fuels as well as carbon emissions, to ensuring work safety and fair wages across the globe.

Companies are well equipped to understand the business impact of supply chain decisions on their own organizations. However, to what extend do business leaders and supply chain managers understand the impact on the external world? In 2014, the World Economic Forum’s Global Agenda Council on the Future of Logistics and Transportation proposed to start closing the gap. Jointly with selected partners and leaders in the field of supply chains and transport, the report Beyond Supply Chains was prepared to provide guidance in making better decisions to drive shared value.

This report answers among others the following questions: Which supply chain practices brought not only positive impact to business, but also to society and the environment? What cases demonstrate how shared value can be created through better supply chain decisions? It is our goal that the results of this report guide future supply chain decisions towards creating more responsible supply chains for tomorrow’s customers and consumers.

Accenture StrategyAs Accenture works with supply chain directors on their journey towards high performance supply chains, a new focus has emerged in their strategies. Rather than concentrating exclusively on developing commercial advantage – which has led to a focus on the trade-off inherent in cost versus customer service – the best of the best are balancing commercial advantage with two factors: environmental advantage and the supply chain contribution to local economic development.

The Beyond Supply Chains report researched this phenomenon and identified a set of 31 proven supply chain practices which provide companies with a blueprint of where they can gain both commercial and socio-environmental advantage (both environment and local economic development) – driving a triple advantage. The report also provides a framework for evaluating the potential value at stake behind each of these practices, and an implementation framework for different strategic priorities.

The good news: There is commercial advantage (both upside improvement as well as downside risk limitation) and socio-environmental advantage to be gained from driving the right behaviours. We hope the examples in this report will spur others to follow the path to responsible supply chains.

Mark H. Pearson Senior Managing Director, Operations Strategy

Wolfgang LehmacherHead of Supply Chain and Transport, Mobility Industries

4 Beyond Supply Chains

The supply chain development of multinational companies can impact both the environment and local economies, especially in emerging markets. This impact can be positive or negative depending on factors including: market pressure to lower costs and the extent to which companies are focused on responsible supply chains.

To ensure the impact is positive, leading companies are looking to adopt what we call “the triple supply chain advantage” – where companies achieve profitability while benefiting society and the environment. Our report, Beyond Supply Chains examines how companies strive for this triple advantage and looks at how they intend to achieve it.

The report identified a comprehensive set of 31 proven practices, underpinned by industry examples that provide guidance for companies looking to codify their own specific portfolio of triple advantage improvement measures. By implementing these triple advantage practices, we show significant potential benefits achieved (modelled initially on consumer goods supply chains):

– Profitability: Revenue uplift of 5-20%; supply chain cost reduction of 9-16%, brand value increase of 15-30%, significant company risk reduction

– Local development and societies: Improved customer health, local welfare and labour standards (wages, working conditions)

– Environment: Carbon gas reduction of 13-22% on overall footprint

Beyond Supply Chains has developed a decision framework that prioritizes the identified practices by their potential to create triple advantage. Although the model uses consumer goods companies as a reference, it can be tailored according to the conditions of a specific industry or an individual enterprise (e.g. its “social archetype”).

But even the triple advantage has its limits because the concept implies a supporting business case. Yet when talking about human rights, a commitment to ethical principles should outweigh financial justification. In this context, the report discusses how to ensure fair wages throughout supply chains and looks at policy changes required to support companies looking to optimize across the three advantage areas.

Executive Summary

Figure 1. Striving for “triple advantage”

Figure 2. Landscape of supply chain practices8

Chapter 2

Cross Functional Practices

End-of-Life

Supplier Relationship

Raw Material and Components

Production Footprint

Production Process

Innovative Distribution Channels

Logistics Network and Warehouses Transport Planning and Execution

Vehicle Optimization

Disposal

Reverse Material Flows (Product and Packaging)

Technologies Labour Standards

Distribution Production Sourcing Product Design

Seek for more sustainable, “second source” alternatives

Source from sustainable suppliers

Establish supplier auditing and control Source from local (micro) suppliers

Consider sustainability criteria in location decision

Enforce high environment, health, safety standards

Reduce energy, water use and emissions

Centralize and optimize waste management

Sell through micro retailers

Sell through crowd-shipping

Consider more decentralized distribution network

Smart and green building deployments

Share network facilities and transport

Increase vehicle utilization degree

Use more sustainable (intermodal) transports

Use innovative vehicle technologies and tires

De-speeding of the supply chain

Use alternative fuels

Support environment-friendly disposal of products

Reduce travel distances

Recycle materials

Reuse materials

Implement fair wages policy and empower workforce Improve supply chain visibility (availability of data & analytics)

Use technology to trace materials

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Packaging Reduce weight or size of packaging material

Design for lower energy and material use in life cycle

Design for maximum recyclability and “circularity”

Design for maximum recyclability and “circularity”

Reduce weight or size of product

Design for positive influence on consumer's health

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Landscape of Supply Chain Practices

Updated it


Chapter 1: Responsible Supply Chains – Why Act Now?



Responsible supply chains: Challenge and opportunity

Creating responsible supply chains – driving shared values for local economies, environments and businesses – is a challenge supply chain officers face every day. From the factory collapse in Bangladesh,1 to the gas leak in Bhopal, business annals are filled with shocking stories of the negative impact commerce can have on society. Underneath the big headlines are smaller dramas that seem to perpetuate despite interventions from governments and business: child labour violations, unethical working conditions, toxic products distributed to a trusting global consumer. The root cause for many of the world’s worst societal and environmental conditions lies in failures in decision-making and in barriers to implementing improvements, including difficulties in:

– Making a business case for sustainability (according to the UN Global Compact-Accenture CEO Study on Sustainability, many programmes fail because it is too difficult to justify investment in sustainability because the business case is too difficult to quantify2)

– Identifying and exploiting the full range of options on sustainability initiatives, driving both value for business and society

– Ensuring compliance in global, non-transparent supply chains, particularly if there is sub-contracting through multi-stage suppliers (e.g. tier 5 suppliers)

– Taking the first move in under regulated areas because companies will face the risk of competitive disadvantage (e.g. when companies hesitate to increase wages for fear they’ll lose their pricing edge)

Against this backdrop, changing market dynamics are increasing the importance of sustainability efforts:

– Customers are becoming more sensitive to sustainability.3 Younger consumers in particular demand sustainable products and practices and will pay more to get them.

– Increasingly scarce natural resources and rising commodity prices make resource efficiency and waste reduction crucial variables for companies to remain profitable.

– The regulatory environment and NGOs are pushing for more transparency when it comes to socio-economic issues. This, in turn, drives non-compliance costs and can create a backlash from the marketplace.

Companies need to act now and look beyond classical supply chain performance to gain what we call the triple advantage: for profit, society and the environment. The purpose of this report is to empower companies to begin or accelerate such a journey. It explores:

– Options for realizing “win-wins” on profitability (revenue, cost, risk, brand) and socio-environmental benefits (environmental and local economic development)

– Guidelines for better decision-making by assessing the value creation potential of supply chain practices, and by creating a framework to prioritize sustainability investments

– Guidance for moving beyond the business case to making a commitment to ethical commerce

Figure 3. Recent incidents in supply chains 4

Chapter 1

Factory crash in Bangladesh Garment workers killed despite inspections/ supplier audits Incident caused brand damage

and

compensation payments to workers

Unethical working conditions No control over manufacturers and their outsourcing policies: non-approved and unethical sub-contractors

Product recalls due to toxic lead paint on toys by a contract manufacturer Company was linked to rainforest deforestation causing 60 companies to suspend their relationship Letter from former employee condemning toxic unethical culture of firm drove market value down by $2 billion

Fashion Industry

Cross Industry

Child Labour Assemblers were audited, no child labour was found, but hundreds of children under 16 worked at sub-suppliers No transparency about hiring procedures at suppliers Incident caused brand damage

Suicides Mistreated workers attempted a mass suicide

Consumer Electronics

Environmental law violations Improper handling, storage and disposal of hazardous materials due to inefficient training leading to fines of 30 million USD

Carbon Footprint Challenges in matching different local customer needs for transportation with environmental aspirations

Transportation Industry

Recent Incidents in Supply Chains


A new type of responsible supply chain What are the beliefs companies hold when it comes to sustainability? How do they steer the course from rhetoric to action? According to studies, many companies are pursuing sustainability programmes to mitigate risk (complying with regulations) or to gain efficiency improvements. Fewer companies focus on achieving top-line or branding effects.

Two key drivers influence a company’s commitment to sustainability efforts: Business strategy: Companies that strive for cost leadership tend to be more hesitant when it comes to assuming social responsibility in their supply chains. Corporations following a differentiation strategy are more actively engaged in socially responsible practices.4 The higher profit margins associated with differentiation strategies provide companies with extra room for supply chain innovation and allow them to take more risk when it comes to sustainability and social investments. On the contrary, cost leaders focus more on low-risk eco-efficiencies.5

Supply chain maturity: Companies with mature supply chains have greater transparency, deeper integration across departments, strong collaboration with partners and solid governance structures. These characteristics of a mature supply chain all facilitate the implementation of sustainability programmes and help companies manage the complexities involved.

There are four core sustainability strategies6 that frame investment priorities:

Strategy Description Example

Compliance- driven

Reducing risks by adhering to laws and external standards on environment and society. Lowest sustainability standard.

Initiative against child labour or corruption

Efficiency-driven

Focusing on cost efficiency and process optimizations driving synergies on environmental aspects

“Green six sigma” initiative in production

Legitimating External presentation of sustainability to create credibility and establish a “license to operate”

Integrating smallholders in the supply chain

Holistic Sustainability is integrated in all facets of the business and is used to enhance overall performance and create differentiation through a unique value proposition

New business models, e.g. selling waste or leasing products

Table 1. Sustainability strategies

Over the years, industry players have evolved from compliance-driven to more holistic sustainability strategies as illustrated in Figure 4. Leading companies in particular have embraced sustainability as a measure of excellence within business performance.

Cost leaders tend to evolve from a focus that is primarily on compliance and efficiency that then moves to more holistic strategies. This helps them break out of the commodity trap inherent in their business model, by differentiating offerings based on sustainable practices.

Differentiators tend to start with a compliance focus and then move towards legitimating before embracing holistic strategies that offer additional value through new ways of differentiation and branding.

Figure 4. Development path of sustainability strategies

5

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By moving to holistic strategies, both cost leaders and differentiators undergo a paradigm shift where driving profit and socio-environmental outcomes are seen as complementary, rather than contradictory. This is what we call the “triple advantage” – realizing societal, environmental and business benefits at the same time. It is a win for society and a win for companies. Studies have shown a positive link between socio-environmental initiatives and corporate performance.7 And triple advantage is increasingly rewarded by positive ratings from financial analysts.8

To make the business case for triple advantage, leading corporations consider a holistic value concept going beyond short-term financial effects and factoring in long-term revenue growth, cost reduction, brand improvement and risk mitigation, as shown in Figure 5.

What results can manufacturers pursuing the triple advantage expect? Here are some examples:

Revenue growth – New revenue streams through closed loop

manufacturing processes (e.g. by re-using products or selling waste)

– Price premium on products manufactured through clean technology

Cost reduction – Resource (energy, material and water) productivity

improvement through Green Six Sigma – Reduced waste and better equipment efficiency

through total productive maintenance

Brand and reputation – Sustainable brand image positively affecting credit

rating and funding cost – Better employee morale and talent retention linked to

good labour practices

Risk mitigation – Securing “license to operate” – establishing credibility

when it comes to sustainability – through regulation compliance (e.g. through proper environmental, health and safety programs providing high ethical standards)

– Developing manufacturing processes for sustainable substitutes that diversify sourcing risk

This chapter highlighted a general shift towards more holistic sustainability strategies, ones that gain a triple advantage. The next chapter explores how companies can drive their journey towards responsible supply chains.

Figure 5. Leading companies capturing the “triple advantage” of sustainability (Source: Accenture)

6

Holistic Value Consideration

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Creating new business models Collaborating to develop new markets Innovating to develop new products and services

Improving energy efficiency Streamlining supply chain and logistics Innovating with suppliers and customers

Focusing on and showcasing sustainability innovations Collaboration to increase transparency Engaging employees and investors

Brand & Reputation Revenue Growth

Cost Reduction

Protecting social license to operate Integrating bottom-line sustainability considerations with corp. risk management Diversifying business model and operations

Risk Mitigation

Value Creation

The “Triple Advantage”

Maximized intersection of interests between business value and socio-environmental value

Focus on initiatives that improve all three dimensions, business value and environment, business value and local economies/societies

Chapter 1

Business Value

Socio- Environmental

Value

Environment Local

Economies, Societies

A

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A A

Leading Companies Capturing the “Triple Advantage” of Sustainability

Updated it

1

1

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3

4


Chapter 2:Empowering Responsible Supply Chains



A framework to empower responsible decisions As noted earlier, root causes for failures in sustaining societal and environmental conditions often lie in the decision-making process – having full transparency on choices, a clear business case and hands-on implementation guidance. Now is the time to get it right.

Responsible outcomes are increasingly rewarded by markets and consumers alike. It appears that companies are beginning to respond as their sustainability strategies move from compliance or cost focus to more holistic strategies. Too many companies, however, are still lagging when it comes to responsible supply chains.

To help clarify how to move from thought to action, we have developed a decision framework for achieving the triple advantage. A specific toolset is available that allows customization of the decision framework for each company based on its specific industry and focus of sustainability strategy.

Feature Explanation How it supports decision-making

Landscape of supply chain practices A comprehensive overview of 31 supply chain practices driving triple advantage – illustrating product design, sourcing, manufacturing, distribution, end-of-life and cross-functional practices.

Creates full transparency on possible measures and options available to tune individual supply chains towards triple advantage, through which companies can identify “white spots” in their own supply chain agenda.

Detailed value assessment A detailed value assessment of all 31 supply chain practices and their potential to drive profitability, social and environmental benefits. It is based on extensive research and data analysis and underpinned by examples for “good practices” of global companies.

Enables executives to understand the full potential behind each of the 31 practices. Also provides numbers to make the case for responsible supply chains or to validate business case calculations, and provides a baseline to track success of socio-environmental initiatives. Contains leading-edge and practice-proven examples as inspirations for adoption.

Cases around leading practices For cases of particular value or innovation, we created a deep dive case with leading companies providing details on how triple advantage was achieved.

Adds additional insights into the concept of supply chain practices and success factors for implementation. This provides further decision variables for initiatives prioritization but also already during implementation.

Multiple value perspectives Initiative rankings by multiple KPIs (e.g. supply chain cost, revenue, community development) based on our data model. In addition, we calculated the overall business case behind the 31 supply chain practices.

