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#NewMetrics ’14 Panel Explores Data-Derived Solutions to Top Global Supply Chain Risks

My coverage of the Sustainable Brands New Metrics Friday afternoon workshop on top global supply chain risks.

It’s Friday afternoon at New Metrics ’14, and next on the agenda is a workshop offering data-based insights and recommendations on top global supply chains risks from specialists in the field.

The conversation was co-led by Andrew Savini, Manager of Supplier Management & Audits at Intertek, and Mark Robertson, Head of Marketing & Communications at Sedex, who shared their companies’ data analyses of supply chain risks and real-world experience.

To illustrate the scope and scale of the supply chain risk ecosystem, they offered this quote from global beverage company Diageo: “At Diageo, we talk about 70,000 suppliers and third parties, spread across over 100 countries of the world. When multiplied by the number of sub-suppliers in the supply chains, you get in to hundreds of thousands of people impacted by our global supply chain, so it’s vital to prioritize the key areas.”

Starting off, they gave an overview of CSR supply chain key events in the past 10 years, from labor issues at Levi’s and the 2013 Rana Plaza disaster, to legislation, regulations, the proliferation of standards in the late 1990s, and the role of NGOs.

Data is the key to measuring progress towards responsible sourcing, they said, which they defined as the process of purchasing goods and services without causing harm to, or exploiting, humans or the natural environment.

On to risks, they shared the top 10 performance trends that audits around the world are picking up globally – fire safety, health and safety management, level of overtime hours, environment, management systems, machinery, chemicals and worker health/first aid/accidents, building/site maintenance and benefits/insurance – as well as how they look when sliced by China, Bangladesh, the United States, and by industry.

Not surprisingly, more mature industries such as food factories tend to perform better overall, due to years of scrutiny and regulations. By contrast, electronics factories have a way to go because of growth and increasing production.

A key supply chain risk is whether suppliers have controls or evaluation procedures for subcontracted work. In the case of Rana Plaza, many suppliers didn’t know their manufacturing processes were subcontracted to an over-burdened building with locked exits. Globally, audits find that 2 out of 5 suppliers do not have these controls in place, with the number being nearly 4 out of 5 in Taiwan.

A brighter story is the case of the global frequency of adequate fire-fighting equipment — only 1 out of 10 facilities fail at this measurement. This indicates that many years of codes of conduct and auditing have positively influenced fire safety practices.

They then did a deeper dive into labor issues in Cambodia, and showed how signs of the labor unrest that broke out in early 2014 could be discerned in earlier factory audits. A year before labor strikes took place, Cambodia’s overtime rate was 1.5 times more than the global average, signaling that workers were approaching a breaking point.

The conversation moved on to solutions and the case for multi-tier transparency. According to a PwC & MIT study, globally, only a third of companies are actively seeking transparency below Tier 1 in their supply chain. This is a problem because the highest risks and most issues are found deeper down (in the case of a garment’s supply chain, Tier 1 is the assembly, Tier 2 is the mill and Tier 3 is the cotton farm).

Intertek research backs up the case for companies to take on deeper levels of transparency – 40 percent of Intertek audit requests from global clients have something wrong with the audit request entity, and 70 percent of brands in a recent Intertek survey admitted their organizations would most likely lack the capability to trace back to production.

Externally, the drivers for improving supply chain risk management are compliance and traceability. The first, compliance, is fueled by regulations and legislation, investor pressure and consumer pressure. Pressure to improve traceability stems from the reality that in a connected world, issues become news in seconds.

What this means for companies is that transparency is expected, the “bare minimum” is no longer acceptable, greenwashing will be called out and criticized, and companies need to know where the next Rana Plaza could be.

The session wrapped up with their advice for what executives should keep top of mind.

Robertson said that sustainability leaders are looking to “not just meet regulatory requirements but go beyond compliance. That starts with protecting workers and doing more around benefits [such a providing a living wage] or training.”

As well, forward-looking companies are harnessing the power of Big Data from government datasets and news sources, expanding traceability beyond Tier 1 and forming collaborations with NGOs and other business leaders.

