Smarter Supply Chains

for a
Sustainable Future
Report based on proceedings at IBM Start
“
When one tugs at a single thing
in nature, he finds it attached
to the rest of the world.
John Muir, US author and naturalist, founder of The Sierra Club
Smarter Supply Chains for a Sustainable Future

Contents
Executive summary .................................................................................................................................................... ..3
Smarter Supply Chains for a Sustainable Future .......................................................................................................... ..3
Outline of the day’s agenda ....................................................................................................................................................3
What is sustainability? ................................................................................................................................................ ..5
Common themes from the Summit ............................................................................................................................. ..7
Collaboration is key to progress ..............................................................................................................................................7
Complexity requires systems thinking ....................................................................................................................................7
Data and metrics are the basis for finding solutions ..............................................................................................................7
Solutions require atypical personal and corporate behaviour ................................................................................................7
Summary of proceedings ........................................................................................................................................... ..9
The constituents of a sustainable supply chain ......................................................................................................................9
There is colossal waste in many supply chains .......................................................................................................................9
Some steps are being taken, but we are not doing enough ...................................................................................................9
We need a holistic view to deal effectively with inefficiencies and waste ............................................................................10
Some policies and regulation are getting in the way ............................................................................................................11
The main challenge will be changing behaviours part 1 – consumers ..................................................................................11
Early education, awareness and new business models are important ................................................................................11
Retailers are in a position to make a difference ....................................................................................................................12
Changing behaviours part 2 – improving collaboration across businesses ...........................................................................12
Commercial sensitivities are a major barrier ........................................................................................................................12
Creating ‘safe havens’ for shared sensitive information .......................................................................................................12
Ask not what you can share, ask what you can’t ..................................................................................................................13
For effective collaboration, relationships matter ..................................................................................................................13
Much of a product’s carbon footprint lies in the supply chain .............................................................................................13
Most carbon emissions statistics for the UK exclude imports ..............................................................................................14
Hitting government targets for carbon emission reductions will be harder than you think .................................................14
Traceability across whole supply chains must (and can) be achieved ..................................................................................14
Standards are already in place ..............................................................................................................................................15
We don’t know about best examples of work going on – needs drawing together .............................................................15
Problems are similar across business sectors .......................................................................................................................15
We must tell people about successes to create a positive feedback loop ............................................................................16
We need a TSM movement to parallel the TQM movement of the 1970s ...........................................................................16
If the price of oil escalates, all bets are off ...........................................................................................................................16
Outcomes: developing the themes ............................................................................................................................. 20
Harnessing the momentum of the Summit ..........................................................................................................................20
The IBM Summit at Start ............................................................................................................................................ 21
About The Bathwick Group ........................................................................................................................................ 22

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Smarter Supply Chains for a Sustainable Future

Executive summary
Only the most hardened climate deniers and sustainability
sceptics still argue that we can continue to live, to expand,
and to consume the way we do indefinitely. We are
heading for deep trouble, and possibly for disaster, driven
by our historic disregard for the scarcity of resources and
the collateral damage our activities create, and on which
our progress to date has depended. The evidence is
increasingly stark, the consensus at practical dominance
and the range of issues broadening across all social,
natural and economic systems. The problems are both
massive and systemic; our response must be worthy of
that challenge.
More than 120 business and government leaders and
commentators attended the Smarter Supply Chains day
(day 6) at the Summit. They concluded we need to act
faster, and work together across industry and country
boundaries; they left determined to make change happen.
Their debates and comments are noted in this report, but
these points were key:
 A customer buying a product sees only the packaging
and the store environment – the fact that the product may
be causing economic, social or ethical distress somewhere
in the world is invisible. In the past, retail organisations have
focussed on supplying customer needs to the exclusion of
all other considerations – ethical, social, product design
and even supply chain costs. It’s clear today however
that the product and its supply chain are part of the same
offer/service; a customer is buying a ‘package’ and we
need to provide more visibility and transparency on the
wider issues relating to that product or service.
 Given that a product’s real cost (including impacts
such as carbon footprint) is 60% or more in the supply
chain, we must achieve better quality data and metrics,
by leveraging the technology already in place, and provide
clarity so that customers can make better choices. Their
choices will drive new strategies and new ways of sourcing
and designing products.
 This is still a new dialogue – neither suppliers nor
customers are overly comfortable with articulating the
issues. This is not all about environmental or social
concerns however – there are big wins to be had for
business, including supply chain cost reduction, better
supplier relationships, and more innovative products.
 Achieving these benefits requires cross-organisational
cooperation and collaboration to amplify individual
endeavours. We need different ways of working and different
organisational structures, with cross-organisational teams
and groups organised around beliefs and values. There
was a willingness to share and participate at the Summit,
and a desire for more information and insight.
 We all need to keep an open mind and experiment, see
what works and what doesn’t and constantly innovate.
The way forward is not clear, it demands new skills, new
ways of thinking and communicating, and new ways of
engaging.
 Sustainability must have a strategic perspective; it will
shape the future of the business and should become the
‘unconscious’ way of working for everyone. M&S exemplify
the strategic approach. Without a strategic approach, we
will lack the impetus for self-sustaining progress that is
strong enough to impact the whole supply chain.