Analysis provides multiple perspectives on the value creation potential of each practice, e.g. a ranking of practices based on their supply chain cost savings potential and is targeted to respond to specific change goals.

Triple advantage decision matrix Two decision matrices illustrate the business value and socio-environmental value as well as ease of implementation of all 31 practices.

Provides a graphical overview for senior executives on quick wins and transformational measures. This allows them to create a prioritized sequence of practices. In addition, a toolset allows for customizing our assumptions to different industries and sustainability strategies.

Sensitivity analysis on social archetype Considers different emphasis of companies on business and socio-environmental value in decision matrices for an economist, liberal humanist, social industrialist, philanthropist.

A framework and toolset enables companies to create an individual decision matrix based on their own social archetype. This allows them to make a responsible decision based on an index consolidating both business and socio-environmental value of the 31 practices.

Table 2. Key elements of the decision framework


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mat

eria

l co

st, h

ighe

r fre

ight

util

izat

ion,

low

er in

vent

ory

cost

s

2-3

% re

duce

d gr

eenh

ouse

gas

due

to le

ss p

acka

ging

mat

eria

l pr

oduc

ed a

nd lo

wer

wei

ght i

n tra

nspo

rt

Im

prov

emen

t in

bran

d va

lue

and

cust

omer

goo

dwill

Des

ign

for

max

imum

re

cycl

abili

ty a

nd

"circ

ular

ity"

Des

ign

pack

agin

g m

ater

ial s

o th

at

it ca

n be

recy

cled

or r

etur

ned

and

reus

ed s

ever

al ti

mes

Uni

leve

r use

s m

ater

ials

that

bes

t fit

the

end-

of-li

fe tr

eatm

ent f

acili

ties

avai

labl

e in

eac

h m

arke

t. Th

is a

ims

to in

crea

se re

cycl

ing

and

reco

very

rate

s fo

r pa

ckag

ing

mat

eria

l by

15%

unt

il 20

20

Eco

vativ

e, a

sta

rt-up

, use

s fu

ngi m

ushr

oom

s to

cre

ate

rigid

, mou

lded

mat

eria

ls

as a

sus

tain

able

sub

stitu

te to

pla

stic

pac

kagi

ng m

ater

ial

20-

30%

low

er c

ost o

f pac

kagi

ng (u

p to

90%

less

mat

eria

l use

) 2

5-30

% lo

wer

car

bon

emis

sion

s (in

cas

e of

reus

able

pac

kagi

ng)

Pos

itive

impa

ct o

n br

and

valu

e

Des

ign

for l

ower

en

ergy

and

m

ater

ial u

se in

lif

ecyc

le

Des

ign

prod

ucts

with

low

er

ener

gy a

nd m

ater

ial r

equi

rem

ents

ac

ross

the

man

ufac

turin

g pr

oces

s an

d du

ring

cust

omer

use

Hen

kel d

evel

ops

laun

dry

dete

rgen

ts th

at d

eliv

er th

eir f

ull c

lean

ing

pow

er e

ven

at lo

w w

ashi

ng te

mpe

ratu

res

and

enco

urag

es c

onsu

mer

s to

was

h cl

oths

at l

ow

tem

pera

ture

s S

amsu

ng u

ses

its “g

reen

mem

ory”

func

tions

to re

duce

pow

er c

onsu

mpt

ion

of

elec

troni

cs

Low

er e

nerg

y co

nsum

ptio

n ov

er p

rodu

ct li

fecy

cle

Red

uced

mat

eria

l use

in p

rodu

ctio

n an

d lo

nger

usa

ge b

y th

e cu

stom

er

Pos

itive

impa

ct o

n br

and

valu

e

Des

ign

for

posi

tive

influ

ence

on

cons

umer

s’

heal

th

Inc

reas

e he

alth

y pr

oduc

ts in

po

rtfol

io o

r rep

lace

ingr

edie

nts

with

mor

e he

alth

y op

tions

Aho

ld in

crea

ses

the

sale

of h

ealth

y pr

oduc

ts to

at l

east

25%

of t

otal

food

sal

es

by 2

015

acro

ss th

e gr

oup

whi

le e

nsur

ing

that

80%

of o

wn-

bran

d fo

od s

uppl

iers

ar

e ce

rtifie

d ag

ains

t the

Glo

bal F

ood

Saf

ety

Initi

ativ

e (G

FSI)

stan

dard

I

mpr

oved

hea

lth b

enef

its fo

r cus

tom

er/a

void

s se

rious

hea

lth ri

sks

Im

prov

ed b

rand

val

ue a

nd re

venu

es fo

r hea

lthy

prod

ucts

from

he

alth

-con

scio

us c

usto

mer

s

R

educ

e w

eigh

t or

siz

e of

pr

oduc

t

Des

ign

prod

ucts

with

ligh

ter o

r sm

alle

r mat

eria

ls to

redu

ce it

s w

eigh

t e.g

. by

usin

g co

ncen

trate

d pr

oduc

ts o

r lig

hter

met

als

NIK

E’s

effi

cien

t Fly

knit

tech

nolo

gy p

reci

sely

eng

inee

rs y

arns

and

fabr

ic

varia

tions

onl

y w

here

they

are

nee

ded,

redu

cing

was

te in

the

man

ufac

turin

g pr

oces

s

BM

W u

ses

of c

arbo

n fib

re in

its

cars

driv

ing

dow

n fu

el c

onsu

mpt

ion

whi

le

impr

ovin

g st

abili

ty o

f the

car

bod

y

Mor

e co

nven

ienc

e fo

r the

cus

tom

er

Mat

eria

l cos

t and

car

bon

savi

ngs

(e.g

. dur

ing

trans

porta

tion)

Des

ign

for

max

imum

re

cycl

abili

ty a

nd

"circ

ular

ity"

Des

ign

prod

uct s

o th

at it

can

be

recy

cled

or r

etur

ned

and

reus

ed

IK

EA

’s K

AJU

T, a

tabl

e la

mp,

use

s 75

% le

ss m

ater

ial t

han

its p

rede

cess

or. I

t co

ntai

ns 3

5% re

used

or r

ecyc

led

mat

eria

ls, i

s 10

0% re

cycl

able

and

eas

ily

stac

kabl

e m

akin

g it

mor

e ef

ficie

nt to

tran

spor

t P

hone

blok

s’ m

odul

ar m

obile

pho

ne c

once

pt re

duci

ng e

lect

roni

cs w

aste

Low

er m

ater

ial u

se, e

nerg

y co

nsum

ptio

n an

d ca

rbon

em

issi

ons

Les

s w

aste

and

pos

itive

impa

ct o

n br

and

Sourcing

See

k fo

r mor

e su

stai

nabl

e,

“sec

ond

sour

ce”

alte

rnat

ives

Use

recy

cled

raw

mat

eria

l, co

mpo

nent

s vi

a co

mm

odity

m

arke

ts o

r int

erna

l "cl

osed

loop

s”

Sou

rce

non-

haza

rdou

s, o

rgan

ic

mat

eria

ls

Mar

ks a

nd S

penc

er ta

rget

s to

use

one

sus

tain

abili

ty s

ourc

ing

crite

ria (e

.g.

orga

nic

cotto

n, re

cycl

ed c

onte

nt, m

ade

in e

co fa

ctor

y) in

to a

ll of

thei

r pro

duct

s un

til 2

020

NIK

E u

ses

recy

cled

pol

yest

er m

ade

from

recy

cled

pla

stic

bot

tles

in h

igh-

perfo

rman

ce a

ppar

el a

nd fo

otw

ear

H&

M la

unch

ed a

line

of d

enim

jean

s m

ade

from

recy

cled

cot

ton

fibre

10-

15%

low

er m

ater

ial c

ost

Red

uced

was

te, t

oxic

em

issi

ons,

ene

rgy

and

wat

er u

se

Ris

k he

dgin

g ag

ains

t mar

ket v

olat

ilitie

s an

d se

cure

sup

ply

Rev

enue

upl

ift a

nd im

prov

ed b

rand

imag

e

Est

ablis

h su

pplie

r aud

iting

an

d co

ntro

l

Im

plem

ent a

com

preh

ensi

ve

audi

ting

syst

em fo

r sup

plie

rs a

nd

cons

tant

ly m

easu

re th

eir

perfo

rman

ce a

gain

st

sust

aina

bilit

y in

dica

tors

Mar

ks a

nd S

penc

er u

ses

a co

mbi

natio

n of

M&

S, t

hird

-par

ty a

nd s

elf-a

udits

to

asse

ss th

e su

pplie

rs c

ompl

ianc

e w

ith lo

cal a

nd n

atio

nal r

egul

atio

n, in

par

ticul

ar

on w

orki

ng c

ondi

tion,

hea

lth a

nd s

afet

y, ra

tes

of p

ay, e

tc.

Miti

gatio

n of

com

pany

risk

s du

e to

une

thic

al s

uppl

iers

I

mpr

ovem

ent o

f wag

es a

nd la

bour

sta

ndar

ds

Hig

her b

rand

val

ue th

roug

h ce

rtific

atio

ns

Sou

rce

from

lo

cal (

mic

ro)

supp

liers

Sou

rce

raw

mat

eria

ls o

r pro

duct

s fro

m lo

cal (

mic

ro) s

uppl

iers

for

the

dom

estic

mar

ket

Ofte

n em

bedd

ed in

long

-term

pa

rtner

ship

s to

em

pow

er lo

cal

smal

lhol

ders

(e.g

. far

mer

s)

Coc

a C

ola

loca

lly s

ourc

es b

ever

age

ingr

edie

nts

from

50,

000

farm

ers

in K

enya

an

d U

gand

a fo

r its

loca

lly p

rodu

ced

and

sold

frui

t bev

erag

es. T

his

doub

les

the

farm

ers

inco

me

whi

le im

prov

ing

the

qual

ity o

f the

frui

t R

educ

ed tr

ansp

orta

tion

cost

and

car

bon

exha

ust

Pos

itive

com

mun

ity im

pact

and

job

crea

tion

G

loba

l bra

nd im

prov

emen

ts a

nd re

venu

e in

crea

ses

in lo

cal m

arke

t

Sou

rce

from

su

stai

nabl

e su

pplie

rs

Def

ine

guid

ing

prin

cipl

es fo

r su

pplie

r sel

ectio

n to

incr

ease

et

hica

l and

“gre

en” s

uppl

iers

in

supp

lier b

ase

Nes

tlé e

xpec

ts th

eir s

uppl

iers

to fo

llow

a “n

o-de

fore

stat

ion”

pol

icy

on p

alm

oil.

C

onst

antly

, ext

ends

and

impr

oves

trac

eabi

lity

of th

e ke

y co

mm

oditi

es

Wal

-Mar

t’s s

uppl

iers

mus

t sou

rce

95%

of p

rodu

cts

from

fact

orie

s w

ith a

hig

h so

cial

and

env

ironm

enta

l aud

it sc

ore,

as

wel

l as

iden

tifyi

ng a

nd d

ecla

ring

ever

y fa

ctor

y us

ed to

pro

duce

item

s so

ld in

Wal

-Mar

t sto

res

Low

er c

ompa

ny ri

sk (l

inke

d to

un-

ethi

cal s

uppl

iers

) I

ndire

ct e

ffect

s on

com

mun

ity a

nd e

nviro

nmen

t P

ositi

ve im

pact

on

bran

d va

lue

Cer

tifie

d

1 2 3 4 5 6 7 8 9 10

N

o Su

pply

cha

in p

ract

ice

Des

crip

tion

Valu

e pr

opos

ition

beh

ind

the

“trip

le a

dvan

tage

” G

ood

prac

tices

Product design

Red

uce

wei

ght

or s

ize

of

pack

agin

g m

ater

ial

Red

uce

use

of p

acka

ging

m

ater

ials

in th

e ow

n su

pply

cha

in

and

at p

artn

ers

by m

inim

izin

g si

ze o

r den

sity

of p

acka

ging

Prof

itabi

lity

Soci

ety

Envi

ronm

ent

Impl

emen

tatio

n Ea

se

U

nile

ver e

mpl

oys

new

pac

kagi

ng te

chno

logy

that

inje

cts

gas

durin

g pa

ckag

ing

prod

uctio

n, re

duci

ng m

ater

ial n

eede

d by

15%

in it

s bo

dy w

ash

prod

uct l

ine

Wal

mar

t red

uced

its

pack

agin

g m

ater

ial b

y 5%

lead

ing

to c

ost s

avin

gs o

f $3.