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#NewMetrics ’14: TD Bank, Intel, CA Technologies, WeSpire Share Employee Impact Case Studies

My article about the Friday afternoon Sustainable Brands New Metrics 14 workshop on employee engagement case studies.

Rounding out the final afternoon of Sustainable Brands’ New Metrics ‘14, Susan Hunt Stevens, founder & CEO of WeSpire, led a candid, data-rich conversation with representatives from TD Bank, Intel and CA Technologies about their employee engagement programs.

“These three people are doing really amazing work not only in employee engagement, but more importantly, connecting employee engagement to broader business value and key HR metrics,” Stevens said.

She explained that WeSpire technology helps global companies engage their employees in sustainability and responsibility initiatives — she said WeSpire customers have saved over $1M while reducing their environmental footprint in waste, water and energy, since July 2013.

But the real win comes from more engaged employees and seeing that as a real value. She said that disengaged employees cost companies an estimated $450-550 billion in lost productivity. Looked at this way, sustainability isn’t just a department goal but a business driver of overall success. When employees get engaged at work with social and sustainability initiatives, you can measure the impact in overall productivity and results.

Starting off, Linda Qian, CSR Communications Manager at Intel, shared her company’s “cherries and pits” — successes and misses — experience with a global employee recycling program. This was one element of Intel’s overall program that offers options for employees at all stages of the sustainability continuum from “light green” to “dark green.” Notably, she said that Intel ties compensation to sustainability metrics. For this year, the bonus metric was tied to the global recycling rate.

The team picked recycling because it was a goal that everyone could contribute to by changing their behavior.  The biggest learnings, or pits, came through a bumpy program rollout and unanticipated employee pushback. But the cherries, Qian said, were that, “The ability to engage all employees in a tangible way does have positive results. We did see an overall reduction in waste produced and increased recycling.”

Brad Peirce, VP of TD Environment at TD Bank, next shared that his company seeks to be “as green as our logo” with leadership in protecting critical forest habitats, greening the urban environment, and a commitment to climate action through renewable energy. In addition, the company believes that engaging employees in these issues helps attract talent, enhance the brand and increase productivity.

Peirce said the bank has found that employees were at different stages along the continuum of green, with some superstars such as an employee named Tim Little, whose passion for talking about TD’s environmental initiatives turns customers into advocates. The challenge was to engage more employees in this way. The solution was the online “Green Pledge Challenges” with seven simple, measureable actions.

To make it go viral through the company, they added game elements and enlisted the support of senior execs and middle management to report progress weekly by lines of business in a friendly competition.

In less than six weeks, 40 percent of bank employees took the Pledge and the number continues to increase.

“We learned a lot from our data about where employees need to do better and how to help them,” Pierce said. “The pledge became a proxy for us to understand our company better, and for employees to see through a different lens that their individual actions add up to collective impact.”

Finally, Andy Wu, Principal of the Office of Sustainability at CA Technologies, discussed how his company measures whether its sustainability programs and initiatives have a positive impact on employees.

In 2011, the company launched numerous employee engagement campaigns, including a Good to Green Game and video vignettes, a Green Teams pilot that expanded in 2012, and the CA Sustain program in 2012. It also added a question to the annual employee survey, asking whether CA Technologies demonstrates its commitment to global sustainability of the environment and our communities.

Over the past two years, the program’s results show increasing employee engagement towards the company’s sustainability commitments. Favorable responses on the 2013 employee survey have jumped from 76 percent to 84 percent. And survey results for Green Team locations were even better in 2012, showing an 89 percent favorable response versus 82 percent favorable for the company overall.

Going forward, Wu said CA Technologies is looking at ways to run studies and separate sustainability from other factors that employees care about. And he noted the partnership role that the Human Resources team plays, saying: “HR has been very helpful in identifying some of the issues we have and how sustainability aligns with retention and satisfaction.”

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#NewMetrics ’14 Day 3 Highlights Power of Consumers to Change Brand Behavior … and Vice Versa

My wrap-up of Sustainable Brands New Metrics ’14 Friday morning plenaries.

The final morning of Sustainable Brands’ New Metrics ’14 conference started with an invitation from MC Bill Baue, co-founder of the Sustainability Context Group, to imagine “what if?” sustainability pioneer Donella Meadows were in the room and what she would say.