Smarter Supply Chains for a Sustainable Future

Outline of the day’s agenda

KEYNOTES: Sara Eppel, Head of sustainable products and consumers, DEFRA

DEBATES How to help consumers make sustainable product decisions

Sustainability through collaboration vs competition
Sustainable supply chains as a source of competitive advantage
How do we reduce the impact of the products we supply?
Taking an industry approach to collaboration – the application of best practices
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Smarter Supply Chains for a Sustainable Future

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Smarter Supply Chains for a Sustainable Future

What is sustainability?
Sustainability: most people think it’s a good idea, some
ENVIRONMENTAL
people are passionate about it, some are truly ambivalent Manage


or even hostile to the notion, but everybody has a different SOCIAL consumption of
Cohesiveness of Cities energy, water,
definition. It is therefore important that we establish a ECONOMIC  Citizen centric health,
food, raw
definition to use as a baseline for this report. Sustainability, Sustainable Economy education and social materials
 Balanced services
simply put, is the capacity to endure1. Minimise
investment  Better distribution of


 Better risk services, jobs, housing wastage of

At a global level: we live on a planet that is a complex scarce resources
management  Transport
inter-dependent set of eco-systems, and increasingly,  Short term & infrastructure
socio-technical systems; sustainable behaviour is long term Work and society
therefore that which ensures the environmental Do more with less (£)  Roles of business and
 Outcomes that government
balance is maintained, allowing human civilisation to
matter  Skills, behaviours,

continue to survive.  Accountability careers

At a regional/national level: we must maintain
the economic structure of our society – markets,
businesses, profits, infrastructure and jobs; societal
stability in turn ensures the long-term demand for,
and the sustainable growth of, products and services.
Along with progressive social policies on equality
and well-being, sustainable markets, businesses and
societies aim to create long-term opportunity for all.
These three elements – economic, social, and environmental
(also referred to as profit, people, and planet) – form the
basis for the Triple-Bottom Line (TBL, figure 1), a simple
description of the elements involved. The problem is that
for many – particularly those of us charged with delivering
hard, short-term results – the social and environmental
appear to detract from the economic; they are seen as
blockers.
It is this central dichotomy that is often cited as the reason
for sustainability being a hard sell in business. But it
shouldn’t be; organisations and those leading them want
to survive and prosper as much as they ever did. The
only issue is to illustrate both the urgency of taking action
and the importance of all three factors in ensuring their
organisational and individual survival.
We find ourselves at a unique point in our history. Unlike
previous generations, we know that we are causing
irreparable damage to the planet and that, regardless of
arguments about the causes, significant changes in how
we live must be achieved.
for spend
Figure 1. One representation of the triple bottom line
We must discover how to deal with the biggest impacts
humans make on this planet, including:
 Population growth. Population growth is at the core
of the sustainability challenge. There were 1.75 billion
people on the planet in 1910; today there are 7 billion,
and by 2050, the UN estimates that the global population
will peak at around 9 billion.
 Resource depletion. The development of the ‘Western’
lifestyle over the past 60 years has greatly exacerbated the
population problem – a lifestyle based on quantity rather
than quality, and on consumption as a validation of our
national and individual success. Powered by cheap energy
and mechanisation, it’s been easy and we could afford it.
But we have taken little notice of the ‘collateral damage’,
and as a result we are using up the planet’s resources and
damaging ecosystems at an alarming rate.
 Unaccountable growth and consumption. The hidden
costs (or ‘externalities’) of some of our activities are now
recognised – not least the estimates of the cost of climate
change brought about by GHG emissions from fossil fuel
use over the past century. Lord Stern’s estimate of 2% of
GDP (£28bn annually in the UK alone) to counter climate
change is dwarfed by estimates of the economic damage in
prospect (for example the figure of $20tn annually by 2100
by the German Institute for Economic Research (DIW)).

1 The Bathwick Group’s definition, which separates the capacity

to endure (surviving) from sustainable development (thriving), which
is growth that has at most a neutral social and environmental
impact.

