Sustainable Supply

Chains

Cecilia Solér
From strategy to implementation…
1. Tension Consumption Earth
SMM

2. Strategy

3. Communication

4. Globalization
The Cocoa films

¡ How can marketing practitioners

work to improve the conditions
described in the films?
Why sustainable supply chains?
(garment industry - cotton)

¡ Buy 13 kg clothes / person / year

¡ Stillenvironmental problems around Borås and other Swedish old

textile centers.

¡ Ground water problems in India next to factories (e.g. non-use of

sewage treatment).

¡ 2700 liters water are consumed for making one t-shirt. This is often
more than what is available locally. For example, in Tirupur in India
2000-3000 trucks drive 7-10 transportations per day with water to
producers.

¡ Extensive amounts of chemicals throughout the supply chains from

the cotton fields and forward. For example, nonylfenoletoxilat is
still found in products sold in Sweden despite being banned by
Swedish buyers, and in Tirupur 80 million liters of contaminated
water / day is released.
Why sustainable supply chains?
(garment industry - cotton)
¡ Social problems
¡ Living wages?
¡ The right to be part of a union
¡ Working conditions
¡ Health problems
Why sustainable supply chains?
(Coffee)

¡ Environmental problems associated with pesticide use and

deforestation (biodiversity losses) in coffee farming regions.
Pesticides banned in the EU are increasingly used overseas with
detrimental effects on human health, the groundwater and the
number of bees.
¡ Social problems
¡ Coffee blends sold under different brands are made up of
anynomous coffees from different regions.

)
Why sustainable supply chains?
Social and environmental problems usually
occur at suppliers rather than in Swedish
companies’ own factories:
¡ Child labour/Forced labour

¡ No living wages

¡ No pensions or accident insurances

¡ Extensive overtime/No overtime payments

¡ No employment contracts

¡ No health and safety education

¡ Exposure to chemicals

¡ Pesticide use

¡ Biodiversity loss
)
¡ Water contamination
Why sustainable supply chains?
The business side
¡ Positive environmental and social impact and
improved staff engagement (ethical)
¡ Potential cost savings (cf. internal efficiency)
¡ Enhancing supplier performance (cf. internal
efficiency)
¡ Minimizing reputational risk (cf. legitimacy)
¡ Enhancing brand (cf. legitimacy)
¡ Avoid government regulations (cf. legitimacy)
¡ Improved supplier contribution to development of
sustainable products (cf. innovation)
 Why not sustainable supply
chains?
Increased purchasing costs
* Conflicts between sustainability and other
purchasing criteria (e.g. delivery times)
* Increased auditing costs
* Validity of information
* Corporate culture and cynicism
* Initiative overload
* Definitional confusion
* Limited reward mechanisms for purchasers
* Really helping? Western values and/or
developing countries competitive advantage.
Sustainable supply chains in
practice

¡ 20% of firms view sustainability issues as their

biggest supply chain risk (Harwood and Humby,
2008).
¡ H&M has over 60 full-time employees in China doing
sustainability work with their suppliers, Ericsson has
over 20 full-time positions and many international
buyers have even more.
¡ In sum, most multinational corporations work with
sustainability in their supply chains.
 Sustainable supply chains in
practice

