Sustainable Development in the Supply Chain Industry
The Gordon Institute of Business Science held a conference on Sustainable Supply Chain with Economic Value. Sponsored by the Transnet Programme in Sustainable Development; industry heads in supply chain and academia were invited to attend and address the fundamentals, purpose and functionality of sustainable development in supply chain.
Sustainable development is the principle for global development in economic, social and environmental sectors; meeting the socio-economic needs of the present without compromising the ability of future generations to meet their own needs. It emphasises the use of natural resources for development without compromising the environment and the earth’s ecological system.
The key purpose of the conference was to address the matter of sustainable development in the supply chain industry. Delegates were taken through the theories of sustainable development and challenged within their organisations to report on and consider the further application of this newly developing theory.
Sustainable development may be regarded by some as a “green” conservationist movement pushed forward by tree-huggers. In essence this may be correct but it should rather be seen as a move by those who are aware of their moral and social responsibility to ensure that industry does not ultimately deplete all the earth’s natural resources, leaving nothing for future generations to live on, develop and enjoy.
Sustainable development holds within it three critical elements in the global development of sustainability; these are the social, environmental and economic impacts of industrialisation.
It challenges industries to map out initiatives and processes that do not harmfully impact these elements.
Socially, the vision for sustainable development is one that does not seek economic growth at the detriment of the world’s most valuable resource; its people. The global challenge is to ensure that all people have access to the world’s resources and developmental systems to better their social position. Poverty eradication is of the upmost importance in the move for sustainability.
Economically the system strives to help and ensure industries continue to grow and develop, without massive and harmful environmental impact and minus the total depletion of natural resources. It seeks to raise awareness that there is not an unlimited pool of resources; over consumption will result in complete exhaustion, resulting in the uncertainty of what future generation will have to develop their world.
Environmentally the goal is to reverse and avert all harmful impacts to the environment that global industrialisation has had to date. To allow for all stakeholders in global development to take responsibility for the future development of the world; while maintaining and preserving its natural resources for future generations.
The process and impact of sustainability does not seek to eliminate global development of industries, but rather to further raise awareness and bring about change in industrial methods that can; and have previously brought about damage to the earth and its inhabitants.
The case for supply chain sustainability was set by Gordon Institute of Business Science Lecturer, Lew Roberts. He set the view of sustainability as a philosophy of designing objects with regard to the environment to eliminate negative effects.
Within the supply chain the key move is to eliminate the carbon footprint set by the transportation industry. As industries grow, so does this footprint; his proposition on this is introduce hybrid power vehicles in the transportation industry, reduce costs of logistics by eliminating waste and becoming more economical by seeking and advancing the development of alternate energies. He cited an example of such efforts by shoe manufacturer Timberland that exports up to 25 million shoes globally; they initiated a redesign of their shoe boxes which reduced the use of more environmentally conscious materials resulting in a 15% reduction in manufacturing costs; amounting to a huge saving and reduced environmental impact. Global courier DHL's promotes the use of route optimisation that reduces in mileage and fuel consumption.
Sustainable design as a reaction to a global crisis and fundamentally seeks to raise knowledge and awareness on the issue of the worlds depleting resources, challenging its people to strive towards conserving these resources and deterring industrialisation and consumerism at all costs as it inevitably benefits none. As an isolated degrading ecological system would inevitably have an impact on all inhabitants of the earth.
Keynote Address on Global Organisational Efforts in Sustainability
Keynote speakers attended to address their organisational implementation of sustainable development principles. These delegates included; Ravi Pillay the Corporate Affairs Director of Nestle South Africa, Cobus Rossouw the Chief Integration Officer of Imperial Logistics, Gary Joseph the Chief Executive Officer of South African Supplier Diversity Council, Boudewijn Goossens the Executive Director of Fairtrade Label in South Africa and Phillip Griffith the Supply Chain Leader of General Electric Africa.
Ravi Pillay of Nestle shared how the organisation has grass-root operations that address social and environmental factors in sustainable development. Nestle has operated in South Africa for ninety-six years with over 4000 employees; worldwide the organisation has over 330 000 employees and 443 factories in over 81 countries.
In South Africa factories are located in small towns to be closer to raw material thus reducing on the environmental drawbacks of logistics.
They implement a business process that creates a shared value with all business partners in sustainability to protect the future through compliance of regulations that implement and practice these principles. Their three focus areas in sustainability are in the areas of nutrition, water and rural development.
Efforts in developing sustainability through their supply chain include; the assistance of local farmers with agricultural services that develop environmentally sustainable farms, establishment and implementation of strategies in pricing and logistics, cocoa farming that reduces the water absorption of the plant through GMO technology. Other local efforts are shown with their move of headquarters from an older building in Randburg to a new greener one in Bryanston which saw electricity consumption reduce by 50% in kilowatt usage.