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Smarter Supply Chains for a Sustainable Future
Common themes from the Summit
Collaboration is key to progress
There are few challenges within organisations that can be
solved by an individual employee or a single department,
and few challenges in sustainability that can be addressed
by a single organisation operating in isolation. ‘We need
to collaborate more’ was a key conclusion of every day of
the Summit at Start; collaboration is the key to unlocking
creativity, finding new ways of approaching familiar
problems, and generating widely-accepted solutions. We
know however that few organisations collaborate well,
internally or externally. Over the past five years we’ve
analysed how and why this is so. Individual and corporate
insecurities, unhelpful reward systems and competitive
sensitivities are among the issues that combine to inhibit
openness and sharing of data and ideas.
Collaboration is about changing the way individuals think
and organisations respond, finding more effective business
process alignment, and encouraging trust and positive
behaviours. Achieving such change is at the heart of
finding the efficiencies, technologies, and market models
that will define a more sustainable future.
Complexity requires systems thinking
The complexities of organisations and markets are a barrier
to understanding and change. The developed world today
is a network of inter-dependent socio-technical systems,
in which changes of any type have systemic impacts that
are hard to foresee in the normal scope of an individual’s
role. Few people ever experience more than a small part
of the picture, and the decisions they take will only be
appropriate within the context of their understanding.
Creating predictive frameworks and more holistic decision
support models requires systems thinking – the process
of understanding how things influence one another
within the whole – which is an unusual set of skills. Few
organisations employ such skills, except perhaps in strategy
or technical design roles, but in an increasingly connected
world systems thinking is becoming important. We would
do well to recognise, nurture and value the appropriate
skills, as second- and third-level impacts are increasingly
coming to define the effectiveness, and therefore the
success, of most organisations.
Page 7
Data and metrics are the basis for finding solutions
We generate enormous quantities of data within our
organisations, much of which languishes in silos, unused
for lack of capacity, the right tools or skills to process and
analyse its meaning. The amount of data, and the number
of sources from which it comes, is spiralling upwards every
day; we can’t hope to understand either the scale of the
challenge we face or the best routes to a solution unless
we learn what we know, and how to gain valuable insights
from it.
Peter Drucker famously said “If it can’t be measured, it
can’t be managed”. In a sustainability context, if you don’t
have information on the impact of your operations and
your activity, you won’t be able manage that impact down.
Worse, you can’t enumerate and report success.
Solutions require atypical personal and corporate
behaviour
Of all the challenges we face in becoming more sustainable,
individual and organisational behaviour will perhaps
be the hardest to address. Personal and corporate
insecurities, consumption-oriented lifestyles, unhelpful
corporate cultures, a focus on the short term, and a lack
of awareness (or unwillingness to understand) inhibit our
ability to effect change. They make us believe that what
we do individually makes little difference, and help us to
hide behind competitive sensitivities to justify inaction.
Will it be more carrot or a bigger stick that will produce the
changes we need? Probably both, and applied without
fear or favour, according to delegates at the Summit.
Scottish philosopher David Hume wrote “All plans of
government, which suppose great reformation in the
manners of mankind, are plainly imaginary”. In other
words, good luck with changing human behaviour. In the
250 years since that was written, have we learned enough,
and are we optimistic enough, to prove him wrong?
Smarter Supply Chains for a Sustainable Future
Summary of proceedings
The constituents of a sustainable supply chain
Supply chains are complex, highly interconnected, and
multidimensional, and while many organisations have
produced good results in some parts of their operations,
addressing the overall challenge remains a difficult
prospect. What constitutes a sustainable supply chain?
 Raw materials from sustainable sources
 Re-use and recycling of product waste and packaging
 Renewable energy sources to power the manufacture
and delivery of goods
 Consumers making constitution educated choices
about the products they buy, the way they use and
dispose of them
 Companies working together to ensure every asset
is fully utilised with duplication of effort and data
eliminated, and
 New and interesting and exciting products brought to
market in a sustainable way
While we may know and understand these elements, there
are relatively few examples of best practice and creating a
sustainable supply chain remains a distant goal.
“ More efficient, less wasteful supply chains
are not just good for the environment, they
make good business sense.
Chris Evans, VP, Retail Industry Executive, IBM
UK
This is a real problem, because the level of waste that
occurs in supply chains in every industry is a real drag on
profitability and artificially inflates product prices.
There is colossal waste in many supply chains
Despite work on improved management and efficiency
over the years, there is still an amazing amount of waste
Page 9
in supply chains. The global consumer products and retail
industries lose an estimated £75 billion every year through
supply chain waste 2; in the grocery sector, fully 40% of
food is lost between harvest and processing, and in the
UK we waste an additional 30% of that food in the home
through over-purchasing and failure to consume before
the sell-by date expires. To put that into real numbers, a
report by the UK’s Waste & Resources Action Programme
(WRAP) in March of this year found that the food and
drink supply chain generates more than 11 million tonnes
of food waste each year, and an additional five million
tonnes of packaging waste. The estimated cost to the UK
economy is GBP£17 billion, with GBP£5 billion of that total
attributed to the supply chain.
Some steps are being taken, but we are not doing
enough
From a consumer perspective, the £12 billion per year of
food and drink that could have been eaten that consumers
throw away is equivalent to £480 for the each household.
Preventing waste could save 20mt of CO₂ eq, which is the
equivalent of taking one in four cars off the road.
“
Companies that don’t operate sustainable
supply chains are probably no better than
thieves – they’re taking something from
society.
Dr. Trevor Davis, Global Subject Matter Expert,
IBM
Statistics such as these may explain why steps have already
been taken in the grocery sector to limit wastage through
collaborative efforts such as the Courtauld commitment.
2 Source: Analysis from IBM’s Institute of Business value, The Bathwick
Group, and others
Smarter Supply Chains for a Sustainable Future

why there isn’t more collaboration already happening.

