Consumer-products giant Procter & Gamble Co. has launched a sustainability scorecard to measure and improve the environmental performance of its key suppliers.
Using measures similar to the packaging scorecard introduced in 2007 by Wal-Mart Stores Inc., the P&G model will assess its suppliers' environmental footprints and encourage improvement by measuring year-to-year energy use, water use, waste disposal and greenhouse gas emissions.
The launch of [the scorecard] represents the next step in P&G's commitment to environmental sustainability and reflects the company's holistic, end-to-end supply-chain strategy, Bob McDonald, Cincinnati-based P&G's chairman, president and CEO, said in a May 12 news release.
Keeping sustainability at the core of our business fuels innovation and strengthens our results, he said.
The company said the scorecard will be open code for use by any organization to help determine common supply-chain evaluation processes across all industries. The scorecard is the result of 18 months of collaboration with more than 20 representatives from P&G's global supply chain.
P&G said the scorecard relies on worldwide sustainability measurement standards, including protocols from the World Resources Institute in Washington, the World Business Council for Sustainable Development in Geneva and the London-based the Carbon Disclosure Project.
Our suppliers wanted a tool that was flexible, yet grounded in existing measurement standards and, by working together, we developed a framework that will help drive real improvement across all industries, Rick Hughes, P&G global purchasing officer, said in the release.
Initial reports are due to P&G in July. Suppliers will have a full year to prepare to report their data before the scorecard can adversely affect their supplier rating with P&G, the company said. In the future, P&G will use the scorecard to determine each supplier's sustainability rating as part of its annual supplier performance measurement process.
After analyzing initial data collected from key suppliers, P&G will consider a wider rollout of the scorecard, the company said.
Supplier scorecards have gained fairly wide distribution since Wal-Mart announced its version in 2007, with other large corporations developing or implementing their own versions.
Managed-health-care provider Kaiser Permanente of Oakland, Calif., said May 4 it will require suppliers to provide environmental data for $1 billion worth of medical equipment and products used in its hospitals, medical offices and other facilities.
Critics said the use of sustainability scorecards is an effort by large companies to cut down on their shipping and storage costs, while increasing research and development expenses suppliers must pay to meet the requirements.
Author Charles Fishman, whose 2006 book The Wal-Mart Effect tracked the Bentonville, Ark., retailer's influence on consumer shopping patterns and the industrial supply chain, acknowledged there was some supplier blowback to Wal-Mart's scorecard.
The packaging scorecard definitely caused static, especially because Wal-Mart wasn't interested in taking any price increases associated with the reduced packaging, he said in a May 13 telephone interview.
Fishman said because P&G's suppliers are not consumer product manufacturers, they aren't likely to absorb as much cost up front as did Wal-Mart suppliers, including P&G.
While Wal-Mart was concerned about packaging reduction, P&G's goals are more broad-based, in keeping with recent moves by corporations including International Business Machines Corp. and Kaiser Permanente, Fishman said.
These large companies are acknowledging a couple of things: that actually they sit in the middle of ecosystems that they create and are reliant on, but that they also help sustain; and that the ecosystems involve a lot more than just money and consumer products, he said.
P&G has obviously discovered what Wal-Mart discovered, that we have a lot more leverage over environmental impact if we consider not only our own impact, but the impact for which we are responsible.
Wal-Mart confined its comment on P&G's move to a May 13 e-mailed statement from Rand Waddoups, senior director of sustainability.
We are encouraged that one of our largest suppliers is taking this initiative, which aligns with Wal-Mart's supply-chain goals to reduce inefficiencies and waste. By embracing and integrating sustainability into the supply chain, we are confident suppliers will be able to take advantage of opportunities that ultimately lead to lower-cost, higher-quality products for customers, Waddoups said.
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