4 bi

llion

; with

the

pote

ntia

l to

rise

to $

11 b

illio

n if

exte

nded

to it

s su

pplie

rs

IK

EA

elim

inat

ed a

ir an

d un

used

spa

ce fr

om th

e pa

ckag

ing

for i

ts G

LIM

MA

tea

light

can

dle

rele

asin

g 40

% m

ore

palle

t spa

ce a

nd re

duci

ng g

reen

hous

e ga

s by

21

%

3-5

% re

duce

d su

pply

cha

in c

osts

thro

ugh

low

er p

acka

ging

mat

eria

l co

st, h

ighe

r fre

ight

util

izat

ion,

low

er in

vent

ory

cost

s

2-3

% re

duce

d gr

eenh

ouse

gas

due

to le

ss p

acka

ging

mat

eria

l pr

oduc

ed a

nd lo

wer

wei

ght i

n tra

nspo

rt

Im

prov

emen

t in

bran

d va

lue

and

cust

omer

goo

dwill

Des

ign

for

max

imum

re

cycl

abili

ty a

nd

"circ

ular

ity"

Des

ign

pack

agin

g m

ater

ial s

o th

at

it ca

n be

recy

cled

or r

etur

ned

and

reus

ed s

ever

al ti

mes

Uni

leve

r use

s m

ater

ials

that

bes

t fit

the

end-

of-li

fe tr

eatm

ent f

acili

ties

avai

labl

e in

eac

h m

arke

t. Th

is a

ims

to in

crea

se re

cycl

ing

and

reco

very

rate

s fo

r pa

ckag

ing

mat

eria

l by

15%

unt

il 20

20

Eco

vativ

e, a

sta

rt-up

, use

s fu

ngi m

ushr

oom

s to

cre

ate

rigid

, mou

lded

mat

eria

ls

as a

sus

tain

able

sub

stitu

te to

pla

stic

pac

kagi

ng m

ater

ial

20-

30%

low

er c

ost o

f pac

kagi

ng (u

p to

90%

less

mat

eria

l use

) 2

5-30

% lo

wer

car

bon

emis

sion

s (in

cas

e of

reus

able

pac

kagi

ng)

Pos

itive

impa

ct o

n br

and

valu

e

Des

ign

for l

ower

en

ergy

and

m

ater

ial u

se in

lif

ecyc

le

Des

ign

prod

ucts

with

low

er

ener

gy a

nd m

ater

ial r

equi

rem

ents

ac

ross

the

man

ufac

turin

g pr

oces

s an

d du

ring

cust

omer

use

Hen

kel d

evel

ops

laun

dry

dete

rgen

ts th

at d

eliv

er th

eir f

ull c

lean

ing

pow

er e

ven

at lo

w w

ashi

ng te

mpe

ratu

res

and

enco

urag

es c

onsu

mer

s to

was

h cl

oths

at l

ow

tem

pera

ture

s S

amsu

ng u

ses

its “g

reen

mem

ory”

func

tions

to re

duce

pow

er c

onsu

mpt

ion

of

elec

troni

cs

Low

er e

nerg

y co

nsum

ptio

n ov

er p

rodu

ct li

fecy

cle

Red

uced

mat

eria

l use

in p

rodu

ctio

n an

d lo

nger

usa

ge b

y th

e cu

stom

er

Pos

itive

impa

ct o

n br

and

valu

e

Des

ign

for

posi

tive

influ

ence

on

cons

umer

s’

heal

th

Inc

reas

e he

alth

y pr

oduc

ts in

po

rtfol

io o

r rep

lace

ingr

edie

nts

with

mor

e he

alth

y op

tions

Aho

ld in

crea

ses

the

sale

of h

ealth

y pr

oduc

ts to

at l

east

25%

of t

otal

food

sal

es

by 2

015

acro

ss th

e gr

oup

whi

le e

nsur

ing

that

80%

of o

wn-

bran

d fo

od s

uppl

iers

ar

e ce

rtifie

d ag

ains

t the

Glo

bal F

ood

Saf

ety

Initi

ativ

e (G

FSI)

stan

dard

I

mpr

oved

hea

lth b

enef

its fo

r cus

tom

er/a

void

s se

rious

hea

lth ri

sks

Im

prov

ed b

rand

val

ue a

nd re

venu

es fo

r hea

lthy

prod

ucts

from

he

alth

-con

scio

us c

usto

mer

s

R

educ

e w

eigh

t or

siz

e of

pr

oduc

t

Des

ign

prod

ucts

with

ligh

ter o

r sm

alle

r mat

eria

ls to

redu

ce it

s w

eigh

t e.g

. by

usin

g co

ncen

trate

d pr

oduc

ts o

r lig

hter

met

als

NIK

E’s

effi

cien

t Fly

knit

tech

nolo

gy p

reci

sely

eng

inee

rs y

arns

and

fabr

ic

varia

tions

onl

y w

here

they

are

nee

ded,

redu

cing

was

te in

the

man

ufac

turin

g pr

oces

s

BM

W u

ses

of c

arbo

n fib

re in

its

cars

driv

ing

dow

n fu

el c

onsu

mpt

ion

whi

le

impr

ovin

g st

abili

ty o

f the

car

bod

y

Mor

e co

nven

ienc

e fo

r the

cus

tom

er

Mat

eria

l cos

t and

car

bon

savi

ngs

(e.g

. dur

ing

trans

porta

tion)

Des

ign

for

max

imum

re

cycl

abili

ty a

nd

"circ

ular

ity"

Des

ign

prod

uct s

o th

at it

can

be

recy

cled

or r

etur

ned

and

reus

ed

IK

EA

’s K

AJU

T, a

tabl

e la

mp,

use

s 75

% le

ss m

ater

ial t

han

its p

rede

cess

or. I

t co

ntai

ns 3

5% re

used

or r

ecyc

led

mat

eria

ls, i

s 10

0% re

cycl

able

and

eas

ily

stac

kabl

e m

akin

g it

mor

e ef

ficie

nt to

tran

spor

t P

hone

blok

s’ m

odul

ar m

obile

pho

ne c

once

pt re

duci

ng e

lect

roni

cs w

aste

Low

er m

ater

ial u

se, e

nerg

y co

nsum

ptio

n an

d ca

rbon

em

issi

ons

Les

s w

aste

and

pos

itive

impa

ct o

n br

and

Sourcing

See

k fo

r mor

e su

stai

nabl

e,

“sec

ond

sour

ce”

alte

rnat

ives

Use

recy

cled

raw

mat

eria

l, co

mpo

nent

s vi

a co

mm

odity

m

arke

ts o

r int

erna

l "cl

osed

loop

s”

Sou

rce

non-

haza

rdou

s, o

rgan

ic

mat

eria

ls

Mar

ks a

nd S

penc

er ta

rget

s to

use

one

sus

tain

abili

ty s

ourc

ing

crite

ria (e

.g.

orga

nic

cotto

n, re

cycl

ed c

onte

nt, m

ade

in e

co fa

ctor

y) in

to a

ll of

thei

r pro

duct

s un

til 2

020

NIK

E u

ses

recy

cled

pol

yest

er m

ade

from

recy

cled

pla

stic

bot

tles

in h

igh-

perfo

rman

ce a

ppar

el a

nd fo

otw

ear

H&

M la

unch

ed a

line

of d

enim

jean

s m

ade

from

recy

cled

cot

ton

fibre

10-

15%

low

er m

ater

ial c

ost

Red

uced

was

te, t

oxic

em

issi

ons,

ene

rgy

and

wat

er u

se

Ris

k he

dgin

g ag

ains

t mar

ket v

olat

ilitie

s an

d se

cure

sup

ply

Rev

enue

upl

ift a

nd im

prov

ed b

rand

imag

e

Est

ablis

h su

pplie

r aud

iting

an

d co

ntro

l

Im

plem

ent a

com

preh

ensi

ve

audi

ting

syst

em fo

r sup

plie

rs a

nd

cons

tant

ly m

easu

re th

eir

perfo

rman

ce a

gain

st

sust

aina

bilit

y in

dica

tors

Mar

ks a

nd S

penc

er u

ses

a co

mbi

natio

n of

M&

S, t

hird

-par

ty a

nd s

elf-a

udits

to

asse

ss th

e su

pplie

rs c

ompl

ianc

e w

ith lo

cal a

nd n

atio

nal r

egul

atio

n, in

par

ticul

ar

on w

orki

ng c

ondi

tion,

hea

lth a

nd s

afet

y, ra

tes

of p

ay, e

tc.

Miti

gatio

n of

com

pany

risk

s du

e to

une

thic

al s

uppl

iers

I

mpr

ovem

ent o

f wag

es a

nd la

bour

sta

ndar

ds

Hig

her b

rand

val

ue th

roug

h ce

rtific

atio

ns

Sou

rce

from

lo

cal (

mic

ro)

supp

liers

Sou

rce

raw

mat

eria

ls o

r pro

duct

s fro

m lo

cal (

mic

ro) s

uppl

iers

for

the

dom

estic

mar

ket

Ofte

n em

bedd

ed in

long

-term

pa

rtner

ship

s to

em

pow

er lo

cal

smal

lhol

ders

(e.g

. far

mer

s)

Coc

a C

ola

loca

lly s

ourc

es b

ever

age

ingr

edie

nts

from

50.

000

farm

ers

in K

enya

an

d U

gand

a fo

r its

loca

lly p

rodu

ced

and

sold

frui

t bev

erag

es. T

his

doub

les

the

farm

ers

inco

me

whi

le im

prov

ing

the

qual

ity o

f the

frui

t R

educ

ed tr

ansp

orta

tion

cost

and

car

bon

exha

ust

Pos

itive

com

mun

ity im

pact

and

job

crea

tion

G

loba

l bra

nd im

prov

emen

ts a

nd re

venu

e in

crea

ses

in lo

cal m

arke

t

Sou

rce

from

su

stai

nabl

e su

pplie

rs

Def

ine

guid

ing

prin

cipl

es fo

r su

pplie

r sel

ectio

n to

incr

ease

et

hica

l and

“gre

en” s

uppl

iers

in

supp

lier b

ase

Nes

tlé e

xpec

ts th

eir s

uppl

iers

to fo

llow

a “n

o-de

fore

stat

ion”

pol

icy

on p

alm

oil.

C

onst

antly

, ext

ends

and

impr

oves

trac

eabi

lity

of th

e ke

y co

mm

oditi

es

Wal

-Mar

t’s s

uppl

iers

mus

t sou

rce

95%

of p

rodu

cts

from

fact

orie

s w

ith a

hig

h so

cial

and

env

ironm

enta

l aud

it sc

ore,

as

wel

l as

iden

tifyi

ng a

nd d

ecla

ring

ever

y fa

ctor

y us

ed to

pro

duce

item

s so

ld in

Wal

-Mar

t sto

res

NIK

E’s

Sou

rcin

g &

Man

ufac

turin

g S

usta

inab

ility

Inde

x (S

MS

I), a

com

pone

nt o

f th

e co

mpa

ny’s

Man

ufac

turin

g In

dex,

put

s su

stai

nabi

lity

cons

ider

atio

ns o

n eq

ual

foot

ing

with

qua

lity,

cos

t and

del

iver

y

Low

er c

ompa

ny ri

sk (l

inke

d to

un-

ethi

cal s

uppl

iers

) I

ndire

ct e

ffect

s on

com

mun

ity a

nd e

nviro

nmen

t P

ositi

ve im

pact

on

bran

d va

lue

Cer

tifie

d

1 2 3 4 5 6 7 8 9 10


N

o Su

pply

cha

in p

ract

ice

Des

crip

tion

Valu

e pr

opos

ition

beh

ind

the

“trip

le a

dvan

tage

” G

ood

prac

tices

Production

Con

side

r su

stai

nabi

lity

crite

ria in

lo

catio

n de

cisi

on

Sol

ving

the

prod

uctio

n lo

catio

n no

t onl

y ba

sed

on e

cono

mic

fa

ctor

s, b

ut a

lso

cons

ider

ing

soci

al a

nd e

nviro

nmen

tal a

spec

ts

Prof

itabi

lity

So

ciet

y

En

viro

nmen

t

Im

plem

enta

tion

Ease

R

elat

ivel

y ne

w a

ppro

ach

Red

uctio

n in

com

pany

risk

, com

mun

ity b

enef

its, l

ower

car

bon

exha

ust,

posi

tive

bran

d im

pact

Red

uce

ener

gy,

wat

er u

se a

nd

emis

sion

s

Dep

loy

effic

ienc

y m

etho

dolo

gies

(e

.g. g

reen

six

sig

ma)

and

new

pr

oduc

tion

tech

nolo

gy to

de

crea

se u

se o

f ene

rgy,

wat

er

and

emis

sion

s

Hen

kel u

ses

new

ultr

a-fil

ter t

echn

olog

y fo

r tre

atin

g w

aste

wat

er s

o it

can

ultim

atel

y be

rein

trodu

ced

into

the

wat

er c

ycle

S

ains

bury

's h

as o

pene

d a

‘Wat

er N

eutra

l’ st

ore

usin

g w

ater

effi

cien

t in

frast

ruct

ure

(incl

. rai

nwat

er h

arve

stin

g) a

nd o

ffset

ting

partn

ersh

ips

1-4

% lo

wer

pro

duct

ion

cost

thro

ugh

10-2

0% w

ater

sav

ings

and

5-

10%

ene

rgy

savi

ngs,

few

er o

vera

ll em

issi

ons

Cen

traliz

e an

d op

timiz

e w

aste

m

anag

emen

t

Cen

traliz

e th

e or

gani

zatio

n of

all

was

te a

nd b

y-pr

oduc

t flo

ws

with

in

the

supp

ly c

hain

. D

eplo

y ce

ntra

l gui

delin

es fo

r co

ncep

t, pr

oces

s, c

ontra

ct

nego

tiatio

ns, t

radi

ng m

ater

ial,

etc.

E

xplo

it op

tions

to s

ell "

was

te" a

s in

put f

acto

r e.g

. for

oth

er

indu

strie

s

GM

’s b

y-pr

oduc

t rec

yclin

g an

d re

use

in it

s 11

0 la

ndfil

l-fre

e pl

ants

gen

erat

ed

reve

nues

of $

1 bi

llion

a y

ear,

enab

led

by c

entra

lized

was

te m

anag

emen

t, su

pplie

r par

tner

ship

s an

d co

ntin

uous

bes

t-pra

ctic

e sh

arin

g

Tur

n co

sts

into

reve

nues

. Pot

entia

lly b

illio

ns o

f sav

ings

and

new

re

venu

es fo

r big

com

pani

es fr

om b

ette

r man

agem

ent o

f res

ourc

es,

deve

lopm

ent o

f new

use

s (u

pcyc

ling)

of w

aste

mat

eria

l and

by-

prod

ucts

, bet

ter c

ontra

cts,

ope

ratio

nal e

ffici

ency

in re

turn

cha

ins.

Distribution

Sel

l thr

ough

cr

owd-

ship

ping

P

arts

of t

he la

st m

ile d

eliv

ery

are

exec

uted

by

priv

ate

pers

ons.