The Courtauld Commitment aims to improve
Joining forces with others could create a wider and deeper
the resource efficiency and reduce the environmental
range of research and generate more action than any one
impact of the grocery retail sector. It supports the aims of
organisation can on its own. Data sharing initiatives like
the UK Climate Change Act 2008 (to reduce greenhouse
GS1 are part of the solution, in which data can provide both
gas emissions by 34% by 2020 and 80% by 2050). WRAP
insight into inefficiencies and a platform for collaboration.
(Waste & Resources Action Programme) is responsible for
the agreement and works with leading retailers, brand
owners, manufacturers and suppliers. Since launching The GS1 Data Crunch project
phase 1 in 2005, 1.2 million tonnes of food and packaging
GS1, a supply chain standards organisation, executed a
waste have been prevented through the programme.
project with IBM in 2009, that compared the product data
Phase 2 was announced in March 2010, now targeting held by suppliers with the data stored on grocery retailers’
reductions in secondary and tertiary packaging, in systems. The results were staggering, uncovering
addition to supply chain waste to primary packaging and inconsistencies in what should have been identical
household food and drink waste. The aim is to encourage information in over 80% of cases.
the sustainable use of resources over the entire lifecycle
Bad data has a severe cost impact on the industry:
of grocery products sold in the UK.
 The cost of manual workarounds to source missing
Organisations commit to develop individual and collective
data and correct errors
‘sector’ strategy plans to achieve the following targets:
 Administrative shrinkage costs in areas such as
To reduce the weight, and increase recycling rates and
ordering and invoicing
recycled content of all grocery packaging, as appropriate,
to reduce the carbon impact of grocery packaging by  Lost consumer sales through shelf stock- outs
10%. The report calculated that the industry could save at least
To reduce UK household food and drink wastes by 4%. £1billion over the next five years addressing these
problems.
To reduce traditional grocery product and packaging
waste in the grocery supply chain by 5%. This includes Looking forward, consumers are demanding better
both solid and liquid wastes. product information and labelling for nutrition, health
and lifestyle. Planned legislation is also demanding that
the industry provides further information related to
Despite the waste and the potential for the businesses
packaging and the environment. The industry predicts a
involved to cut losses, only around a third of supply
400% increase in the amount of data retailers need to
contracts today include sustainability clauses. Many
hold about products – manual workarounds and
delegates expressed their frustration both at the lack
pragmatic fixes employed currently by retailers are no
of progress made towards more sustainable behaviour
longer sustainable.
in recent years and at the difficulties involved with
coordinating action across supply chains that can contain The conclusion of the Data Crunch Project was that
thousands of organisations. retailers and their suppliers should consider adopting
Global Data Synchronisation (GDS) techniques already in
use in the USA, Australia and mainland Europe. Similar
We need a holistic view to deal effectively with inefficiencies
techniques could deliver benefits in the UK, but would
and waste
require major retail groups to move away from tactical
Dealing with inefficiencies, waste and reporting from solutions and embrace a new industry standard for
the supply chain requires us to implement solutions managing product data where one single, accurate,
that encompass the whole lifecycle. There are too many master source is used by all parties.
individual solutions today – many delegates questioned

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Smarter Supply Chains for a Sustainable Future
Some policies and regulation are getting in the way
It could be argued that a good starting point for addressing
waste would be to tackle the unintended consequences
of policies and regulation. For example, the construction
industry is the single largest waste producer in the UK.
Fully 30% of that waste is packaging, but vehicles arrive on
building sites to deliver materials and leave empty rather
than carrying away potentially recyclable material (much of
which is then burned). Construction companies would like
to hall away the waste, but are prevented from doing so
because they would have to procure a waste licence every
one of their vehicles, which is prohibitive both logistically
and economically.
Similarly, on sites where new housing is being built,
construction companies are obliged to erect their own
generators and mini-grid for powering equipment, site
offices, etc. because the law does not allow them to attach
to the National Grid (cheaper, no local pollutants, and
usually close by any new building site in the UK) until the
buildings are completed and certified.
The main challenge will be changing behaviours part 1
– consumers
While retailers and other businesses can and should
be addressing supply chain inefficiencies, consumers
should also be playing their part. Viewing consumption
as an affirmation of status leads to profligate behaviour
and over-consumption; creating waste through lack of
thinking is inexcusable in the modern world. Changing
consumer behaviour is not a simple task however; societal
dimensions are in play. A range of both incentive and
compulsion options are required, and we must consider
potential tipping points and new business models, such
as reverting to an ‘old fashioned’ approach of mending
things or taking things back to retailers for service instead
of simply consuming and throwing away.
There were a range of views on how to change behaviours,
from the mainly ‘carrot’ end of the spectrum advocating
incentives as the key to change, to the mainly ‘stick’ view
that consumers would not change unless forced to, either
by higher prices or legislation. Some delegates took the
view that if we want people to change behaviour we have
to make it easier and attractive; others expressed views at
the other end of the spectrum.
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“ Culture is what people do in the absence of
instruction.
Richard Wilding, Professor of Supply Chain Risk
Management, Cranfield School of Management
Whichever balance is chosen, the starting point is to
provide clarity on the choices available and the implications
of those choices, which would require a greater degree of
information availability and openness than is currently in
evidence and the education of consumers in how to use
that information to make more informed choices.
Early education, awareness and new business models
are important
Providing people with the ability to make better choices
would suggest that we should be working to educate
consumers to the greatest degree possible. Education
creates awareness, and awareness creates change. The
easiest place to start is with young people; not only
because schools actually are educational facilities, but
because education is simpler and more effective before
poor learned behaviours become ingrained. Changing
expectations from buy-use-dispose consumption to one of
repair-reuse-recycle is core to changing how people think
about resource usage and sustainable living.
Education is also about information provision however,
which should extend through to product labelling and
in-store promotions. The lack of standards for product
information in regard to sustainability should not provide
us with an excuse for inaction.
New business models may hold the potential for existing
retailers to grow their businesses into new areas, while
increasing the sustainability of their overall offerings.
Sharing rarely-used products is a commonly-quoted idea,
but the few trials that have been completed show us that
to work, such schemes must take into account people’s
discomfort both with sharing more ‘personal’ products,
and in having to negotiate with strangers.
Defra ran a pilot programme on a housing estate and found
that social and communication barriers were difficult to
overcome; while sharing power tools and lawnmowers
Smarter Supply Chains for a Sustainable Future