“Am I working at a leverage point that has the most potential to leverage systemic change?” Baue asked, referring to Meadows’ landmark book, Places to Intervene in a System. He then asked attendees to keep this in mind for the day’s theme of analyzing and engaging consumers and employees, and to consider how New Metrics can help us inform and illuminate ways “to transform systems for a more sustainable — and indeed flourishing and prosperous — future.”

Terry Garcia, Chief Science and Exploration Officer at National Geographic, announced the global release today of findings from National Geographic’s fifth 2014 Greendex with GlobeScan’s Eric Whan.

Eric Whan, Terry Garcia, Alexander Gillett

L-R: Eric Whan, Terry Garcia & Alexander Gillett

The survey highlights a growing concern about environment and climate change and how that’s going to impact quality of life. But despite this, it also shows that a corresponding change in consumer behavior has only grown slowly.

Even with this gap between intention and action, there’s some good news in the survey. Whan said that a growing sense of anxiety — an awareness — shows the preconditions for making change. And that, “In my opinion there are no better change agents than marketing and branding people.” He ran through some of the survey’s deeper findings, including which groups seem more willing to change, that people are willing to pay more for more sustainable choices, and what actually motivates them do take actions.

Amy Fenton

Amy Fenton

Next up was Amy Fenton, Global Leader of Public Development & Sustainability at Nielsen, who shared new research on whether consumers actually follow their words and intentions with their wallets.

“In fact, the profound answer is ‘yes,’” Fenton asserted. “Consumers do care and their actions will follow. There are preconditions for how that change occurs, but consumer change can result in increased revenues.” Indeed, the latest data from Nielsen’s 2014 Global Corporate Social Responsibility survey shows that 55 percent of global online consumers across 60 countries are willing to pay more for products and services from companies that are committed to positive social and environmental impact.

Jenny Rushmore

Jenny Rushmore

Focusing in on millennials, she said that since over 50 percent of those willing to pay more globally for more sustainable choices are millennials, this is the group brands need to be thinking of long term.

Next, Jenny Rushmore, Director of Responsible Travel at TripAdvisor, discussed the novel metrics her company is using for its green hotel rating program by saying that it’s “a totally different way of doing research that avoids current pitfalls and opens up new exciting possibilities.” This work is the first time guest perception research has been done with a very large sample set of unprompted responses, gathered from the TripAdvisor’s GreenLeaders database of both sustainable hotel practices (over 4,000) and traveler reviews of those practices (over 30,000).

One of the striking takeaways from the research is that highly-visible green practices like sustainable food that directly add value to the consumer experience can improve the customer’s overall experience and potentially increase revenue by bumping up the hotel’s rating overall.

Highlighting another example of how new metrics can help consumers make better informed purchasing decisions was Alexander Gillett, CEO of How Good. His company’s food rating labels help create shifts in purchasing behaviors by giving shoppers an at-a-glance view of a product’s environmental and social impacts.

Echoing what TripAdvisor learned about customers, the food industry is a bellwether for how new metrics can help influence more sustainable customer decisions in other sectors. “Food is one of the areas where there is positive change,” Gillett said. “Some of the things that are happening in food will probably be happening in other industries in 10 years.”

How Good is finding that giving customers more information can bump up sales for sustainable products. He shared how putting a “This product is great for the environment, society and the world” label on the shelf under a high-rated product led to a 46 percent increase in sales for that item in conventional grocery stores.

Roya Kazemi

Roya Kazemi

After a break, the sessions continued with Roya Kazemi, Director of GreeNYC, the NYC Mayor’s Office of Long-Term Planning and Sustainability. She shared research that the City has done on how best to engage residents on sustainability issues, and what her team has learned about branding, messaging and media strategies that get results.

When NYC Mayor DeBlasio recently announced the city’s new goal to achieve an 80 percent reduction in emissions by 2050, he not only made NY the largest city in the world committing to that goal, but also made Kazemi’s job that much bigger. There’s a lot that the City is doing on the levels of infrastructure and policy, but consumers have to be a big part of that. “Household energy use is 39 percent of New York City’s CO2 emissions, so consumers have to be a big part of it,” she said. She pointed out that consumer behavior change can have an impact in a matter of months, compared to legislation that can take years.