Thi

s pr

actic

e is

sup

porte

d by

mob

ile

tech

nolo

gies

and

app

s. It

can

be

used

to tr

ade

over

capa

city

on

othe

r rou

tes

betw

een

com

pani

es/

indu

strie

s to

incr

ease

util

izat

ion

Wal

-Mar

t has

the

idea

that

in-s

tore

sho

pper

s de

liver

pac

kage

s on

thei

r way

ho

me

from

the

stor

e to

peo

ple

who

bou

ght i

tem

s at

Wal

mar

t.com

. In

retu

rn, i

n-st

ore

cust

omer

s w

ould

get

a d

isco

unt f

or th

e de

liver

y ef

forts

D

HL

pilo

ts a

cro

wd-

ship

ping

ser

vice

“MyW

ays”

par

ticul

arly

for c

usto

mer

s do

ing

onlin

e pu

rcha

ses

and

are

inte

rest

ed in

“fle

xibl

e de

liver

y”. P

eopl

e, fo

r exa

mpl

e,

com

mut

ing

past

a D

HL

faci

lity

see

the

deliv

ery

info

rmat

ion

in th

eir s

mar

tpho

ne

and

can

earn

som

e ex

tra m

oney

for e

xecu

ting

the

deliv

ery

1,0

-3,5

% lo

wer

sup

ply

chai

n co

st d

ue to

40-

60%

low

er tr

ansp

ort

cost

s fo

r the

last

mile

del

iver

y; 4

-10%

car

bon

savi

ngs

on c

ompa

ny's

fo

otpr

int

Rev

enue

upl

ift a

s de

liver

y is

3-5

tim

es fa

ster

B

rand

impr

ovem

ents

and

cre

atio

n of

jobs

and

wel

fare

S

ell t

hrou

gh

mic

ro re

taile

rs

Col

labo

rate

with

sm

alle

r, de

mog

raph

ical

ly ta

rget

ed s

tore

s to

incr

ease

pro

xim

ity to

end

-cu

stom

ers

and

fost

er s

usta

inab

le

econ

omic

dev

elop

men

t

SA

B M

iller

is s

ellin

g be

er th

roug

h 68

.000

mic

ro re

taile

rs a

nd p

rovi

des

train

ing/

m

ento

ring,

and

acc

ess

to fi

nanc

e to

them

C

oca

Col

a em

pow

ers

wom

en to

bec

ome

“ent

repr

eneu

rs” b

y pr

ovid

ing

acce

ss

to b

usin

ess

train

ing,

fina

ncia

l ser

vice

s an

d a

men

torin

g ne

twor

k, e

.g. a

s “m

icro

-di

strib

utor

s” th

ey c

an b

ecom

e co

nnec

ted

to C

oca

Col

as v

alue

cha

in

Rev

enue

upl

ift th

roug

h be

tter m

arke

t pen

etra

tion,

enh

ance

d im

age

Com

mun

ity a

nd w

elfa

re e

ffect

s by

dev

elop

ing

mic

ro re

taile

rs

Loc

al jo

b cr

eatio

n

Use

inno

vativ

e ve

hicl

e te

chno

logi

es a

nd

tires

Im

plem

ent v

ehic

le d

esig

n ch

ange

s fo

r bet

ter a

erod

ynam

ics,

lo

wer

resi

stan

ce o

f tire

s an

d w

eigh

t to

impr

ove

fuel

effi

cien

cy

Wal

-Mar

t is

impl

emen

ting

Wal

-Mar

t Adv

ance

d V

ehic

le E

xper

ienc

e in

itiat

ive

colla

bora

ting

with

man

y ve

ndor

par

tner

s. T

his

prot

otyp

e co

mbi

nes

adva

nced

ae

rody

nam

ics

with

20%

aer

o im

prov

emen

t fro

m c

urre

nt m

odel

2

-5%

low

er s

uppl

y ch

ain

cost

due

to 2

5-50

% fu

el s

avin

gs, 7

-15%

re

duct

ion

of c

ompa

ny's

car

bon

foot

prin

t, fe

wer

noi

se e

mis

sion

s

Use

alte

rnat

ive

fuel

s U

se a

ltern

ativ

e fu

els

such

as

gas

base

d fu

els

or b

iofu

els

to p

ower

th

e fle

et

UP

S e

mpl

oys

a ra

nge

of a

ltern

ativ

e te

chno

logi

es, i

nclu

ding

a c

ombi

natio

n of

el

ectri

fied

vehi

cles

and

ele

ctric

ally

ass

iste

d tri

cycl

es in

som

e de

nse

Eur

opea

n ur

ban

area

s le

adin

g to

redu

ced

exha

ust e

mis

sion

s an

d le

ss tr

affic

con

gest

ion.

Fu

rther

env

ironm

enta

l ben

efits

are

ach

ieve

d on

som

e lo

ng d

ista

nce

runs

in th

e U

K b

y us

ing

truck

s po

wer

ed b

y a

mix

of d

iese

l and

bio

-met

hane

from

land

fill.

C

oca

Col

a ha

s la

rges

t fle

et o

f hea

vy-d

uty

hybr

id e

lect

ric tr

ucks

in th

e w

orld

with

m

ore

than

750

hyb

rids

in N

orth

Am

eric

a al

one

0,5

-1,5

% lo

wer

sup

ply

chai

n co

st b

y be

nefit

ting

from

low

er p

rice

of

gas

base

d or

bio

-fuel

s an

d re

duci

ng c

ompa

ny’s

car

bon

foot

prin

t by

up to

1,5

% a

nd Im

prov

emen

ts in

bra

nd im

age

Con

side

r mor

e de

cent

raliz

ed

dist

ribut

ion

netw

ork

Inc

reas

e de

cent

raliz

atio

n of

w

areh

ouse

net

wor

k fo

r hig

her

prox

imity

to th

e m

arke

t and

to

decr

ease

last

mile

tran

spor

tatio

n co

st

Bay

er H

ealth

care

in C

hina

rede

sign

ed it

s su

pply

cha

in m

odel

tow

ards

a m

ore

regi

onal

/dec

entra

lized

app

roac

h. B

esid

es s

ervi

ce le

vel,

stoc

k an

d tra

nspo

rt co

sts

the

scen

ario

ana

lysi

s al

so c

onsi

dere

d ca

rbon

exh

aust

as

a ke

y de

cisi

on

crite

ria

0,7

-2%

sup

ply

chai

n co

st re

duct

ion

and

6-13

% re

duct

ions

on

corp

orat

e ca

rbon

foot

prin

t (th

roug

h re

duce

d tra

nspo

rt co

sts

and

incr

ease

d de

liver

y re

liabi

lity.

Low

er e

mis

sion

s an

d en

ergy

use

by

trans

port,

esp

ecia

lly b

y m

odal

shi

fts o

n th

e m

ain

leg)

S

mar

t and

gre

en

build

ing

depl

oym

ents

Mor

e ef

ficie

nt li

ghtin

g du

e to

se

nsor

s, L

ED

s, u

sing

nat

ural

ligh

t so

urce

s, d

e-la

mpi

ng

Bet

ter h

eatin

g/re

frige

ratio

n du

e to

in

telli

gent

spa

ce h

eatin

g sy

stem

s,

cont

rol o

f air

cond

.

RE

WE

’s d

istri

butio

n hu

bs h

ave

reac

hed

ener

gy a

nd c

arbo

n sa

ving

s of

30%

us

ing

sola

r pan

el a

nd e

nerg

y ef

ficie

nt te

chno

logi

es

Wes

tfalia

tech

nolo

gies

has

min

imiz

ed la

nd u

sage

, ene

rgy

cons

umpt

ion

thro

ugh

auto

mat

ed s

tora

ge a

nd re

triev

al s

yste

ms

Nik

e’s

Eur

opea

n Lo

gist

ics

Cen

ter i

n La

akda

l, B

elgi

um, i

s a

show

piec

e fo

r ad

vanc

ed d

istri

butio

n an

d re

new

able

ene

rgy.

The

on-

site

Nik

e W

ind

Par

k ho

sts

six

turb

ines

with

cap

acity

of 1

.5 M

W e

ach,

and

the

faci

lity

also

feat

ures

on-

site

so

lar e

nerg

y.

0,8

-1,5

% s

uppl

y ch

ain

cost

and

1-7

% g

reen

hous

e ga

s re

duct

ion

thro

ugh

20-5

0% o

n lig

htin

g en

ergy

and

40-

70%

on

heat

ing/

refri

gera

ting

ener

gy

11 12 13 14 15 16 17 18 19


N

o Su

pply

cha

in p

ract

ice

Des

crip

tion

Valu

e pr

opos

ition

beh

ind

the

“trip

le a

dvan

tage

” G

ood

prac

tices

S

hare

net

wor

k fa

cilit

ies

and

trans

port

Col

labo

rate

with

a c

orpo

ratio

n fro

m a

diff

eren

t ind

ustry

(or e

ven

com

petit

ion)

by

shar

ing

dist

ribut

ion

faci

litie

s an

d by

co

mbi

ning

veh

icle

load

s

Prof

itabi

lity

So

ciet

y

En

viro

nmen

t

Im

plem

enta

tion

Ease

A

maz

on a

nd P

roct

er &

Gam

ble

have

ent

ered

into

sev

eral

join

t ven

ture

s di

strib

utio

n ce

ntre

s. A

maz

on u

ses

P&

G's

war

ehou

se s

pace

for a

fast

er a

nd

chea

per d

eliv

ery

and

to s

tore

hig

her m

argi

n pr

oduc

ts th

ere.

P&

G h

as re

duce

d tra

nspo

rtatio

n an

d w

areh

ousi

ng c

ost

Nes

tlé a

nd P

epsi

Co

bund

led

thei

r war

ehou

sing

, co-

pack

agin

g an

d ou

tbou

nd

dist

ribut

ion

of fr

esh

food

pro

duct

s le

adin

g to

logi

stic

s co

st s

avin

gs, s

ervi

ce le

vel

impr

ovem

ents

and

car

bon

redu

ctio

ns. G

ains

are

div

ided

thro

ugh

a fa

ir sh

arin

g m

echa

nism

. The

“CO

3 co

nsor

tium

” cre

ated

a le

gal f

ram

ewor

k to

ena

ble

colla

bora

tion

not c

onfli

ctin

g an

titru

st la

w

10-

20%

redu

ctio

n in

tran

spor

tatio

n co

sts

whe

n sh

arin

g ou

tbou

nd

logi

stic

s 0

,4-0

,6%

sup

ply

chai

n co

st s

avin

gs th

roug

h sh

ared

fix

cost

s in

w

areh

ousi

ng a

nd h

ighe

r util

izat

ion

of tr

ucks

0

,1-0

,8%

redu

ctio

n in

com

pani

es c

arbo

n fo

otpr

int b

y re

duci

ng m

iles

trave

lled

and

war

ehou

se s

pace

bui

lt

Distribution

Incr

ease

veh

icle

ut

iliza

tion

degr

ee

Red

uce

sub-

optim

al lo

ads

or le

ss

than

truc

k lo

ad s

hipm

ents

thro

ugh

load

agg

rega

tion

plan

ning

(in

clud

ing

retu

rns

proc

ess)

IK

EA

elim

inat

ed a

ir an

d un

used

spa

ce fr

om th

e pa

ckag

ing

for i

ts G

LIM

MA

tea

light

can

dle.

Afte

r the

twea

k, th

e nu

mbe

r of t

ea li

ght p

acks

that

fit i

n a

stan

dard

E

urop

ean

palle

t inc

reas

ed b

y 40

%, r

educ

ing

emis

sion

s by

21%

I

n Tu

rkey

, Uni

leve

r re-

desi

gned

pac

ks a

nd p

alle

ts to

fill

truck

s m

ore

effic

ient

ly.

This

led

to s

avin

gs o

f 20

0.00

0 an

d a

redu

ctio

n of

277

tonn

es in

tran

spor

t-re

late

d C

O2 e

mis

sion

1,0

-1,5

% s

uppl

y ch

ain

cost

and

1,5

-2,5

% in

gre

enho

use

gas

redu

ctio

n th

roug

h hi

gher

truc

k ut

iliza

tion

Red

uce

trave

l di

stan

ces

Use

(rea

l-tim

e) in

form

atio

n on

sh

ipm

ents

& lo

catio

ns to

form

a

com

bina

tion

of m

ost e

cono

mic

al

rout

es w

ith le

ast k

ilom

etre

s tra

velle

d to

mak

e th

e de

liver

ies

DH

L's

Sm

art T

ruck

opt

imiz

es k

ilom

etre

s tra

velle

d by

a v

ehic

le b

y re

plac

ing

stat

ic ro

ute

plan

ning

with

dyn

amic

rout

e pl

anni

ng (u

sing

real

tim

e tra

ffic

data

). Th

is le

ads

to s

igni

fican

t tim

e sa

ving

s U

PS

dev

elop

ed a

rout

ing

softw

are

(“O

RIO

N”)

that

use

s pa

ckag

e le

vel d

etai

l an

d cu

stom

ized

map

dat

a to

pro

vide

driv

ers

with

opt

imiz

ed ro

utin

g in

form

atio

n.

It co

nsid

ers

mor

e ro

ute

com

bina

tions

than

trad

ition

al s

oftw

are

lead

ing

to

sign

ifica

nt c

ost a

nd c

arbo

n sa

ving

s.

Low

er tr

ansp

orta

tion

cost

, and

car

bon

exha

ust

Hig

her l

ivin

g qu

ality

due

to le

ss tr

affic

jam

s

Use

mor

e su

stai

nabl

e (in

term

odal

) tra

nspo

rts

Sw

itch

to m

ore

envi

ronm

ent-

frien

dly

trans

port

mod

es, e

.g. r

ail

inst

ead

of ro

ad

Bos

ch S

iem

ens

Hau

sger

äte

Gm

bH (B

SH

) shi

fted

arou

nd 1

3.00

0 TE

UR

from

ro

ad to

rail

savi

ng u

se o

f 120

truc

ks fr

om th

e B

SH

faci

lity

to th

e ha

rbou

r. Th

is

redu

ced

CO

2 em

issi

ons

by u

p to

70%

with

out c

ompr

omis

ing

othe

r tra

nspo

rt pa

ram

eter

s 0

,2-0

,7%

sup

ply

chai

n co

st re

duct

ion

(15-

20%

frei

ght s

avin

gs o

n ad

dres

sabl

e la

nes)

and

1,0

-4,5

% g

reen

hous

e ga

s re

duct

ion

(50-

60%

pot

entia

l whe

n sw

itchi

ng fr

om ro

ad to

rail)

D

e-sp

eedi

ng o

f th

e su

pply

cha

in

De-

spee

ding

tran

spor

t cha

ins

ofte

n is

pos

sibl

e fo

r a s

igni

fican

t am

ount

of p

rodu

cts.

Thi

s le

ads

to

an e

xpon

entia

l red

uctio

n of

ca

rbon

exh

aust

Con

-Way

has

turn

ed e

lect

roni

c sp

eed

limite

rs in

the

fleet

from

65

mph

to 6

2 m

ph. I

t sav

es >

3 m

io g

allo

ns o

f die

sel f

uel a

yea

r, w

hile

redu

cing

its

carb

on

emis

sion

s by

72

mio

pou

nds

(equ

als

the

carb

on e

xhau

st o

f 7.3

00 a

utom

obile

s)

0,5

-1,0

% s

uppl

y ch

ain

cost

redu

ctio

n an

d 0,

5-1,

0% g

reen

hous

e ga

s re

duct

ion

thro

ugh

low

er fu

el c

ost/f

reig

ht ra

tes

and

with

out a

n in

vest

End of life

Sup

port

envi

ronm

ent-

frien

dly

disp

osal

of

pro

duct

s

Fac

ilita

te a

nd s

uppo

rt ad

equa

te

disp

osal

of u

sed

prod

ucts

in

acco

rdan

ce w

ith e

nviro

nmen

tal

regu

latio

ns

Mar

ks &

Spe

ncer

col

labo

rate

s w

ith th

e no

n-pr

ofit

orga

niza

tion

Oxf

am w

here

us

ed M

&S

clo

thes

, sho

es a

nd b

ags

can

be e

xcha

nged

aga

inst

M&

S v

ouch

ers.