was seen as a positive move, sharing washing machines
was unpopular.
Retailers are in a position to make a difference
Retailers are of course the gateway to consumers; they
have enormous power to influence people’s consumption
choices. There are areas where consumers will want to
make their own decisions, so education on the right choices
is important; in other cases, retailers could and perhaps
should make the choice for them. Customers could be
influenced if retailers only sold products above a certain
sustainable standard – if those standards could be defined
– and deleted product lines known to be unsustainable.
‘Choice editing’ has already been used in some cases –
B&Q for example stopped selling patio heaters some time
ago, without any apparent impact on other sales.
In contrast to the potential for retailers to encourage more
sustainable consumer behaviour, several delegates at the
Summit pointed out that many of today’s promotions,
especially in the retail sector, actually encourage greater
consumption – ‘Buy One Get One Free’ in particular.
Historically, retailers have focused on selling larger
quantities of product (often at the expense of higher
quality), and indeed consumers have gladly played along.
We must find other ways of growing revenues (and
potentially profit margins) – perhaps through exploiting
lines of business such as the rental or maintenance models
we mentioned above.
Encouragingly, when delegates were asked for responses
by voting, 72% believed that consumer-facing organisations
were, despite a weak economy, in a position to help the
public make sustainable choices.
Changing behaviours part 2 – improving collaboration
across businesses
The need to change behaviours is not limited to consumers
of course. Creating more sustainable supply chains requires
a groundswell of manufacturers and retailers working in
concert, against agreed targets. The basis of collaboration,
and particularly in the case of supply chains, is the sharing
of information. From basic data to information about
operating processes, objectives and strategies, we need to
share to understand where inefficiencies exist, and how
we can act to find solutions.
Commercial sensitivities are a major barrier
The greatest barrier to information sharing and collaboration
remains the fact that commercial organisations have a
long history of carefully protecting their information –
very often without any intention or effort to differentiate
between truly sensitive data and that which could be easily
shared without endangering commercial objectives.
One delegate described how the seafood cluster of
companies in Grimsby held a summit earlier in the year,
at which they discussed marketing plans, vision, and
strategies to try to identify synergies. Did this only happen
because the sector is under great pressure? Or could this
experience be applied to many other sectors without
generating any adverse consequences for participants?
“ Technology businesses are used to
simultaneous competition and
collaboration. There is a maturity in how
relationships are managed. Retailers for
example do not have the same maturity in
relation to their competition.
Creating ‘safe havens’ for shared sensitive information
One answer to the problem is to create independent
‘safe havens’ that allow data to be exchanged. There are
already many opportunities for sharing information – such
as the example of GS1 above, or Sedex, the Supplier
Ethical Data Exchange, below. In fact, there are often
too many initiatives, each needing a degree of work from
organisations to provide and maintain the information
they contribute, and creating the potential for multiple
standards.
“ Creating independent safe havens for data
is one way to address competitive
sensitivities.
Jim Spittle, Chairman, GS1