Cobus Rossouw of Imperial Logistics addressed the company's direct role in sustainability in supply chain which they tackle through working with suppliers in transport optimisation. This is done by reducing the number of vehicles on the road and increasing mileage of each active vehicle. Their challenge is that they own only half of their vehicle fleet and thus seek to engage business partners in their efforts in sustainability.
Gary Joseph's position challenged the socio-economic aspect in the complexity of supply chain. His address raised the issues of marginalisation in the supply chain industry which inhibits newcomers to the industry. He challenged industry leaders to help sustain local markets by eliminating social challenges through integration and incorporation, and the building of new Black Economic Empowerment business partners.
Boudewijn Goossens spoke of how the Fairtrade label has been operating globally in sustainability since 1988 grossing over U$5 billion in retail sales. Their key products are coffee, cotton, cacao, tea, bananas and sugar. In South Africa Fairtrade has been in operation since 2010, partnering with companies such as; Distell, Woolworths, Cadbury and Puma.
With over fifty wine grape farmers they have a vital role in the improvement of the lives of small-trade farmers. Fairtrade has a global leading sustainable development initiative operating through product certification that enforces socio-economic and environmental standards. This is maintained through audits of business partners processes.
The social impact provides good working and living conditions, environmental management, workers rights respected through a life development premium in which suppliers give back to the working community a sum of money averaging R100 000 per farm; often used for community development programmes such as improved housing and education.
Their direct engagement with businesses is by trader certification; retailers offer and promote their products, manufactures procure Fairtrade ingredients, farmers and cooperatives supply certified products.
Phillip Griffith Supply Chain Leader of General Electric Africa addressed his organisations efforts in Sustainable development in Supply Chain. General Electric has over 300 000 employees around the world, in 2012 they grossed revenues of over U$160 billion worldwide, of which more than half was profited from outside of the United States. The company is currently seeking Sub-Saharan growth. Its challenges are in manufacturing energy efficient automotives, jet engines and turbines and compliance of sustainable development initiatives with business partners.
Their initiatives are enforced through political pressure; lobbying by GE Pack to advocate legislation that pushes for total industry sustainability. The challenge according to Griffith is, “you can't force legislation”. Through their processes they call for all business partners to engage in environmentally sustainable processes as they “require all businesses to strive to meet global standards”. Not all business and industry partners score well in having business practices that enforce sustainability; GE does not disassociate with them but rather actively engages in improving their processes and position thus raising their overall score on sustainability.
Vulnerabilities and Prospects of Sustainability
The challenges of Sustainable development in South Africa are multi-faceted. These include; a lack of overall knowledge and understanding of what sustainable development is and strives for and corruption within the supply chain industry.
Adam Raman a senior lecturer at Kingston University in the United Kingdom regards the issues with sustainable development as; a problem with the adoption of theoretical perspectives, a disconnected network in the supply chain, and the fact that there are few success stories to show its benefits. He regards the reasons for this as theories on sustainability being too static, not dynamic, having closed methodologies and relative stakeholders knowledge of theory being limited.
What he advises it that stakeholders should implement a service dominant logic – regard everything as service including goods, to alter their myopic view of sustainability being limited to manufacturing processes.
His challenge for this is to advocate a new global theoretical perspective: proposing a new definition and understanding of sustainability being issues relating to extreme social, economic and environmental change and sustainable development as the actions undertaken responding to these issues.
Pressure advocating for change would emanate from one’s own actions and feelings in moral perspectives; this would drive a change in consumer related behaviour, thus changing supplier behaviours in the manufacturing process of goods. The view that all actors are stakeholders, including the supplier and consumer.
He proposes a “Corporate Social Responsibility” model that holds ethics as potential leading to change, sustainability the issue and corporate social responsibility as actions undertaken to initiate progress. He asserts that sustainability is important for an organisations image and overall market capitalisation.
To address issues there needs to be a re-education of consumers and a change of habits.
Business to business, there needs to be a development of new products and processes lowering environment impact.
Supply chain networks need to be broken to establish new sustainability ties; organisations are to no longer be treated as single entities but as collective interacting network that can affect global change.
With the issue of corruption, Imperial Logistics tackles these challenges by allowing relative stakeholders to be informed of alternate methods of trade that are sustainable and by effective internal audits to deter any corruption.
Nestle South Africa has a rigorous supplier code of conduct that upholds transparency is all steps of trade.
Gary Joseph of the South African Supplier Diversity Council advises organisations not to overlook minor irregularities in internal audits and promotes a change of attitude within the methods that business is conducted.
Fairtrade bases its business model on trust; thus it holds strict audits to ensure transparency. This is “key for Fairtrade otherwise we can’t exist” says Goossens, the Executive Director.
