Last week, P&G launched its Supplier Environmental Sustainability Scorecard. You can download the scorecard and supporting materials here. In an overview document, P&G explains the scorecard and its purpose as follows:
We are launching the scorecard to measure the sustainability of our suppliers in four key areas: energy use, water use, waste disposal and greenhouse gas emissions—as well as their contributions to key P&G sustainability activities. Developed by a global team of P&G and Supplier experts, the scorecard is organized to flexibly measure sustainability improvement at the scope (corporate, site, product, etc.) suppliers can report now; while encouraging them to develop the capability to measure end-to-end supply chain sustainability for specific P&G materials and services—consistent with business/industry initiatives and sound science. The scorecard (and rating system) specifically focuses on whether each supplier is making year-on-year improvement; creating an actionable evaluation matrix and collaboration tool—regardless of a supplier’s size or current capability.
P&G Purchasing Supplier Relationship Owners (SROs) will use the scorecard to determine their supplier’s sustainability rating in P&G’s annual supplier performance measurement process. SROs/Buyers may also use components of the scorecard as a template to gather comparable sustainability measures to use in best total value business award decisions.
Suppliers have to submit completed scorecards to P&G by July 1, 2010 and suppliers will receive feedback by the end of September.
My initial reaction to the news was “Great, another scorecard, just what the industry needs.” Less than a year ago, Walmart launched its Sustainable Product Index, which includes 15 supplier assessment questions (see “Initial Thoughts on Walmart’s Sustainable Product Index”), and there’s also the Packaging Scorecard that Walmart introduced in November 2006.
The good news is that there is some alignment between these initiatives. For example, both P&G and Walmart use the GHG Protocol developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBSCD). And both companies support the Carbon Disclosure Project (CDP), although P&G chose not to use CDP as the vehicle to collect scorecard information because “the CDP report does not address all scorecard areas nor does it provide year-on-year progress report or detail initiative support.” P&G, however, “matched scorecard definitions and measures, wherever possible, with the same measures in CDP and Global Reporting Initiative (GRI), so suppliers will not have to do double work to track and calculate the data.”
But in reality, there is additional work required for suppliers, and it is only going to get worse once other large manufacturers and retailers jump on the bandwagon and create their own sustainability scorecards, even if they are all based on “standards.” Just look at the mess we’re in with so-called EDI standards for purchase orders and other business transactions. Almost every company took these standards and tweaked them (e.g., changed the syntax, added unique variables, reordered the transmission) because they felt the standards didn’t fully meet their needs. Now we have a “Tower of Babel” business environment where billions of dollars are spent each year mapping transaction sets between companies and correcting data.
This potential problem, however, creates another growth opportunity for providers of Supply Chain Operating Networks (see “Revisiting Supply Chain Operating Networks”). The more I think about it, the more I believe sustainability reporting should be a network-based service. Then again, based on P&G’s approach, who needs the Internet and Web technologies when you can use Excel spreadsheets?
Another thought: P&G talks about “improving sustainability without trade-offs” (see chart below). But as I wrote about more than two years ago in “Inconvenient Truths About ‘Green’ Supply Chain Management,” if you don’t accept tradeoffs, then you place limits on how much you can actually achieve.
P&G Supplier Sustainability Apporach (Source: "Sustainability Scorecard Training Module 1" available at P&G website; click to enlarge)
As I wrote back in 2008:
And this brings me to the second inconvenient truth [about green supply chain management]: creating “green” supply chains that are truly sustainable will be costly and messy, and we’re all going to have to pay for it, one way or another.
Yes, it’s true: ‘Green’ is good for business. But this is true because, for the most part, only ‘green’ projects that are good for business (or required by law or Wal-Mart) get done.
Now, I don’t have an argument with this. Companies are in business to make money, not lose it. I certainly don’t want to work for a company that drives itself into bankruptcy and leaves me jobless by undertaking “green” projects without any fiscal discipline. But we must also recognize that there’s a limit to how much progress we can make, and how quickly, if “good for business” is the only litmus test we use. Eventually, the law of diminishing returns will kick in, and then what will we do?
And what will P&G, Walmart, and others do with all of this data? How will they verify its accuracy? What long-term changes will it drive in network design, product development, procurement, logistics, and other business processes? What will happen when tradeoffs have to be made? We’ll just have to wait and see.
Let us know what you think. Post a comment and share your viewpoint!