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Smarter Supply Chains for a Sustainable Future
There are too few examples of good information sharing
today, so while remaining mindful of the possibility of
proliferating standards, we should not let such concerns
get in the way of defining agreed approaches to the
presentation of useful and actionable information to
consumers and other organisations within our supply
chains.
Sedex, the Supplier Ethical Data Exchange, is a
not-for-profit organisation based in London, UK, open
for membership to any company (anywhere in the world)
that is committed to continuous improvement of the
ethical performance of their supply chains. Sedex started
2001 when a group of UK retailers and their first tier
suppliers recognised a need to collaborate and drive
convergence in social audit standards and ethical
self-assessment. Members participate in working
groups and networking, using the organisation’s services
to establish best practice and as a collaborative platform.
Member numbers passed 28,000 during 2010.
Ask not what you can share, ask what you can’t
One strategy for making progress on collaboration is to
ask what data shouldn’t be shared, rather than starting
from the assumption that everything is sensitive. The
reality of the latter assumption is that few employees will
invest the time in achieving internal agreement to release
a set of data, and few would want to take the risk if the
effort ran into problems. If you start from the premise
that most data is not competitively sensitive, it is easier to
encourage a culture of sharing – both within and outside
the organisation.
For effective collaboration, relationships matter
It is difficult to over-estimate the importance of trust in any
collaboration. Relationships at every level of an activity
determine whether collaboration will be successful or
not. In the supply chain, creating long-term contracts and
relationships can form the basis for working towards joint
goals. Without such collaboration, many sustainability
efforts will not succeed.
Page 13
“ It is critical to establish long-term supply
relationships to encourage investment in
the right behaviour.
Martyn Seal, PepsiCo
It’s also important to consider the micro and well as
the macro. Commercial pressures don’t just apply to
decision-making executives – they affect everyone in a
company, and particularly those involved at the interfaces
between organisations. The procurement function in many
organisations prizes low cost and aggressive negotiation
above progress towards longer-term goals. Attitudes
that do not allow for give and take in supply relationships
are unlikely to survive long enough or generate the trust
required to cooperate on achieving sustainability goals.
“ The commercial pressures we put on
individuals in supplier-customer
relationships rarely take long-term aims
into account.
Much of a product’s carbon footprint lies in the supply
chain
In addition to the issue of visible waste is that of invisible
impacts, such as the carbon footprint of a product. Up
to 80% of a product’s carbon footprint lies in the supply
chain. All organisations in that supply chain share the
responsibility to find solutions to reduce that impact,
and will have to work together if the challenges are to be
addressed.
“ 60% of the carbon footprint of a packet of
crisps is in the supply chain, before it gets
to us.
Martyn Seal, PepsiCo
Smarter Supply Chains for a Sustainable Future
The issue of embedded emissions throughout the supply
chain has made it hard in many cases for companies and
regulators to determine the true environmental impact of
a product.
Most carbon emissions statistics for the UK exclude
imports
Embedded emissions are important particularly in
those countries that import heavily, such as the UK, but
most reported carbon emission statistics do not include
embedded emissions – and the numbers involved are
staggering.
A study by scientists at the Carnegie Institution for
Science3 showed that 253m tonnes of CO2 are released
annually in the manufacture of products bound for UK,
which if included in our emissions totals would increase
the country’s carbon footprint by 46%! Only the US
and Japan have a higher total emissions import figure.
Professor Dieter Helm from the University of Oxford, in a
paper published in 20074, noted: “If carbon outsourcing is
factored back in, the UK’s impressive emissions cuts over
the past two decades don’t look so impressive anymore.
Rather than falling by over 15% since 1990, they actually
rose by around 19%. And even this is flattering, since the
UK closed most of its coal industry in the 1990s for reasons
unrelated to climate change.”
“ 75% of a UK resident’s individual carbon
impact comes from the products and
services they buy and use.
Sara Eppel, Head, Sustainable Products and
Consumers, Defra
As Professor Helm points out, it is consumption and not
production that matters when apportioning responsibility
for carbon emissions, or any other impact of a product
or service, making it clearer still that our import-based
consuming lifestyle is a major obstacle to reducing true
emissions.
3 ‘Consumption-based accounting of CO2 emissions’ (2010), Steven J.
Davis and Ken Caldeira
4 Helm, D. R., Smale, R. and Phillips, J. (2007), ‘Too Good to be True?
The UK’s Climate Change Record’
Page 14
Hitting government targets for carbon emission reductions
will be harder than you think
Even without taking embedded emissions properly into
account, meeting existing targets for emissions reduction
is going to prove even harder than the raw numbers would
suggest. Reduction targets are based on 1990 levels,
regardless of (economic or population) growth since that
year.
“ Something that came out of our future
scenario planning process was that we
need to be almost carbon-free today; taking
growth into account, an 80% reduction by
2050 is equivalent to a 95% reduction
today.
Martyn Seal, PepsiCo
As other independent sources have suggested, reductions
in the future, adjusted to take account of growth, are
equivalent to a proportionately higher cut on today’s
figures. Finding that scale of reductions across many supply
chains will be impossible without virtually carbon-free
transportation and swingeing cuts in emissions from
manufacturing and/or processing.
Traceability across whole supply chains must (and can)
be achieved
Meeting targets requires the ability to report real numbers.
Not just emissions of course, but all manner of elements of
activity, whether from reporting, regulatory or standards
viewpoints. Traceability – the ability to understand and
report on the source(s) of a product and its route to
market – is fundamental to environmental reporting and
auditing.
As well as the challenges already noted (such as
information availability), there are many other potential
obstacles, such as the sheer scale of an operation – how
can clothing retailers engage with all stakeholders to get