Suzanne Shelton

Suzanne Shelton

Kazemi then described the data-driven approach they’re using to guide strategic decision-making. The detailed plan they rolled out focuses on the top 10 actions to reach people who aren’t currently doing them, to help NYC get a significant way to the goal using a positive voice, clear call-to-actions, and the use of a branded mascot named Birdie.

Kazemi’s presentation was a perfect tee-up from New York’s citywide plan to Shelton Group CEO Suzanne Shelton’s, on applying behavioral economics to inspire behavior change around energy-efficiency actions.

“Energy-efficiency is actually the best thing we can do for the environment,” Shelton said. “The problem is that none of us really want to be energy-efficient — and that’s a perception problem.” She laid out the program her company runs with utility companies to drive energy-efficiency behavior change. The “Do 5 Things” program rests on the insight that getting people to do just five things — not 2 and not 25 — is the sweet spot for getting customers engaged, happy with their savings and highly likely to do the next thing. She described how they tailored messages and methods to four distinct customer segments and used off-beat marketing messages to catch customers’ attention.

Steph Sharma

Steph Sharma

“If you want to change behaviors,” Shelton said, “you have to know who you’re talking to, customize the actions for them, make the action list manageable, and apply behavioral nudges over time.”

Shifting gears a bit, Steph Sharma, Managing Partner of Lead the Difference, posed a provocative metrics question to the room: “If human capital is a company’s greatest asset, then why does business-as-usual reflect it only as a liability?” She then explained how ongoing analysis is delving into the possibilities of making human capital more real on the balance sheet, how it could be measured, what the barriers are, and what it could mean for how we organize and manage businesses overall.

If the task is to discover which metrics represent the actual value created by humans, then one of the challenges is to determine the right inputs and outputs. As the analysis continues, Sharma said that information will be shared widely and openly. “This is all about keeping humans central,” she said, towards the goal of making humans a real asset to businesses and doing it correctly.

Tom LaForge

Tom LaForge

Finally, Tom LaForge, Global Director of Human & Cultural Insights at Coca-Cola, took the stage to discuss how culture shifts are changing how brands see themselves and position themselves in the marketplace.

“What’s emerging is that brands are starting to stand for something good — we’re entering an era where brands stand for solving problems of society,” he said. “Corporations and government have the power to make change. What I’m hoping is happening is that we the people — including the people who use your product — think that the good they want to see in the world is possible if they team up with the right people.”

The morning wrapped up with LaForge saying, “This is the world you have to prepare your organization for. This new era of social branding is about what’s the right way to do business. Start thinking about words like ‘right’ and ‘good.’ We are assessing brands at a social level and we need metrics that can help us measure and assess if a brand is helping society.”

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#NewMetrics ’14 Panel Dives Into #SocialFootprint Approach for Ensuring Product Sustainability

My coverage of the Sustainable Brands New Metrics 14 Thursday afternoon workshop on the #socialfootprint approach to product sustainability.

L-R: João Fontes, Dirk Voeste, Charles Duclaux, Sébastien Zinck and Lindsay Clinton. | Image credit: Sustainable Brands

Thursday, the second afternoon at Sustainable Brands’ New Metrics ’14 conference, featured a follow-up deep dive session into the topic of one of the morning’s well-received plenary presentations — how to quantify a product’s “social footprint” as a next step in assessing sustainability.

While the sustainability field has developed many ways to assess products’ environmental footprints, until now few tools have helped accurately measure the social impacts that products have on workers, local communities, suppliers, consumers and more throughout their life cycle.

This workshop expanded on the Sept. 1 release of the Handbook for Product Social Impact Assessment, developed by PRé Sustainability and a Roundtable of 12 leading companies in various industries: Ahold, AkzoNobel, BASF, BMW Group, DSM, L’Oréal, Marks & Spencer, Philips, RB, Steelcase, The Goodyear Tire & Rubber Company, and a chemical company led by PRé.