D

epen

ding

on

the

item

’s q

ualit

y, it

is e

ither

reso

ld o

r rec

ycle

d K

esko

has

mor

e th

an 2

20 e

copo

ints

at K

-food

sto

res

for r

ecyc

ling

cons

umer

pa

ckag

ing,

pap

er a

nd d

isca

rded

clo

thin

g. C

usto

mer

s ca

n re

turn

thei

r was

te

elec

trica

l and

ele

ctro

nic

equi

pmen

t to

the

stor

es

Opp

ortu

nity

to re

cycl

e or

refu

rbis

h m

ater

ial

Pos

itive

impa

ct o

n br

and

imag

e an

d po

tent

ially

a re

venu

e up

lift

Rec

ycle

m

ater

ials

R

ecyc

ling

of u

sed

prod

ucts

N

ike

Grin

d is

a p

rem

ium

-gra

de ra

w m

ater

ial m

ade

from

recy

cled

ath

letic

sho

es

colle

cted

thro

ugh

NIK

E‘s

Reu

se-A

-Sho

e pr

ogra

m a

nd th

e re

cycl

ing

of s

crap

m

ater

ials

left

over

from

the

man

ufac

turin

g of

NIK

E fo

otw

ear.

Nik

e G

rind

has

been

foun

d to

be

an id

eal c

ompo

nent

of h

igh-

perfo

rman

ce N

IKE

foot

wea

r and

ap

pare

l, an

d ca

n al

so b

e ap

plie

d fo

r use

in h

igh-

qual

ity s

ports

sur

face

s in

clud

ing

cour

ts, t

rack

s an

d m

ore

Tim

berla

nd a

nd th

e tir

e m

anuf

actu

rer O

mni

Uni

ted

desi

gned

spe

cial

tire

s th

at

can

be re

cycl

ed in

to fo

otw

ear o

utso

les

at th

e en

d of

thei

r life

on

the

road

rath

er

than

for t

ire-d

eriv

ed fu

el o

r end

ing

up in

land

fills

Red

uctio

n of

raw

mat

eria

l and

ene

rgy

cost

. P

ositi

ve im

pact

on

bran

d im

age

and

pote

ntia

lly a

reve

nue

uplif

t

Reu

se m

ater

ials

U

se re

cycl

ed m

ater

ials

or

com

pone

nts

as in

put f

or

prod

uctio

n or

re-u

se w

hole

pr

oduc

t thr

ough

, for

exa

mpl

e,

refu

rbis

hmen

ts

AS

OS

feat

ures

on

its o

nlin

e m

arke

tpla

ce 7

50 b

outiq

ues

thro

ugh

whi

ch

indi

vidu

als

can

sell

pre-

owne

d an

d vi

ntag

e cl

othe

s to

a g

loba

l aud

ienc

e, th

us

exte

ndin

g th

e lif

ecyc

le o

f fas

hion

item

s R

ico

reus

es p

arts

in p

rinte

rs, s

cann

ers,

etc

. whe

n re

tired

to re

capt

ure

valu

able

m

ater

ial,

ener

gy a

nd c

ompo

nent

s

Rem

anuf

actu

ring

lead

s to

net

redu

ctio

n in

inpu

t cos

t of 3

0-40

% a

nd

a gr

oss

prof

it in

crea

se o

f up

to 5

0% (f

acto

ring

in h

ighe

r lab

our c

ost)

R

eman

ufac

turin

g cr

eate

s hu

ndre

ds o

f tho

usan

ds jo

bs (e

.g. i

n th

e U

S a

roun

d 20

0.00

0 fu

ll-tim

e jo

bs)

Rem

anuf

actu

ring

requ

ires

85%

less

ene

rgy

com

pare

d to

m

anuf

actu

ring

Impr

ove

supp

ly

chai

n vi

sibi

lity

(ava

ilabi

lity

of

data

/ana

lytic

s)

Lev

erag

e te

chno

logy

to in

crea

se

visi

bilit

y in

the

supp

ly c

hain

and

ap

ply

anal

ytic

s fo

r mor

e su

stai

nabl

e ou

tcom

es

Lab

orlin

k, a

mob

ile p

latfo

rm th

at o

ffers

com

pani

es re

al-ti

me

data

from

thei

r su

pply

cha

in o

r fie

ld o

pera

tions

, giv

es w

orke

rs a

nd fa

rmer

s a

voic

e to

repo

rt on

co

nditi

ons

in th

eir w

orkp

lace

or c

omm

unity

R

isk

met

hods

: A c

olla

bora

tive

cros

s-en

terp

rise

risk

man

agem

ent p

latfo

rm

leve

ragi

ng d

ata

from

var

ious

dig

ital a

nd n

on-d

igita

l sou

rces

of i

nfor

mat

ion

Bet

ter d

ecis

ion

mak

ing

R

educ

ed c

ost a

nd ri

sk a

long

the

supp

ly c

hain

. A

void

ance

of u

n-et

hica

l sup

plie

rs

Shar

e it

20 21 22 23 24 25 26 27 28


N

o Su

pply

cha

in p

ract

ice

Des

crip

tion

Valu

e pr

opos

ition

beh

ind

the

“trip

le a

dvan

tage

” G

ood

prac

tices

Use

tech

nolo

gy

to tr

ace

mat

eria

ls

Use

tech

nolo

gy a

long

the

end-

to-

end

supp

ly c

hain

pro

cess

to tr

ack

prod

uct o

rigin

, qua

lity,

saf

ety,

du

rabi

lity,

relia

bilit

y as

wel

l as

auth

entic

ity. T

his

"pub

lic

trans

pare

ncy"

is re

ques

ted

by

toda

y's

cust

omer

and

go

vern

men

ts/re

gula

tions

.

Prof

itabi

lity

So

ciet

y

En

viro

nmen

t

Im

plem

enta

tion

Ease

N

estlé

’s k

ey s

uppl

iers

are

requ

ired

to p

rovi

de in

form

atio

n on

thei

r sup

ply

chai

n ba

ck to

the

orig

in fo

r the

pro

duct

s th

ey s

uppl

y to

Nes

tlé. T

he in

tent

is to

gai

n a

com

preh

ensi

ve p

ictu

re o

f the

ext

ende

d su

pply

chi

n do

wn

to th

e fa

rm le

vel.

Nes

tle ta

rget

s a

40%

trac

eabi

lity

of th

e vo

lum

es o

f its

key

com

mod

ities

unt

il 20

15

Joh

n W

est T

una:

Thr

ough

its

“Can

Tra

cker

” con

sum

ers

can

track

the

sour

ce o

f th

e fis

h in

thei

r can

, eve

n in

clud

ing

the

ocea

n an

d th

e bo

at th

e ca

ught

the

fish

Tru

st a

nd s

ales

upl

ift th

roug

h ad

ditio

nal b

rand

val

ue (0

,5- 1

%)

Sec

ure

supp

ly a

nd e

nabl

e gr

owth

I

mpr

oved

sup

ply

chai

n m

anag

emen

t (1-

3%) t

hrou

gh im

prov

ed

inve

ntor

y m

anag

emen

t, qu

icke

r rec

alls

, red

uced

loss

es

Red

uced

cos

ts a

ssoc

iate

d w

ith ri

sks

(10-

30%

) thr

ough

acc

urat

e in

sigh

t in

prod

uct t

race

abili

ty, r

educ

ed fi

nes

from

regu

lato

ry n

on-

conf

orm

ities

Cross Functional

Impl

emen

t fai

r w

ages

pol

icy

and

empo

wer

w

orkf

orce

Im

plem

ent f

air w

ages

pol

icy

and

pay

sala

ries

abov

e liv

ing

wag

e in

ow

n fa

ctor

ies

and

enfo

rce

on s

ub-

cont

ract

or le

vel

Mar

ks a

nd S

penc

er im

plem

ents

a p

roce

ss to

ens

ure

that

clo

thin

g su

pplie

rs a

re

able

to p

ay w

orke

rs a

fair

livin

g w

age

– st

artin

g in

its

leas

t dev

elop

ed s

ourc

ing

loca

tions

. To

be a

chie

ved

by p

ayin

g ad

equa

te c

ost p

rices

to th

eir s

uppl

iers

and

by

rolli

ng o

ut a

n et

hica

l mod

el fa

ctor

y pr

ogra

m

Sw

itche

r has

set

up a

“sol

idar

ity fu

nd” a

t one

of i

ts s

uppl

iers

in B

angl

ades

h. F

or

each

ord

er a

n ad

ditio

nal 1

% o

f the

FO

B p

rice

is p

aid

dire

ctly

to th

e w

orke

rs

incr

easi

ng th

e w

ages

of t

he w

orke

rs to

a li

ving

wag

e

Im

prov

ed h

ealth

and

live

lihoo

d at

wor

kers

leve

l hig

her b

rand

imag

e.

Bet

ter a

cces

s to

tale

nt a

nd h

ighe

r em

ploy

ee s

atis

fact

ion.

R

educ

ed o

vera

ll co

mpa

ny ri

sk o

f bei

ng c

onsi

dere

d as

“une

thic

al”

Enf

orce

hig

h en

viro

nmen

t, he

alth

, saf

ety

stan

dard

s

Im

plem

ent h

igh

envi

ronm

ent,

heal

th a

nd s

afet

y st

anda

rds

on

oper

ativ

e le

vel (

incl

. no

child

la

bour

pra

ctic

es)

Cat

erpi

llar c

reat

ed it

s vi

sion

and

con

cept

for a

saf

e w

ork

envi

ronm

ent i

n 20

03.

Sin

ce th

en, t

he a

mou

nt o

f acc

iden

ts h

as b

een

redu

ced

by 8

0%

Eve

ry d

olla

r spe

nt o

n E

HS

pro

gram

mes

resu

lt in

a re

turn

of $

1,5

to

$6

Im

prov

e em

ploy

ee p

rodu

ctiv

ity a

nd re

tent

ion

rate

Tabl

e 3.

Det

aile

d va

lue

asse

ssm

ent o

f sup

ply

chai

n pr

actic

es (S

ourc

e: T

eam

ana

lysi

s, A

ccen

ture

)

29 30 31


The World Economic Forum approached partner companies to validate the applicability of the supply chain landscape. Based on those conversations, practices were identified and examined in more detail through deep dive explorations. The specific practices explored in more detail include: sourcing from local suppliers, sharing network facilities and transport, using innovative vehicle technologies and tires, and increasing visibility and traceability.

No Supply chain practice Deep dive Company

Sourcing from local (micro) suppliers

Sourcing locally from thousands of small-holders SABMiller

Share it Sharing network facilities and transport Collaborating with the competition Nestlé

Using innovative vehicle technologies and tiresUse innovative vehicle technologies and tires – aerodynamic truck DHL

Increasing visibility and traceability

Leveraging digital technologies for triple advantage Vodafone

Sourcing locally from thousands of smallholdersIn the past 20 years or so, more and more companies have reconfigured their sourcing models to take advantage of low-cost countries. Now companies are again changing their strategies when it comes to local sourcing. Instead of doing it purely to drive down costs and risks, they are taking a more holistic approach and using it to strengthen their brand image and to drive growth, achieving the triple advantage. Business ValueThere are three approaches to leveraging smallholders:

1. Operational efficiency. Players connect with smallholders to hedge against supply chain disruptions and, in the process, improve quality and reduce production losses.

2. Licence to operate. Global product manufacturers leverage smallholders to ensure their “license to operate.” By that we mean that doing so gives them the credibility with communities, NGOs, media and governments that they are invested in sustainability, and ensures fewer bureaucratic hurdles and access to more resources, better pricing and government subsidies. It also raises the brand profile of the company in the eyes of consumers and markets rewarding businesses that “get” sustainability.

Figure 7. Local sourcing approaches

Table 4. Deep dive topics

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3. Local market penetration. This involves companies that market products locally. Instead of just using local sourcing as an efficiency play, these companies emphasize the local nature of brands to boost growth through local brand awareness. In addition, they enjoy lower excise taxes and are able to develop market-specific products and services – ones more suited to the specific needs of local customers.

Socio-environmental valueLocal sourcing can lead to significant savings in carbon exhaust through decentralized logistics structures. In addition, local sourcing has spill-over effects on local economies and welfare, for example10:

– Studies show that if farmers are included in long-term contracts and high-value export chains it leads to more benefits for them: better product quality, higher yields and overall income.

– Technology transfer plays an important role in creating local wealth through spill-over effects to other crops. In addition, the food security of rural households is improved.

– Training may lead to higher wages through an “efficiency premium” to motivate trained workers to stay with the same buyer in the long term.

– Additional social benefits come through job creation in labour-intensive sectors, e.g. farming and textile manufacturing.

– Working conditions are more likely to improve when fair trade standards are applied.

SABMiller’s brand, Eagle beer, produced by Nile Breweries Uganda, is one example of how local sourcing can help gain advantage for communities. In 2001, Nile Breweries faced strong market competition that threatened to stymie ambitious growth goals. SABMiller decided to launch Eagle as a low-cost beer, and source the sorghum used in its production from local farmers. As part of their smallholder relationships, Nile Breweries committed to longer term contracts and price agreements. Over 20.000 farmers are now part of the supply chain for Eagle, and the brand represents more than 50% of Nile Breweries’ sales. For farmers, the success of Eagle means more stable income and access to medical care and funding to achieve their own growth goals.11

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According to a 2008 INSEAD study, Niles Breweries contributes 44.000 jobs to the Ugandan economy. Nile Breweries created a value add of around $100 million for the local economy, or 0,8% of GDP, through higher household incomes, taxes and local company profits.12

Collaborating with the competitionTo achieve their own triple advantage, Nestlé has come up with an unusual recipe for success: collaborating with competitors. Together with PepsiCo, Nestlé combined parts of its supply chain for its fresh and chilled food products in the Belgian market. The horizontal collaboration approach not only addresses low truck fill rates, but it also exploits retail customer overlaps.

Nestlé bundled warehousing, packaging and outbound distribution and synchronized deliveries to retailers to get full truck loads. This drove down transportation costs by 44%. Compared to “classic groupage” optimization, this horizontal collaboration created 15% higher cost savings. In addition, carbon emissions were reduced by 55% with spill-over effects on traffic and a decrease in accidents. Better yet, service levels increased. The approach also allowed Nestlé and PepsiCo to deliver more frequently – a key differentiator in fresh products – driving up the overall satisfaction levels of retailers and end customers.

One key success factor was to create a legal framework between the two companies to safe guard anti-trust compliance. STEF was chosen as third-party supplier to bundle the physical logistics of Nestlé and PepsiCo’s shipments while keeping sensitive information separated (e.g. detailed cost or order details and quantities).13

The benefits created are split through a fair share mechanism based on the quantities shipped by each party all of which is mapped into STEF’s invoicing process. The process is audited by an external party bi-annually. Nestlé intends to extend the model for fresh and chilled warehousing and distribution by integrating more companies and extending it to other geographies.