Failures of sustainability according to Raman further include a lack of network connection; stakeholders and sole interests being the bottom line. “Diffusion and adoption inertia due to imbalance between destruction of strong ties in established networks and creation of weak ties as well as strong ties in new ones.”
Deterrents of sustainable development that were highlighted are consumerism; living in a societies that drive consumerism; resulting in industries being driven by purchasing power. Consumers wanting bargains at all costs drives demand for more goods this lowers labourer and farm worker wages. Consumers are advised to take more responsibility of their actions within these processes.
Within organisations, the short-lived tenures of CEO's pushes each to view only short term financial goals thus not placing an importance on sustainability of organisational actions and processes.
Prospects are now seen as the increased spread of the knowledge of the theory, global initiatives by stakeholders in development such as donor agencies imposing sustainability regulations and the change in social habits.
Boudewijn Goossens of Fairtrade regards “consumer driven change most important. Change in South Africa is slow; slowly but surely people are waking up and wanting sustainably developed products”.
The biggest drivers of sustainability are morally conscious consumers, according to Ravi Pillay of Nestle.
For supply chain stakeholders and clients, change is driven by people within organisations.
Phillip Griffith of General Electric which has made major moves and strives for sustainability believes it should be incorporated in marketing more and that “good entrepreneurs listen”, thus an all round initiative for sustainability is possible and inevitable in the event that the desire and move for change is properly vocalised.
Sustainable Development and Supply Chain in a Changing World
Abrie de Swardt of Abrie de Swardt and Associates, a logistics and supply chain management thought leader, is an advocate of “Green Logistics” which seeks to highlight an imbalance between supply and demand for sustainability. He regards sustainability as an act that broadens the concept of performance. Eliminating previous notions that focused solely on the economical but now incorporating social and environmental aspects equally and holistically, as they are interdependent.
His initiative emphasises the move forward as one in which industry heads and individuals are socially and morally conscious of the worlds dwindling resources and environmental condition. These moves can have a positive economic impact and have been seen in the creation of new fields and environmentally friendly industrial initiatives.
Such can be seen in the development of alternate energy sources; the spread of solar power technologies, bio fuels and wind turbine development.
In South Africa this view can be pushed in the supply chain industry through logistics; as 13% of total carbon emissions arise from the transportation industry. Collectively, he views that all logistical stakeholders should work on understanding and acknowledging their role in sustainability, route optimisation, social responsibility and unity in action. Sustainability should be a lifestyle not a competitive advantage.
Christine Mondor, a lecturer from Carnegie Mellon University in the United States spoke of sustainability in supply chain design. She highlighted that value and sustainability can be found in unexpected places.
Architecture as an agent in the supply chain industry also plays a valuable role in the promotion of sustainability.
The David L Lawrence Convention Centre in Pittsburgh was the focal point of her presentation. Built in 2004 at a cost of US$375 million, it receives five-hundred thousand annual visitors and was designed with a “Green” sustainable concept.
The building is regarded as an important benchmark for sustainability in construction. In comparison to its competitors has set a new standard for sustainability, encouraging “greening” operations in development thus promoting the transference of sustainability. This transference moves from the guest to supplier in supply chain.
Its key sustainable features include natural ventilation, daylighting and 40% less steel used in construction. Natural ventilation has saved energy to power fifty-one Pittsburgh homes annually.
Water efficiency minimises demand, matches water to usage and treats black water on site.
The indoor environment maximises satisfaction of users with the design holding a biophilic advantage; holding within it harmonious river views, maintaining natural warm and outdoor air. Daylighting; which saves significant energy is also used in the design that boasts large windows allowing the natural flow of light.
Conventions are a billion dollar industry: with that there is a push to reduce overall consumption in the building, reuse and recycle, as the convention industry produces massive waste streams.
It receives 25% of its revenue from “Green Seeking” events that have so far equalled to revenue of over U$144 million.
Mondor highlights that there is a gap between sustainable building design and construction and the convention centre stands as a benchmark for sustainability and profitability.
Closer to home greening construction moves can be seen in developments such as The Pick and Pay Falls Roodepoort store, a R160 million development. The flagship store, set on 10,000 square metres in Little Falls Johannesburg is an innovative Green concept store by Atterbury Properties and Pick and Pay.
The store was constructed in 2012 and brought with it a pioneering sustainable development node. It makes use of daylight harvesting, allowing for maximum use of natural light in the building design. Rainwater harvesting, grey water use and water-wise planting, featured along with environmentally friendly, energy efficient lighting and LED lighting in the car park.
Global initiatives, moves and actions such as these depict shifts in the thoughts and structures of development striving for sustainability.
What sustainable development requires of us is to see the world as an interconnected system that cannot function if all components are not fully active as decisions made now will effect generations to come.
Yes I said it...