The Handbook gives companies a tool to understand risks and opportunities in product development through the whole supply chain, and support better decision making.

Lindsay Clinton, Director at SustainAbility, moderated the panel of representatives from BASF, L’Oréal and Steelcase, and João Fontes, Social Footprinting Expert at PRé.

Fontes explained what sets this tool apart from others in terms of measuring social impact: “This social footprint integrates a lot of efforts and tools that companies have available at different departments. In terms of the methodology, the social footprint is life-cycle oriented, while at the same it gives the practitioner the flexibility to define the scope of the assessment.”

Charles Duclaux, Head of Corporate Responsibility Reporting and Environmental Innovation for L’Oréal, explained his company’s motivation to join the Roundtable, saying that the initiative “perfectly fit with one of our 2020 sustainability commitments to social and environmental improvements.” Participating in the Roundtable pilot also moves the cosmetics company forward in fulfilling its pledge to help customers make more informed choices with product information.

Then, Sébastien Zinck, Manager of Eco-design and Life-Cycle Assessment for Steelcase, described how his company conducted a pilot to evaluate the social impact of one component part of a chair. “We see the big potential of these metrics to make improvements on social issues, and bridge the gap between academic research and industrial needs,” he said.

Next up was BASF’s VP of Sustainability, Dirk Voeste, who spoke about his company’s upstream position in many of the products made by fellow Roundtable members, the responsibility that comes along with that, and how this tool can help make better business decisions.

“Social metrics are getting very critical for us,” he said, noting the importance of using a standardized frame for making decisions.

Fontes walked through the steps of the social footprint methodology, which is similar to a Life Cycle Analysis. The process starts with setting goals and scope, moves on to data inventory, and then to reference points as performance indicators for benchmarking and comparison. Roundtable members helped create and validate the process that also incorporates international standards for social issues.

At the end of the seven-step process, Fontes said, “you have a visual dashboard color-coded, where you can see the areas where you or one of your business partners are doing a great job, as well as the areas that need attention.”

While still a work in progress, the social impact tool has huge potential to help companies measure and improve their relationships between products and people through the entire product value chain.

The speakers said the next phase of refining the product social footprinting methodology is underway and the Roundtable for Product Social Metrics is looking for new corporate members to join and collaborate.

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2-Part #NewMetrics ’14 Panel Shines Light on Sustainability Context in Practice

My coverage of the Sustainable Brands New Metrics 14 Thursday afternoon workshop on adding context to sustainability goals.  (First half written by Tamay Kiper.)

A two-part session on Thursday afternoon explored sustainability context through examining the evolution of corporate sustainability goals, and case studies from leading companies proactively applying it to their goal-setting processes.

First, Sustainability Context Group co-founder Bill Baue — moderator of both parts — led a discussion on the state of corporate sustainability goals and equipping companies with practical advice on how to incorporate context.

Baue started by explaining the concept of context — which calls for assessing “the performance of the organization in the context of the limits and demands placed on environmental or social resources at the sector, local, regional or global level” — and raised the question: “Where are we now in sustainability and where are we going?”

Panelist Mark McElroy, founder & Executive Director of Center for Sustainable Organizations, further explained the necessity for Context Based Sustainability (CBS) in environmental goal-setting, as well as the need to turn to climate science for thresholds, to then devise a way to apportion them to organizations. A new CBS method, the MultiCapital Scorecard (MCS), which Ben & Jerry’s has just adopted, puts Trajectory Targets (interim goals) and Triple Bottom Line concerns in scope and assessing performance relative to both final (Sustainability Norms) and interim (Trajectory Targets) goals.

Next, Bob Willard picked up where his morning plenary presentation left off, further explaining The Future-Fit Business Benchmark — which defines the science-based, minimum acceptable levels of environmental and social performance that a company must reach if it is to be truly sustainable and fit for the future — and expanding on the 21 Key Performance Indicators (KPIs) for businesses. Social KPIs were divided into 5 categories (Employees, Community, Customers, Investors and Suppliers, & Partners) and Environmental KPIs included Energy, GHG, Water, Materials, Products, Waste and Land. A company’s Future-Fit performance on these KPIs ensures its environmental and social impacts do not contribute to the issues.