Figure 8. Benefits for Nestlé - Scenario comparison (Source: Nestlé)

Use innovative vehicle technologies and tires – Aerodynamic truckIn 2006, DHL and Don-Bur, a manufacturer of vehicle trailers, jointly developed the Teardrop™, an aerodynamic trailer delivering fuel and CO2 savings of up to 12%. Through the joint project, Don-Bur managed to withstand the local economic recession and became one of the most successful trailer companies in the UK. Don-Bur increased staffing levels by about 20%. Local suppliers have benefitted from increased production rates.

Leveraging digital technologies for triple advantageHow can digital contribute to the triple advantage? There are a number of ways, from improving supply chain visibility to allowing better access to financing for smallholder players.

Mobile technologies - Connecting farmers in the agriculture value chainConsider the findings of a recent Vodafone Accenture study.14 One-third of humanity is fed through an estimated 500 million smallholder farms with less than two hectares of land. The Vodafone Accenture research explored how mobile communications help these small operations cope with the challenge of feeding a growing population. The study also identified a number of opportunities that would increase farmer’s income by 11% or around $128 billion across 26 of Vodafone’s markets by 2020. Some of the areas mobile technologies can improve in agricultural operations include:

– Access to finance: Better access and affordability of financial services allowing farmers to invest independently, driving outputs, local growth and welfare

– Agricultural information: Knowledge on agricultural techniques, commodity prices and weather forecasts improving the farmer’s yield

– Data visibility: Usage of traceability systems enables a better fleet management and reduces food losses significantly

– Access to markets: Better linkage of commodity exchanges, traders, buyers and sellers of agricultural produce

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Chapter 2

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Load % Cost CO2

Benefits for Nestlé – Scenario Comparison (Nestlé)

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Figure 9. DHL’s Teardrop Truck (Source: DHL)


The recommendations would decrease greenhouse gases and reduce freshwater withdrawals while improving overall supply chain efficiency.

There are numerous case studies that illustrate how digital is enabling the triple advantage for supply chains across industries and geographies. Here are two examples:

Telematics – Improved delivery performance and carbon footprint: A global transportation company developed a proprietary telematics system that combines information on the mechanical behaviour of delivery vehicles and behavioral patterns of drivers and helps the company increase its fuel efficiency throughout the process. The vehicles are equipped with multiple sensors to gather information on vehicle speed, direction, braking and performance of specific parts and components of the engine. At the end of each driver’s shift all the information is uploaded to a data centre. Off-the-shelf telematics software helps to gather and compile the data. Using proprietary applications, the company’s personnel queries and analyses the data and draws conclusions about vehicle maintenance and logistics processes. Improved driving behaviour helps the company reduce the fuel consumption thereby improving its carbon emissions. Maintenance of vehicles reduces waste (parts, oil, etc.) because of reduced idling time and fewer engine restarts.

Scalable visibility solutions for supplier information management: Corporations can use digital platforms to identify and manage different types of risks in real time in their global supply chains or field operations. One global retailer was struggling with low visibility into hazardous material used in colouring processes. There was a need for improved information collection with tier 3 suppliers. A digital platform helped the retailer capture product composition information from its supplier base. The platform also helped data validation through analytics for compliance with restricted substances rules.


Leaders on triple advantage The supply chain landscape and its detailed value position is a blueprint for companies driving their supply chains towards triple advantage. Unilever and SABMiller are two companies making headway when it comes to the triple advantage.

Unilever Unilever’s vision is clear: “We cannot close our eyes to the problems the world faces. At Unilever we believe that business must be part of the solution. But to be so, business needs to change.”15 Through Unilever’s “Sustainable Living Plan”, launched in 2010, the company has integrated sustainability at the core of its business strategy. The plan encompasses a wide-range of initiatives driving toward triple advantage including a goal to “decouple Unilever’s growth from environmental impact, while increasing its positive social impact”.16 A selection of initiatives behind those goals is presented in Figure 10 and mapped to the “Beyond Supply Chains” supply chain landscape.

Figure 10. Non-exhaustive view of Unilever‘s sustainable initiatives (source: Unilever, Team analysis)

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Chapter 2

“Making Progress, Driving Change”

Product innovation reducing packaging weight and product carbon footprint

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Collaboration with suppliers fostering sustainable sourcing

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Innovative product design reducing energy consumption during life

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New packaging technology to reducing plastic usage

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Heathier products - Portfolio met highest nutritional standard (reduced salt level, lower saturated fat, etc.)

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Collaboration with local supplier – Local sourcing

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Improving Health & Well-Being

Reducing Environmental Impact

Enhancing Livelihoods

Goals Sample of Initiatives

Social Measure Environmental Measure # No. of practice from the “Landscape of Supply Chain Practices”

Non-Exhaustive View of Unilever‘s Sustainable Initiatives

Updated it

SABMiller “We understand that our profitability depends on healthy communities, growing economies and the responsible use of scarce natural resources.”17 It’s this vision that has propelled SABMiller to define, “Five Shared Imperatives.” “By working together with local communities, suppliers, governments, consumers and beyond, SABMiller can develop shared opportunities to the benefit of all.”18

SABMiller is known in the market as being a leader when it comes to sustainability. The company is renowned for its strength in local sourcing. Figure 11 highlights the practices mapped to our landscape.

Figure 11. Non-exhaustive view of SABMiller’s sustainable initiatives (source: SABMiller, Team analysis)

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“Prosper” - Five Shared Imperatives NON-EXHAUSTIVE

Imperatives Sample of Initiatives

1. Accelerating growth and social development in our value chains

2. Make beer the natural choice for the moderate and responsible drinker

3. Secure shared water resources for our business and local communities

4. Create value through reducing waste and carbon emissions

5. Support responsible, sustainable use of land for brewing crops

Water use per liter of production reduction

Directly support over half a million small enterprises to enhance their business growth and family livelihoods

Responsible retail practices support - Engagement, targeting small retailers

Waste reuse or recycle Packaging carbon footprint reduction

“Better Barley, Better Beer”: Improves sustainability of barley farming practices

Use under-commercialized crops providing new markets w/o affecting food availability

Program to mitigate shared water risks

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Social Measure Environmental Measure # No. of practice from the “Landscape of Supply Chain Practices”

Non-Exhaustive View on SABMiller’s Sustainable Initiatives

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Figure 12. Profitability potentials and benefits for local economies/ societies (Source: Team analysis, Accenture)

Implementation, prioritization, business case Companies often struggle when it comes to proving a business case for responsible supply chains. Once they do, setting the right priorities becomes the next hurdle. To help guide companies towards achieving the triple advantage, we have taken our 31 practices and shown how each drives organizational value. Rankings and decision matrices enable companies to set the right investment priorities and implementation sequence.

Leveraging the 31 practices can help companies:19

– Boost profitability: Revenue uplift of 5-20%; supply chain cost reduction of 9-16%, brand value increase of 15-30%, significant company risk reduction

– Benefit local development: Improved customer health, local welfare and labour standards (wages, working conditions)

– Improve the environment: Carbon gas reduction of 13-22% on overall footprint

The following figures20 summarize benefits held within each triple advantage area.

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Chapter 2

Cost 9-16% lower supply chain cost 5-15% lower manufacturing cost 10-25% lower material cost

Risk Overall decrease in company risk through lower risk of unethical suppliers, NGO campaigns, legal fees and secure resource supply

Revenue 5-20% revenue uplift for more sustainable products Sales of carbon certificates Revenues by new business models

Example: Supply Chain Cost Reduction Potentials High Value Practices

Profitability

Brand 10-25% increase in overall corporate brand by implementing responsible supply chain practices Use more sustainable (intermodal) transports 0,7%

0,2%

Reduce travel distances

0,8%

Smart and green building deployments 1,5% 0,8%

Sell through crowd-shipping 4,3% 1,0%

Increase vehicle utilization degree 1,5% 1,0%

Use innovative vehicle technologies and tires 4,8% 2,4%

Reduce weight or size of packaging material 5,0% 3,0%

0,5% 0,2%

Share network facilities and transport 0,5% 0,4%

Consider more decentralized distribution network 2,2% 0,7%

De-speeding of the supply chain 1,1% 0,7%

Use alternative fuels 1,4%

Optimistic Conservative

Practices sorted by cost reduction potentials for conservative scenario

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Cost Reduction Potentials and Community Benefits

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Chapter 2

Example: Community Benefits High Value Practices Local Economies /

Societies

Community High effect, e.g. through local development programs, selection or more sustainable suppliers

Ethical Standards High effects, through fair wages policies, supplier auditing and materials traceability

Health Medium effect, e.g. by designing more healthy products and executing EHS programs

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Reduce energy, water use and emissions

Sell through micro retailers

Use technology to trace materials

Design for positive influence on consumer’s health


Source from local (micro) suppliers

Establish supplier auditing and control

Consider sustainability criteria in location decision

Source from sustainable suppliers

Implement fair wages policy and empower workforce

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The Community Benefit Index (1-10) is based on ratings discussed by partners from the World Economic Forum.


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Reduce weight or size of packaging material Design for maximum recyclability and “circularity” Design for lower energy and material use in life cycle Design for positive influence on consumer's health Reduce weight or size of product Design for maximum recyclability and “circularity” Seek for more sustainable, “second source” alternatives Establish supplier auditing and control Source from local (micro) suppliers Source from sustainable suppliers

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Consider sustainability criteria in location decision Reduce energy, water use and emissions Centralize and optimize waste management Sell through crowd-shipping Sell through micro retailers Use innovative vehicle technologies and tires Use alternative fuels Consider more decentralized distribution network Smart and green building deployments Share network facilities and transport

Increase vehicle utilization degree Reduce travel distances Use more sustainable (intermodal) transports De-speeding of the supply chain Support environment-friendly disposal of products Recycle materials Reuse materials Improve supply chain visibility (availability of data & analytics) Use technology to trace materials Implement fair wages policy and empower workforce Enforce high environment, health, safety standards

Socio-Environmental Value Matrix Business Value Matrix

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Figure 13. Carbon exhaust reduction potentials (Source: Team analysis, Accenture)

To fully exploit the triple advantage, executives need to set clear priorities and aim for early “quick wins” to prove the efficacy of the approach. To make that possible, our decision framework gives a full view of the value inherent in each of the 31 practices in terms of both profit and socio-environmental benefit (see Figure 14).

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Chapter 2

Example: Carbon Exhaust Reduction Potentials High Value Practices

Environment

Land Fill Reduction in landfill up to 60% through higher recovery rates or closed loops

Resource used 20-30% less material needed in production 20-40% less water needed in production 20-50% less energy needed

Carbon Exhaust Reduction from 13%- 22%, mainly distribution and procurement practices

4,5% 1,3%

Increase vehicle utilization degree 1,6% 2,5%

4,5% Reduce weight or size of packaging material

Sell through crowd-shipping

3,0%

3,2% 10,0%

15,0% Use innovative vehicle technologies and tires 7,5%

Share network facilities and transport 0,8% 0,2%

Reduce travel distances 0,8% 0,4%

De-speeding of the supply chain 1,0% 0,5%

Use alternative fuels 1,5% 0,8%

Smart and green building deployments 3,3% 1,0%

Consider more decentralized distribution network 2,4% 1,1%

Use more sustainable (intermodal) transports

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Practices sorted by exhaust reduction potentials for conservative scenario

Carbon savings refer to the company’s footprint

Carbon Exhaust Reduction Potentials

Figure 14. Decision-making support towards “triple advantage” (Source: Team analysis, Accenture)


Based on the decision matrices, “make-to-stock” companies can define their individual path to realizing the triple advantage in the least amount of time.

Decision quadrant

Explanation Example (business value) Example (socio-environmental value)

Short-term/large impact

“Quick-win” practices providing high value with relative little effort and cost

Smart and green building deployments (19)

Enforce high environment, health and safety measures standards (31)

Transformational High-value initiatives, however with high effort (e.g. larger scale supply chain programmes)

Improve supply chain visibility (28)

Source from local (micro) suppliers (9)

Incremental Lower value, but easy to implement Support environmentally friendly disposal of products (25)

Increase vehicle utilization degree (21)

Conditional Lower value, difficult to implement initiatives suitable in certain conditions

Consider sustainability criteria in location decision (11)

Reduce weight or size of product (5)

Creating responsible supply chains entails factoring in both business and socio-environmental value. Depending on the organizational mindset towards sustainability, companies emphasize business value versus socio-environmental value differently.

There are four major archetypes that capture companies’ approach to sustainability – economist, liberal humanist, social industrialist and philanthropist – each putting a different weight on socio-environmental value. The economist archetype places the least amount of value on socio-environmental issues and the philanthropist the highest. The borders between the archetypes are not rigid. Most corporations are within the first three, with cost leaders tending to be closer to economist. Social entrepreneurs (organizations that exist purely to provide social benefit) often appear within the philanthropist archetype. We simulated the changes in decision-making and prioritization in a tool using the data behind our 31 practices for the four different archetypes – defining a triple advantage index21.

When it comes to prioritizing the 31 practices, about 35% of them will vary in their ranking depending on the social archetype (see examples in Figure 15 and the changes within the decision quadrants); 65% will remain relatively stable.

To create maximum impact when it comes to launching triple advantage efforts, it is important to understand an organization’s social archetype and factor it into the decision-making process.

Figure 15. Decision-making for different social archetypes (Source: Team analysis)

Table 5. Decision quadrants

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Beliefs

Liberal Humanist

Emphasis on business value Emphasis on socio-environmental value

Economist Social Industrialist Philanthropist

Matrices (Triple Advantage Index)

Business Socio-

Environ.

100% 0%

Business Socio-

Environ.

65% 35%

Business Socio-

Environ.

35% 65%

Business Socio-

Environ.

0% 100%

Q1 - Large Impact

Q3 - Transformational

Q2 - Incremental

Q4 - Conditional

Prioritization

Archetypes

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Q1 Q3

Q4

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31 31 31 24 24

24 24

28 28 28 6

6 6 6

6 28 24 31

Design for maximum recyclability and "circularity"

De-speeding of the supply chain

Improve supply chain visibility (availability of data and analytics)


Q2

Q1 Q3

Q4 Q2

Q1 Q3

Q4 Q2

Q1 Q3

Q4

Decision Making for Different „Social Archetypes”

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Chapter 3:Beyond the Business Case – Committing to Human Rights



Everyone should have access to fair pay and a safe working environment. Yet, unfortunately, many companies struggle to balance a commitment to ethical working conditions over managing multiple value chain partners and remain competitive in the process. Retailers in particular seem vulnerable as witnessed by a host of news articles about working conditions especially in developing countries. That may be because they are not trying hard enough to gain control over their networks, or because they lack visibility into their sub-contractor layers. The following deep dive addresses issues surrounding fair wages, highlighting what companies and governments can do to ensure living wages and in general safe and healthy working conditions.