Proactive

Emerging Rare
attention
Mainly CO2
Globally

Environment Extensive attention Extensive attention Social

Codes of conduct Codes of conduct

Emerging
markets

Reactive
Proactive example: SKF and CO2
¡ Requires major suppliers to have programs
for reducing CO2 emissions.
¡ Requires major suppliers to report quarterly
on CO2 reductions.
¡ SKF sustainability supplier days.
¡ Encourages suppliers to help SKF reduce
energy consumption (and consequently CO2
emissions) from SKF’s production.
¡ Encourages power/heat suppliers to help SKF
reduce CO2 emissions by providing
renewable energy.
Reactive example: Toy production and social
sustainability
Content of codes of conduct (Top Toy, Brio, Coop)
¡ Working hours (maximum of 40 hours per week,
maximum of 3 hours overtime per day and maximum
of 36 hours overtime per month)
¡ Number of working days a week (at least one day of
per week)
¡ Guaranteed minimum wage (approximately €40 per
month)
¡ Overtime compensation (50% extra on weekdays and
100% extra on weekends)
¡ Accident and pension insurance
¡ Physical examinations (once every year)
¡ Health and safety education
¡ Child labor (minimum age of 16)
¡ Copy of employment contract
 Reactive example: Toy production
and social sustainability
¡ Results from evaluation of nine suppliers:
¡ All violated some of the evaluated code of
conduct standards
¡ 7/9 violated the majority of the standards
¡ 3/9 violated all but one of the standards
¡ No Swedish retailer better than the others
¡ Codes of conduct are unsuccessfully
implemented at the studied Chinese
suppliers
à Improvements over time? YES!
Reactive example: Toy production
and social sustainability

Suppliers trick monitoring organizations:

¡ Instructing employees on what to say
¡ Compensation for "correct" answers
¡ Forged salary lists
¡ Forged time cards
¡ Hiding part of workforce
¡ Employee contracts

Poor monitoring:
¡ Announced interviews
¡ Official interviews
¡ Non-confidential interviews
¡ Interviews inside factories
Ways forward
¡ Codes of conduct: Race between monitors
and suppliers regarding identifying
cheating. Winner?
¡ Sustainability certification
¡ Labour laws: Stricter labour laws, and more
enforcement of labour laws.
¡ Integration: Link auditing closer to supplier
development.
Summing up - Sustainable issues in
supply chains
1. Sustainability issues are often located in supply
chains, and there are business opportunities to
solve them.
2. The majority of large multinational corporations
work with sustainability in their supply chains.
3. Buyers pressure their suppliers to improve their
environmental and social performance.
4. Suppliers sometimes contribute to reductions of
buyers’ direct CO2 emissions via their products
saving energy or them providing renewable energy
sources.
5. Many firms work reactively with sustainability by
imposing minimum requirements on suppliers, but
some also work proactively (mainly regarding
environmental performance).
Competing sustainability
certifications

¡ The race to the bottom

¡ Sustainability certifications as
branding tools
Coffee and cotton supply chains

¡ Voluntary sustainability standards

(VSS) certifications as marketing
tools
¡ Mainstream market VSS are
marketing tools increasingly used
by dominant actors in the coffee
and cotton value chain to build trust
among consumers who value
sustainable-sourced products.
Coffee supply chain
¡ Mass market sustainability certification relies on
sourcing of certified coffee from different coffee-
producing countries to secure supply
¡ The need for large-scale sustainably sourced coffee
for the mass market is proposed to generate a need
to apply criteria that are sufficiently wide to allow for
rapid certification in different coffee-producing
contexts
¡ VSS coffee certifications as marketing tools entail

numerous benefits for coffee farmers, such as training

opportunities, improved farming practice, product
quality, and long-term trading relationships
Coffee supply chain
¡ For some farmers, certification is too costly in relation to
the financial remuneration gained, and a few studies
indicate that costs of certification biodiversity conservation
¡ There is a paradox in communicating environmental
governance in agricultural production, which by default is
localized, by the same sustainability metric across various
coffee-farming localities.
¡ coffee marketing and branding tools are performative and
produce different biodiversity outcomes. Markets are
shaped by VSS certification through mutual reinforcing
market practices as large-scale supply of low-priced
sustainable coffee and low standards for biodiversity
conservation in coffee farming.
Cotton supply chain

¡ Better Cotton initiative as a mass

market low requirement
sustainability standard is growing
¡ At the expense of Organic cotton
¡ The price of cotton is very low and a
double certification of Organic+Fair
Trade is needed to ensure a living
income of Indian cotton farmers.