the information back that they need? Marks & Spencer
for example deals ultimately with 30,000 different cotton
farmers. How can the end supplier of products to the
customer help all elements of the supply chain to achieve
Smarter Supply Chains for a Sustainable Future
the required goals? A common dataset and platform would
make many such tasks simpler, perhaps available as a web
service, so that even very small suppliers could contribute
easily through technology as simple as a browser.
There are instances where traceability has been achieved
however, such as tracking food from farm to plate, showing
that similar ambitions in longer or more complex scenarios
are achievable.
Standards are already in place
Contrary to the thinking of many delegates at the Summit,
some standards for assessing and reporting aspects of
sustainability already exist. For example, a British Standard
already exists for assessing the life cycle greenhouse gas
emissions of goods and services: PAS 2050 (Publically
Available Specification 2050). The standard sets out 5
basic steps to determine a product carbon footprint:
1. Process map
Detail all the materials, activities and processes that
contribute to each stage of the chosen product’s life
cycle.
2. Check boundaries and prioritisation
Define which emissions will be included and excluded
– for example: you may wish to focus data collection
on the main sources of greenhouse gas emissions.
3. Collecting data
Collect data based on actual meter readings and
records - only use estimates if absolutely necessary.
Select appropriate emissions conversions factors (for
example, kgCO2/litre of fuel).
4. Calculate footprint
Calculate the greenhouse gas emissions (kg CO2e per
product unit) from each source.
5. Check uncertainty
Provide an assessment of the margin of error for your
calculation. This can be a statistical analysis or a simple
assessment of data quality.
Page 15
There are problems with PAS2050 however; it is a
complicated methodology and requires a significant
investment to complete properly, and product category
rules need to be defined. It is possible for a smaller
company to run through the tool and get a rough carbon
footprint for a product, but despite several organisations
adopting it, there is not enough data today to make simple
calculations possible for companies unable or unwilling to
make the full investment required.
We don’t know about best examples of work going on –
needs drawing together
Providing standards to assist companies to plan their
efforts to be more sustainable is important, but not the
only way to help efforts move forward. Several delegates
pointed to the unavailability of a shared repository for
examples of best practice as a major gap in the market.
Despite there being some outstanding individual examples
of successes achieved and efficiencies gained, it was clear
that the experiences gained are not widely known. One
clear output of the day was a suggestion to create a shared
repository for such achievements, both as a source of
information for organisations with similar challenges, and
as a place of inspiration.
Again though, some organisations might view the
experience they have gained as competitively sensitive,
but we would urge them to consider whether there is
more to be gained – in both co-working with partners
and suppliers, and in the opportunity to establish thought
leadership – from sharing their successes more widely.
Problems are similar across business sectors
There were suggestions that examples of best practice are
really only applicable to very similar companies in the same
sector. As in many other cases we have analysed in the
past however (such as data warehousing requirements),
there are surprisingly few differences between industry
sectors in many of the sustainability challenges they face,
which should allow more effective sharing of experience
and best practices.
Smarter Supply Chains for a Sustainable Future
“ We need to recognition that problems are
fundamentally pretty similar across industry
sectors. We should look cross-sector for
scale and sharing best practices.
Wayne Balta, IBM
Similarities across multiple sectors could combine with a
library of best practice to provide the opportunity to scale
efforts and create real change.
We must tell people about successes to create a positive
feedback loop
As well as the opportunity to share best practice between
companies, Marks & Spencer showed how providing
information back to consumers on how successful
sustainability projects are being creates a positive feedback
loop which will generate more success. The example
cited was the in-store provision of information about the
amount of money raised for Oxfam from the take-back
scheme for clothing. Such communication acts both as a
spur to action for a customer, and a strong brand boost for
M&S.
The government was cited as an example of not doing well
in this regard; very few public campaigns are followed up
with an assessment and communication of their success.
We need a TSM movement to parallel the TQM movement
of the 1970s
One intriguing suggestion from Dr Trevor Davis of IBM
involved creating a ‘Total Sustainability Management’
movement to parallel the ‘Total Quality Management’
(TQM) surge in the 1970s. TQM became integral to
businesses as the value of adopting TQM practices was
demonstrated.
Page 16
“ TQM movement started as cost-avoidance.
Not only was quality a good thing to have,
but lack of quality was a bad thing. Quality
is intimately related to financial
performance; so are most aspects of
sustainability.
Dr. Trevor Davis
TQM placed significant emphasis on measurement as the
basis for understanding both how improvements could be
achieved and for measuring success, and it is important
again now as we have already noted.
“ A lot of emphasis on measuring things and
benchmarking was key to getting quality on
the agenda.
Dr. Trevor Davis
Also important is the concept of the ‘management system’.
There is an equivalent in sustainability (ISO14000) but it
hasn’t become as popular or embedded in the same way as
ISO9000 has in the field of quality – too many organisations
still see sustainability as a bolt-on – something that is done
in addition to normal operation – rather than a core part of
that operation. TQM became embedded in organisational
culture; it is vital that sustainable thinking become
embedded throughout organisations until it becomes a
part of business as usual.
If the price of oil escalates, all bets are off
One of the key elements behind the success of global
supply chains is cheap energy, primarily oil. The price of
oil has been rising steadily over the past 10 years; rising
demand, particularly from China, heralds the permanent
end of cheap oil – the past two years only reached a plateau
because of the global recession, but even so, spot prices
have reached beyond even the peak prices of 1980.
Smarter Supply Chains for a Sustainable Future