Paying above the living wage – A deep dive Below poverty line wages have been an issue that plagued the textile, clothing, leather and footwear industry for years. As Figure 16 clearly shows, wages in producing countries like Bangladesh, Cambodia, India and Indonesia are not enough to supply a living wage – ranging between 14% and 36% of what would be necessary.

Some countries such as India and Indonesia have improved over the last decade, but the pace of change is far too slow. Bangladesh, as one example, shows no sign of improvement over the last decade. In Cambodia, the

workers’ purchasing power has even decreased. Still some countries, including China, have made more substantial progress and will close the gap within the next 10-15 years.22

The world’s garment workforce is comprised primarily of women. Sub-standard earnings lead for many of them to “low calorific intake, limited access to adequate health services, lack of social security, poor housing and limited access to education”. 23 In countries like Bangladesh, women made strides in easing poverty in rural areas. When jobs shifted to manufacturing in urban centres, rural development slowed. At the same time, the International Labour Organization (ILO) noted that little progress was made in urban areas in sectors like garment manufacturing.24

Legislation in countries like Bangladesh and the resolve of businesses to work ethically are not enough. As demonstrated in Figure 17, Asian manufacturing hubs in Bangladesh and Sri Lanka have set the minimum wage to equal one-fifth of the living wage. What is worse, studies show that most companies do not comply, paying their workers even less than the already paltry legal minimum. For example, a staggering 42% of Indian25 and 39% of Indonesian26 garment producers do not follow recommended minimum wage standards. Governments, fearful of losing this lucrative trade, have been slow to respond.

Figure 16. Garment workers’ wages and their evolution (Source: Worker Rights Consortium)

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Changes 2001 - 2011

Years until living wage

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Garment Workers Wages and their Evolution [% Living Wage]

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*Living wage as defined by the Asia Floor Wage - PPP$725 in 2013 - Calculated for a worker to be able to support himself and either one adult or two children.

Garment Workers’ Wages and their Evolution

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*Living wage as defined by the Asia Floor Wage - PPP$725 in 2013 - Calculated for a

worker to be able to support himself and either one adult or two children.

Legal Minimum Wages

Figure 17. Legal minimum wages (Source: Clean Clothes Campaign)


To break the status quo, companies and their sub-suppliers need to gain clarity on where “the buck stops” when it comes to fair wages. Today, companies look to suppliers to provide solutions and, likewise, suppliers look to governments to solve problems. To address the issue of ethical salaries, governments and corporations need to set standards and ask the following questions:

– What is an ethical salary? – What is the share of responsibility between business

and government? – Who should absorb these costs along the value chain? – How can we move from rhetoric to action?

Earning a living wage is a human right The United Nations Universal Declaration of Human Rights (Article 23/3) states: “Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.”27 In other words: living wages are a basic human right. And following basic human rights should be non-negotiable.

The UN Guiding Principles provide a framework to resolve this issue by clarifying responsibilities between governments and corporations as well as between corporations and their sub-suppliers: – Responsibilities between governments and business:

Governments need to protect human rights; corporations need to respect and follow human rights. The principles state that a corporation’s responsibility to protect human rights “exists independently of States’ abilities and/or willingness to fulfil their own human rights obligations, and does not diminish those obligations. And it exists over and above compliance with national laws and regulations protecting human rights.”28 So, even if governments are failing to implement subsistence level wages, corporations are still obliged to pay fair wages.

– Responsibilities within the supply chain: According to Principle 13 of the UN Guiding Principles, companies cannot delegate the responsibility of fulfilling human rights, (paying living wages in this case) to suppliers or sub-contractors. It notes companies should “seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.” Fashion brands and retailers, therefore, have a responsibility to ensure a living wage is paid in both supply chains and sub-supply chains.

Fair share of cost between retailer and subcontractor Looking at the share of value of a t-shirt from Bangladesh sold in Germany exemplifies the degree of freedom companies have within margins. Garment workers there receive around 0,6% of the t-shirt’s retail price. A manufacturer profits 12,5% from the per unit cost, while retailers enjoy a commercial margin of 42,6% compared to a margin of 4% for subcontractors (Figure 18).

Retailers have recognized their responsibility and acted on it with a number of initiatives aiming to improve wage levels.

Switcher “brand bonus” projects: Brands like Switcher have come up with their own approaches to closing wage gaps. Switcher, in collaboration with the Fair Wear Foundation, has created a solidarity programme where 1% of every garment’s FOB (the cost of ocean shipping) is pooled and distributed annually as a bonus. For Bangladeshi workers, that translates into a doubling of their annual salaries.

Limited short-term contracts with subcontractors: Several major retailers have capped the use of short-term contracts of suppliers. Short-term contracts are often used to undermine the ability of unions to negotiate wages.

Figure 18. Share of value – T-shirt from Bangladesh sold in Germany (Sources: DPA, Fairwear Foundation)

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In Germany, the Commercial Margin for a shirt is about 43% of sales price, the garment worker only earns 0,6%

4,63

3,402,19

1,201,150,27

12,37

3,61

0,1829,00

Retail* Value Added Tax

Brand Profit

Material Cost

Profit Factory Bangladesh

Overhead Cost

Intermediary Pay to Garment Worker

Transport Cost

Share in %: 100% 0,6% 0,9% 4,0% 7,6% 11,7% 12,5% 16,0% 42,6% 4,1%

Share in EUR:

*Includes all costs at a retail level including staff, rent, store profit, etc

Share of Value – T-Shirt from Bangladesh Sold in Germany

Sources: Sources: DPA, Fairwear Foundation


Recommended actions for corporations and governments Earning a living wage is a major step towards establishing acceptable working conditions. Another host of issues should also be addressed: forced labour, discrimination, harassment and workplace safety, among others. Companies and government need to act jointly to ensure that the internationally recognized norms established by the Universal Declaration of Human Rights and the ILO’s labour standards are upheld.29

Recommended actions for companies30,31,32

Empower workers: Workers are first and foremost impacted by wage levels and working conditions, so they have to be given the freedom to claim their rights. As Oxfam noted, “When people have the power to claim their basic rights, they can escape poverty – permanently.”33 Where to start to ensure that happens? Workers need to be given access to formal complaint structures within a company. They should be encouraged to join unions and companies need to require their own suppliers to provide access. That will give workers the ability to negotiate wages and working conditions.

Set new purchasing practices and benchmarks: Because of constant pressure on pricing, providing a living wage remains a challenge to suppliers looking to make their margins. To enforce change, companies need to do two things: First, engage in long-term relationships with their suppliers. By doing so, buyers can shape incentives and share best practices to encourage higher standards in their supplier pool. And they can require suppliers to benchmark remuneration schemes against living wage standards. Second, buyers should encourage industry-wide standards. Teaming up to establish standards with other companies forces the market of suppliers to meet requirements, or lose business.

Raise transparency within the supply chain: Changing purchasing practices must be complemented by higher transparency over the entire supply chain. Today, too many suppliers maintain a network of subcontractors. Those layers reduce visibility throughout the value chain. And companies should use field validation and worker interviews to ensure an impartial view and more control of supply chain practices. Companies need to work with governments and NGOs to guarantee transparent and independent factory inspections to uphold safety standards.34

Commit to a living wage: Most companies have committed publicly to working on the promotion of living wages. But to move from words to action, companies need to set up a realistic strategy that includes specific measurable goals and in a realistic timeframe. And they need reporting mechanisms to credibly demonstrate progress.

Adopt and implement a code of conduct: Complimentary to a commitment to fair wages, companies should collaborate with key stakeholders (NGOs and governments, factory owners, etc.) to establish a comprehensive and transparent

code of conduct. And they should track its application and act proactively to prevent violations. When it is not followed, manufacturers should refuse to work with subcontractors in violation of the code.

Recommended actions for governments35,36

Strengthen legislations: Governments can ratify new or upgrade existing legislations that guarantee fair wages, raising the minimum wage to living wage levels and advocating for acceptable working conditions. Legislation will have a halo effect on the efforts of individual companies and workers, making their goals more obtainable.

Ensure independent factory inspections: Governments can enforce regulations. They need to empower an authority with the means to run regular, transparent and independent factory inspection in respect to wages, working condition, and safety standards. Governments should penalize factory owners when they’re in non-compliance by, for example, revoking their export license.

Invest in infrastructure and education: Governments in countries like Bangladesh are walking a fine line: on one hand they fear that by increasing wages, their cost advantage is lost. And if they lose that, unemployment (arguably worse than low pay) will result. Governments need to invest in infrastructure and education to increase overall productivity and competitiveness. This in turn accelerates the adoption of fair wages by mitigating the risk of companies that “hop” to lower cost countries.37

Regulate investments: Again facing a difficult trade-off, governments should deal with foreign investment appeal carefully. Although investment in manufacturing means seems genuinely worthy, governments should apply policies that do not compromise working conditions.

Slowly, wages and working conditions are improving in pockets around the world. But to continue to make progress, trust and collaboration between corporations, governments and NGOs needs to strengthen further. Each plays its own part: Corporations need to act ethically, regardless of whether legislation dictates that they do so. Governments provide incentives and underlying legislation that catalyses action. NGOs serve as “checks to the system”, watchdogging when abuses happen, and setting global standards that will lead to improved conditions for workers and society at large.


Chapter 4:Conclusions and Outlook

We are in the middle of a paradigm shift. Consumer pressure, fuelled by social media, is driving commercial organizations to do more than pay lip-service to the global socio-environmental impact of their supply chains. This is no longer about risk mitigation, even though that is important; it is about a structural change in the way in which companies gain and maintain competitive advantage.

Leading companies have made the first step by moving from pure efficiency- or service-driven supply chain strategies to more holistic concepts which drive profitability and socio-environmental benefits simultaneously. Today, implementing responsible supply chains is a must for all other companies as well. Doing so promises significant competitive (triple) advantage and higher business performance. Conversely, if neglected, companies face the risk of being left out of the game when market demands change.

It is time to act, but how? There are a seemingly endless number of options for setting investment priorities. This conundrum is addressed by the decision framework we created. It supports the definition of an individual journey towards a triple advantage. A landscape of 31 supply chain practices unveils “white spots” in a company’s current agenda, a good starting point to identify imbalances in the portfolio of sustainability initiatives and a way to screen potential improvements. It is backed by detailed but “hands-on” value information for the business case, delivering a quick overview on practices that drive profitability, environmental or societal benefits.

To make a final decision on when to invest in which initiative, a decision matrix provides orientation for prioritization. It can be customized by a company’s social archetype that defines how strongly an organization emphasizes business versus social value. This suite of decision frameworks and tools supports the entire decision-making process that drives the triple advantage.

Following the landscape of 31 practices, corporations with make-to-stock supply chains achieve revenue uplifts of 5-20% for responsible products, overall supply chain cost reductions of 9-16%, brand value increases of 15-30% and carbon gas reductions of 13-22%, among other benefits.

It is important, however, when deciding on ethical measures, for companies to go beyond the business case. Human rights in particular should be non-negotiable. As illustrated in the deep dive, companies need to commit to paying workers above a living wage.

The journey towards responsible supply chains, ones that capture the triple advantage of business, social and environmental benefit, is challenging. Fortunately, leading companies have proven it is obtainable. Here is hoping that through their efforts, and through reports like this one, more companies will join the mission to improve business and the world.


MethodologyThe supply chain practices value assessment, value rankings, the decision framework and toolset are the result of extensive research, analysis and interviews. The project team reached out to more than 25 corporations across seven industries, as well as several NGOs and more than 20 sustainability experts to test the value proposition behind each supply chain practice and the overall project hypotheses. All results were analysed in depth, documented and supported by evaluation models. The project approach involved three stages as displayed in Figure 19.

Figure 19. Phases to the decision framework

23

The value assessments are focused on make-to-stock supply chains and were validated with consumer goods companies

Phase 1: Identify Options

Identified all supply chain practices driving a triple advantage

Leveraged various studies/ practitioner reports

Phase 2: Assess Value

Reviewed all 31 practices on their value creation potential and quantified benefits

Validation with selected leading corporations and experts

Phase 3: Create Decision Framework

Consolidated results of value assessment in two decision matrices

Consideration of fit to sustainability strategies and different social archetypes

Updated it

Just use this for figure 19,

without pictures

Phase 1: Create a comprehensive picture of options to drive triple advantageAs a starting point, a comprehensive set of supply chain practices was created covering all options needed to realize a triple advantage. By researching practitioners’ books, academic whitepapers and sustainability benchmarking studies, we identified a set of supply chain practices with environmental and social benefits. We extended the collection, balanced the right depth of practices, and refined the structure through interviews with leading corporations from the consumer goods (retail) and transportation sector, sustainability experts and NGOs. The outcome was a “MECE” landscape of 31 supply chain practices as shown in Figure 6.

Phase 2: Perform an in-depth value assessment of all identified practicesTo create a solid foundation for our decision frameworks and toolsets, we executed a detailed, bottom-up assessment of all 31 practices. For each practice we identified state-of-the art papers, articles and cases, stating its value creation potential and validated and extended it with corporations, industry experts and academia. The results are applicable to “make-to-stock supply chains” using the consumer goods (retail) and transportation industries as reference industries. The figure below illustrates an assessment of one exemplary practice of “smart and green building deployments”.

As Figure 20 shows, each practice was analysed for its potential to create business value and socio-environmental value. To capture the full business value, we took a holistic valuation approach (as described in the second section of the report) by factoring in benefits beyond short-term financial effects. We looked at benefits on revenues, costs, risk and brand. The socio-environmental value is defined through improvements on carbon footprint, customer health, community development/welfare and labour standards. Ease of implementation considers cost and complexity of implementation and risk to fail.

Figure 21 below shows the “quantitative background” of the assessment with supporting numbers behind the business and socio-environmental value. Here we provided facts on energy cost and carbon savings reflecting relevant studies. To allow for cross-practice comparisons on value, we aggregated benefits to the highest possible level, e.g. transformed energy cost savings in the warehouse into supply chain cost savings by reflecting typical cost structures of consumer goods companies. Analogue to the environmental value: transforming energy savings into carbon savings on company level.

The overall results of this bottom-up calculation are reflected in the business case described in the “implementation, prioritization, business case” section. Key to those benefit calculations was to consider interdependencies between baselines of the 31 practices. That is why for example, the overall supply chain cost potentials of 9-16% are less than the sum of individual supply chain cost potentials shown in Figure 12.