Andrew Winston, author of The Big Pivot, engaged the audience with the latest updates from the PivotGoals Data introduced at SB’14 San Diego in June, and emphasized that 75 percent of Fortune 200 companies now publicly share sustainability goals. Echoing McElroy’s and Willard’s insights, Winston divided these goals into two categories: Science-equivalent — what external thresholds would demand for some large part of the business (not the full value chain); and “Future Fit” compatible — moral, ethical, or based on a flourishing model, but not technically ‘science-based.’ Winston encouraged the audience to track companies’ sustainability goals online on PivotGoals.com, and feedback from the audience was to track these goals periodically to see if companies were successful meeting these goals.

Then Cynthia Cummis, Deputy Director of GHG Protocol at the World Resources Institute (WRI) introduced its science-based target-setting framework, which aims to raise the ambition of corporate GHG reduction targets to support a transition to a low-carbon economy and keep the planet below a 2-degree temperature rise. She then explained how WRI’s Sectoral decarbonization approach (SDA). — a sector-specific decarbonization pathway based on the 2ºC carbon budget, expected sector activity and mitigation potential — aims to engage the leading multinational companies to set science-based emissions reduction targets by the end of 2015, and demonstrate to policy-makers the scale of ambition among leading companies to reduce their emissions and act as a positive influence on international climate negotiations.

After a round of audience questions and a short networking break, Baue returned with a fresh set of panelists to delve into case studies from EMC, Cabot Creamery and Autodesk, detailing each company’s experience incorporating sustainability context into their efforts.

“We’re in transition from incremental goals towards more ambitious goal-setting that takes the larger context of ecological limits and social impacts into consideration,” Baue said.

Emma Stewart, Head of Sustainability Solutions for Autodesk, kicked things off the three reasons her company got into science-based goal setting.

“As an environmental scientist, I’d never seen the level of consensus and clear guidance that we have on climate science,” she said. Secondly, she found the current practices around goal-setting to be “ripe for disruption” due to short-term timeframes and guesstimate benchmarking that would “save the climate, but 39 years too late.” And finally, rising regulations expectations beginning to affect Autodesk’s customers opened an opportunity to be more responsive to their needs.

This analysis led Autodesk to build C-FACT (Corporate Finance Approach to Climate-Stabilizing Targets), a science-driven method for setting GHG emissions reduction targets against real-world limits, which Autodesk has since made freely available to all companies.

EMC’s Chief Sustainability Officer, Kathrin Winkler, spoke next about her company’s role as one of the first to set a carbon-reduction goal with the EPA climate leaders program. They hit that initial goal and then moved on to setting, and achieving, better ones for 2012, 2015, 2020 and 2050. Winkler described how the company has customized its glidepath for achieving its carbon stabilization goals, based on the C-FACT model, and cautioned that flexibility is key to meeting future challenges.

“The thing with absolute goals is that they kind of lock you into a mindset, and depending on what happens with climate science, business might need to do more,” she said.

Up next was Jed Davis, Cabot’s Director of Sustainability, who shared his company’s context-based sustainability journey as a nearly 100-year-old Vermont-based cooperative with 1,200 dairy farm families. He described the company’s sustainability motto — “Living within our means, Ensuring the means to live” — as a “straightforward way of baking in context-based sustainability that implicitly is about respecting some thresholds and limits.”

Baue and the panel then fielded inquiries from the room about how CBS and C-FACT can be applied to resources other than carbon (as Cabot is doing for water), material traceability, and for small businesses and cities. Stewart noted that the City of Palo Alto has just adopted C-FACT as its baseline target, as Autodesk customized the methodology for cities earlier this year.

Winkler shared another example of when context involves a company setting its own thresholds. Most hardware IT companies set goals for materials take-back in terms of tonnage, she said, but a better question to ask is: “How much are we getting back in terms of what we put out? Making e-waste isn’t the goal. The point is to create a closed loop. In this case, you set the threshold.”

The session closed with plenty of questions left to ask about ambitious sustainability targets and practice, but with a clear sense that setting real-world science-based goals is no longer just a possibility, but an imperative.