3-year rolling average crude oil prices/bbl

$80 (inŇaƟon adjusted)

$70

$60
Price per barrel of crude oil

$50

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$0
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Figure 2. Three-year rolling average price of crude oil;

source: www.inflationdata.com

What if oil prices continue to rise? How will global supply

chains be affected? How many products will become
economically unsustainable? Many organisations are
already planning for more local sourcing of products and
sub-components to mitigate the risk.
The questions raised during the Summit and outlined in this
paper are being addressed in the ongoing work planned or
supported by IBM, some of which is noted below.

Page 17
Smarter Supply Chains for a Sustainable Future

Outcomes: developing the themes

Harnessing the momentum of the Summit The Jam will be facilitated by IBM in conjunction with the
Start organisation and many of the other Start partners.
RETAIL AND CPG FORUM They will be inviting everyone who attended the 2010
IBM will host an ‘Enabling a Sustainable Supply Chain’ Summit, their partners and clients, and many others who
forum in the New Year to continue the discussion of key wish to join them on the journey.
issues. The event is designed to build on the momentum
and shared learning created during Start and will specifically
seek to build a vibrant and collaborative community of
business leaders who, collectively, can have a positive
impact on the delivery of sustainability strategies within
their own organisations.

THE START INNOVATION JAM

The IBM Summit at Start, to quote Charles Hendry, the
Minister of State for Energy & Climate Change, was “one
of the most significant events of its kind that has ever
taken place in this country”. The Summit brought together
key stakeholders from many communities, and created a
momentum amongst attendees to do something to make
a difference. The journey towards a sustainable economy
will be a long one, and the Summit was always intended
to be the start of a process rather than a single, albeit
impressive, event. As a continuation of that process, IBM
has announced that it will be hosting a ‘Start Innovation
Jam’ in April of 2011.
An Innovation Jam is an online text-based discussion forum
for conducting a large-scale brainstorming event. Diverse
groups of individuals are connected via a web browser to
discuss and develop actionable ideas for business-critical
or urgent societal issues. The key word is ‘actionable’. The
purpose of this Jam is to take what was learned from the
Summit, and turn it into a bank of actionable ideas. This
is about how – the Summit identified a number of urgent
needs to which we need to find solutions: we need to
encourage collaboration between differing constituencies,
but how do we make it happen? How do we start to change
individual and corporate behaviours? How do we engage
with younger people and how do we act NOW to make a
difference? The Jam aims to answer these questions and
in doing so kick off hundreds of projects that will generate
real solutions and provide inspiration for a thousand
more.

Page 20
Smarter Supply Chains for a Sustainable Future

The IBM Summit at Start

Start is an initiative established by HRH The Prince of UK. Over 1,000 of the UK’s most influential people joined
Wales, that aims to create a vision of a more sustainable forces with some of IBM’s global experts to create a new
future, and seeks to promote sustainability through simple, constituency around economic, social and environmental
positive and aspirational messages. sustainability.
IBM is one of the founding partners, and is the exclusive Charles Hendry, the UK Minister of State for Energy and
partner for Business to Business engagement. In September Climate Change said that the IBM Summit at Start was
2010 IBM led a Business Summit – nine invitation-only “one of the most significant events of its kind that has ever
days that covered key topics on the sustainability agenda taken place in this country”; this document, written by
for business. Its starting point was simple: “ask not what The Bathwick Group, reports the output from the summit,
you can do for sustainability – ask what sustainability can with a specific focus on Day 6, ‘Smarter Supply Chains for
do for you”. a Sustainable Future’.
Business engagement in the broad sustainability agenda
is crucial if we are to make progress. Business led the
industrial revolution, it led the digital revolution and all the
signs are that it will drive the sustainability revolution too.
Each day of the summit saw senior business leaders, public
sector officials, NGOs, academics and commentators come
together in London’s Lancaster House to make a difference
to how sustainability is perceived and positioned in the

Page 21
About The Bathwick Group
The Bathwick Group is a research-based consulting company that helps clients address their most pressing needs in
strategic planning and go-to-market execution.
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www.bathwickgroup.com
Document number: BG-EV-W-00073UK-EN-00