Phase 3: Derive decision framework and toolsetIn the final phase, we consolidated the data from the value assessment. We were able to create a decision matrix based on business value and socio-environmental value. The framework is supported by a tool and allows customization of our assumptions to reflect individual company profiles and social archetypes.


Value Creation Potential Business Socio-Environ.

Ease of Implementation Low Med High

Low

M

ed

Hig

h B

enef

its

Strategic Fit

Ease of Implementation Low Med High

Low

M

ed

Hig

h B

enef

its

Overall Assessment

Lever Magnitude of Benefit

Business Value

Low: Very complex trans-formation programs, many stakeholders, risk to fail

Medium: Projects of medium complexity, low risk to fail

High: Easy to implement, usually doesn’t fail Low Med High

Low Med High

Socio-Environmental Value

Ease of Implementation

Lever Magnitude of Benefit

Low Med High

0% >20% 5% 10%

Revenue increase in targeted product area

0% >10% 1% 5%

Decrease in company’s carbon exhaust

0% 5% 0,5% 1%

Supply chain or production cost reduction

High constant health benefit

Small irregular health benefit

Medium, constant health benefit

0% >10% 0,5% 5%

Estimated brand value improvement over time

Improve-ment of living

condition

Little improve-ment for

individuum

Improve-ment of working standard

Long term & serious reputation damage avoided

Short-term negative

press avoided

Impact on stock price - reputation avoided

Long term, integrated community

development

Short-term support with

limited benefit

Medium impact

Hedging of commodity price/ SC risks

Description More efficient lighting due to sensors, LEDs, using natural light sources, de-lamping More efficient heating/refrigeration due to more intelligent space heating systems, control of air conditioning, more efficient heating / refrigerating systems Use energy efficient equipment

Logistics network and warehouses

Reduce energy consumption (leading to cost and exhaust reduction)

20-50% more efficient Lighting 40-70% more efficient Heating/ Refrigerating

Good Practices

Smart and green building deployments

Key Levers

19.

Distribution A.

Risk Mitigation

Efficiency

Legitimating

Holistic Revenue Carbon Exhaust

Cost Health

Brand Labor Standards

Risk Community

REWE, a German retailer, has reached energy and carbon savings of 30% in the distribution hubs using solar panel and energy efficient technologies.

Business Value

Socio-Environmental Value

Revenue Cost Risk Brand

Carbon Exhaust Health Community Labor Standards

Quantitative Background

Logistics network and warehouses

Smart and green building deployments 19.

Distribution A.

SC cost WH cost Energy cost

Lighting Energy Heating/Refrigerating

Energy

26% 15% Other Energy

36%

64%

30% 34%

20-50% energy cost (0,234-0,585% SC

cost)

40-70% energy cost (0,530-0,928% SC

cost) Savings p.a.

Addressable 2,50% SC cost

0,76-1,51% SC cost

Payback 0,5-1y 2-3y 0,5-3y

Corporate GHG WH GHG

Lighting GHG Heating/Refrigerating

GHG

5-17% Other GHG

36%

64%

30% 34%

20-50% energy GHG (0,3-2,55% Total

GHG)

40-70% energy GHG (0,68-4,046% Total

GHG)

GHG reductions

p.a.

Addressable 3,2-10,8% Total GHG

0,98-6,6% Total GHG

http://www.cambridge-eng.com/case_studies/warehouse_heating.asp http://www.ukwa.org.uk/_files/23-carbon-trust-23.pdf

Supply chain cost of typical consumer goods companies bear 26% of warehousing cost Energy costs are around 15% of warehousing cost Of that, lighting accounts for 30%, heating/ refrigerating for 34% of energy in the warehouse Overall, 2,5% of supply chain costs are addressable Studies show potentials of 20-50% on lighting energy and 40-70 % on heating / refrigerating energy Overall 0,76%-1,51% of supply chain cost can be saved

Warehousing operations accounts for 5-17% of total corporate greenhouse gas Therefore 3,2-10,8% of the overall carbon footprint is addressable Using the same reduction potentials on energy as above, the overall potential greenhouse gas savings are 0,98-6,6%

Figure 20. Illustrative overall assessment (Source: Team analysis)

Figure 21. Illustrative quantitative background (Source: Team analysis)


AcknowledgementsProject membersJohn Moavenzadeh, Senior Director, Head of Mobility Industries, World Economic ForumSean Doherty, Director, International Trade and Investment, World Economic ForumWolfgang Lehmacher, Director, Supply Chain & Transport Industry, World Economic ForumJieun Chung, Senior Manager, Supply Chain & Transport Industry, World Economic ForumChristina Ferrer, Community Manager, Consumer Industries, World Economic ForumSarah Shellaby, Senior Manager, Consumer Industries, World Economic ForumLullit Jezequel, Associate, Supply Chain & Transport Industry, World Economic Forum

Mark H. Pearson, Senior Managing Director, Operations Strategy, Accenture StrategyMarkus Hayek, Managing Director, Operations Strategy, Accenture StrategyMichael Kraft, Manager, Operations Strategy, Accenture Strategy (primary author, secondee at the World Economic Forum)Alexander Holst, Managing Director Sustainability Services, Accenture StrategyGary Hanifan, Managing Director Supply Chain Sustainability, Accenture StrategyMelissa Barrett, Senior Manager Sustainability Services, Accenture StrategyAditya Sharma, Senior Manager Supply Chain Sustainability, Accenture Strategy

Contributors and reviewersMembers of the World Economic Forum’s Global Agenda Council on the Future of Logistics and TransportationUPSDeutsche Post DHLSAB Miller plcNestlé SAInternational Labour Organization (ILO)

Special thanks toJohn Manners-Bell, Editor and Chief Executive Officer, Transport Intelligence LtdAlan McKinnon, Professor and Head of Logistics, Kühne Logistics UniversityBernard Hoekman, Director, European University Institute


Endnotes1. “Disaster at Rana Plaza”, The Economist, 2013, http://www.economist.com/

news/leaders/21577067-gruesome-accident-should-make-all-bosses-think-harder-about-what-behaving-responsibly.

2. UN Global Compact-Accenture CEO Study on Sustainability 2013.

3. The Consumer Study: From Marketing to Mattering, UN Global Compact-Accenture CEO Study, 2014.

4. An empirical examination of the relationship between business strategy and socially responsible supply chain management (2012).

5. Designing Socially and Environmentally Responsible Supply Chains, Pullman, Sauter, 2014.

6. Corporate Sustainability Strategies: Sustainability Profiles and Maturity Levels, Baumgartner, 2010.

7. Investigating the relationship of sustainable supply chain management with corporate financial performance, Wang, 2013.

8. The Impact of Corporate Social Responsibility on Investment Recommendations, Harvard Business Manager, 2014.

9. Sources of good practice examples:- Alternative Fuels Provide Cost Savings For Supply Chain, Geneco (www.

genco.com/Logistics-Articles/article.php?aid=800766938)- Amazon Gets Up Close and Personal with P&G, Dave Blanchard, 2013

(http://www.industryweek.com/blog/amazon-gets-close-and-personal-pg)- ASOS: marketplace.asos.com- BSH acquires CO2 certificates for environmentally-friendly

logistics, 2012, (https://www.bsh-group.com/laender/us/index.php?showPI&y=&pm=126464)

- Caterpillar: www.caterpillar.com/en/company/sustainability/environment-health-safety.html

- Crowd shipping: using the crowd to transform delivery, Financial Review, 2014 (www.afr.com/p/boss/crowdshipping_using_the_crowd_to_8WrJhcDWW4XnYeKjLHZ6aL)

- DHL: www.dhl.com/en/press/releases/releases_2013/logistics/dhl_crowd_sources_deliveries_in_stockholm_with_myways.html#.VJVhOF4CA

- Ecovative: www.ecovativedesign.com/- How Con-Way Delivers Greener Trucking, GreenBiz.com, 2011 (http://

www.con-way.com/mjp/sustainability-news/6-How_Con-way.pdf)- Intermodal Transportation Saves Time and Money, Delivery Competitive

Advantage (www.idstransportation.com/services/intermodal-transportation)

- International Marine Organization (IMO): www.imo.org/Pages/home.aspx- John West Tuna: www.john-west.co.uk/discover-the-story-behind-your-

can- Laborlink: www.mylaborlink.org- Con way: http://money.usnews.com/money/blogs/beyond-the-

barrel/2008/03/26/truckers-back-a-national-65-mph-speed-limit- LKW tanken Autogas – Wenn Diesel auf Flüssiggas trifft, werden

Emissionen und Kraftstoffkosten reduziert, Deutscher Verband Flüssiggas, 2013 (dvfg.de/infothek/lkw-tanken-autogas-wenn-diesel-auf-fluessiggas-trifft-werden-emissionen-und-kraftstoffkosten-re)

- Making stores ‘water neutral’: a new standard for supermarkets?, The Guardian, 2013 (http://www.theguardian.com/sustainable-business/water-neutral-new-standard-supermarkets)

- Nachhaltige Logistik: ein strategischer Vorteil, Dr. Georg Mogk, Barbara Schulte, 2011, (http://www.bayertechnology.com/fileadmin/user_upload/Redakteure/Supply_Chain/PDF_SD_0111_CM_43_S13.pdf)

- Phoneblock: phonebloks.com/en- Riverford sustainable development project (www.riverfordenvironment.

co.uk/Packaging.aspx)- Sustainable Shipping : www.sustainableshipping.com- Timberland, Omni Recycle Tires into Footwear, Environmental Leader,

2014 (http://www.environmentalleader.com/2014/11/05/timberland-omni-recycle-tires-into-footwear/)

- Warehouse Heating... When Energy Matters, Cambridge Engineering (www.cambridge-eng.com/case_studies/warehouse_heating.asp)

- Adidas Sustainability Progress Report – Fair Play, 2013- Ahold Sustainability Report, 2012- Bayer, www.annualreport2013.bayer.com- BMW Sustainable Value Report – Working together, 2013- Campell Soup Sustainability Report, 2014- Coca-Cola Sustainability Report, 2013-2014- Colgate Sustainability Report, 2013- Danone Sustainability Report, 2013- General Motors gmsustainability.com/report.html- Henkel Sustainability Report, 2013- H&M Conscious Actions – Sustainability Report, 2013- Ikea Group Sustainability Report, 2013- Kesko Sustainability Report, 2013

- LG Sustainability Report, 2012- Lotte Sustainability Report, 2012- Marks & Spencer, Sustainability Report PlanA, 2014- Nestle CSV Summary Report , 2013- PUMA Business and Sustainability Report, 2013- Rewe, Sustainability Under the Rewe-Umbrella, 2013- Sainsbury, http://www.j-sainsbury.co.uk/responsibility/our-approach- SABMiller, Sustainable Development Summary Report, 2013- Samsung Sustainability Report, 2014- Switcher Social Report, 2013- Unilever, www.unilever.co.uk/sustainable-living-2014- UPS Corporate Sustainability Report, 2013- Walmart Sustainability Report, 2014- Woolworths Limited Corporate Sustainability Report, 2013- Benchmarking supply chain sustainability: Insights from a field study”,

Benchmarking: An International Journal, 2011.- “Innovating for Shared Value”, Harvard Business Review, 2013.- “Making Sustainability Profitable”, Harvard Business Review, 2013.- “Save Energy, Cut Costs – Energy Efficient Warehouse Operation”, UKWA,

2013.- “Simultaneous Sustainability and Savings – Why companies should invest

in sustainable packaging”, Accenture, 2011.- “Supply Chain Decarbonization”, World Economic Forum, 2009.- “The Business Case for a Healthy Workplace”, IAPA, 2008.

10. Global Agricultural Value Chains, Standards and Development, European University Institute, 2014.

11. Farming Better Futures Report, SAB Miller, 2011

12. The Socio-Economic Impact of Nile Breweries in Uganda and Cerveceriea Hondurena in Honduras, INSEAD, 2009

13. Horizontal collaboration in fresh and chilled retail distribution, CO3, 2014.

14. Accenture-Vodafone: Connected Agriculture – The role of mobile in driving efficiency and sustainability in the food and agriculture value chain.

15. Unilver website, http://www.unilever.com/sustainable-living-2014.

16. Unilver website, http://www.unilever.com/sustainable-living-2014.

17. SABMiller website, http://www.sabmiller.com/sustainability.

18. SABMiller website, http://www.sabmiller.com/sustainability.

19. Results are quantitative bottom-up validations based on Accenture research, the report team’s research and validated with partners. Consumer goods (retail) and transportation industries used as a reference. See “Methodology” for details.

20. Ibid.

21. Triple advantage index is the weighted average of business value and socio-environmental value. The weights are determined through the social archetype.

22. Global Wage Trends for Apparel Workers, 2001–2011, Worker Rights Consortium, July 2013. Wages and Working Hours in the Textiles, Clothing, Leather and Footwear Industries”, International Labour Organization (ILO), 2014.

23. Tailored Wages - Are the big brands paying the people who make our clothes enough to live on? Clean Clothes Campaign, March 2014.

24. Bangladesh seeking better employment conditions for better socioeconomic outcomes, International Labour Organization, 2013.

25. India Country Study, Fair Wage Foundation, 2012.

26. Better Work Indonesia: Garment Industry 4th Compliance Synthesis Report, Better Work, 2013.

27. On December 10, 1948 the UN General Assembly adopted and proclaimed the Universal Declaration of Human Rights.

28. Business & Human Right Resource Centre, Human Rights Council – Seventeenth Session, March 2011.

29. ILO Declaration on Fundamental Principles and Rights at Work, International Labor Organization, 18 June 1998 (revised in 2010). ILO Declaration on Social Justice for a Fair Globalization, 2008.

30. Tailored Wages – Are the big brands paying the people who make our clothes enough to live on? Clean Clothes Campaign, March 2014.

31. Cashing In – Giant retailers, purchasing practices, and working conditions in the garment industry, Clean Clothes Campaign.

32. Climbing the Ladder to Living Wages, Fair Wage Foundation, 2012.

33. Oxfam, http://www.oxfam.org/en/explore/how-oxfam-fights-poverty.

34. Aid for trade and value chains in textile and apparel, OECD/WTO/IDE-JETRO, 2013.

35. Cashing In – Giant retailers, purchasing practices, and working conditions in the garment industry, Clean Clothes Campaign.

36. Hazardous Work place – Making the Bangladesh Garment Industry Safe, Clean Clothes Campaign, 2012.

37. Bangladesh’s ready-made garment landscape: the challenge of growth. Mckinsey.

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Documents

Beyond Supply Chains; Empowering Responsible Value Chaines_WEF&Accenture, 2015.01