Big Companies Step Up Efforts to Trim Environmental Risks in Suppliers EHS Chains
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Multinational corporations are increasingly taking on a regulatory role in their supply chains. For that’s to improve performance on environment, health, and safety (EHS) issues. That’s particularly in developing countries where government oversight can be weak. As governments struggle to enforce suppliers to EHS regulations amidst rapid growth in manufacturing. So companies are stepping in to ensure compliance. Furthermore, minimize environmental risks.
The Need for Corporate Oversight in Developing Countries Suppliers EHS issues
In developing countries like China, supplies know EHS regulations can be stringent. However, the enforcement is often challenging. Especially due to the fast pace of industrial growth. Multinational corporations have traditionally conducted facility audits. That’s to ensure their supply chains comply with local regulations. Moreover and their own supplier standards. However, many facilities lack the technical skills. In addition, the management expertise. Those things required to meet these standards.
Recognizing this gap, major companies such as General Electric, Wal-Mart Stores Inc., and Hewlett-Packard Co. are providing more training and education programs. That’s to help suppliers. All to learn how to manage various suppliers EHS issues. I mean from energy and water use to fire safety. These companies are also implementing new tools to track their suppliers’ performance.
General Electric’s Move Towards Suppliers EHS Management Systems
General Electric (GE), a multinational corporation producing appliances, lighting, power systems, and other products, has focused its supply chain auditing in countries where government enforcement is weak. According to Ann Condon, who leads efficiency, stewardship, and product environmental compliance programs. That’s most importantly across GE’s global supply chain. For the auditing program was not generating long-term improvement in most suppliers. Consequently, in 2011, GE added a requirement for suppliers. One that is to move from a “find-it-and-fix-it mode to more of a management-system mode.”
Using a new key performance indicators (KPI) tool introduced in 2012. Thats because GE now compiles a scorecard for suppliers. Most surprisingly on how well they’re managing issues. Especially related to:
- the environment
- labor rights
- and human rights
This approach has proven successful. Especially with suppliers scoring better on their management systems. However they are having fewer audit findings and requiring less frequent audits.
Collaborating on EHS Training
To help suppliers build these suppliers EHS management systems. For GE has partnered with local and international non-governmental organizations (NGOs). Directly on training and also education programs. One notable example is the Environment, Health, and Safety Academy. For that was launched in 2009 in China’s Guangdong Province. It’s known as the “factory to the world.” The academy, part of a public-private partnership. One that is led by the Institute for Sustainable Communities (ISC). For it also works with local universities and other organizations. Especially to provide training in essential skills for EHS management and sustainability leadership. For that’s covering topics like greenhouse gas emissions, energy efficiency, water resources, and more.
GE, Pfizer, Honeywell, Wal-Mart, and other multinational companies have provided training materials for the academy. All which teaches a combination of local regulatory requirements. As well as international best practices. The academy aims to improve policy implementation and strengthen its impact. That’s by significantly expanding the pool of qualified suppliers EHS managers in China.
Creating a Cultural Shift Towards Sustainable Management
The academy focuses on preparing managers to prevent suppliers EHS issues from arising rather than just reacting to them, which is often the case after facility audits or assessments conducted by companies. By training managers instead of line workers or owners, the academy aims to create a cultural shift within factories towards more sustainable management of EHS factors.
This approach has yielded positive results: more than 88% of those trained say they’ve made positive changes in their EHS practices, including improvements in wastewater treatment, energy efficiency, injury rates, and the establishment of a routine and transparent system for reporting EHS problems.
Wal-Mart’s Sustainable Working Conditions and Sustainability Index
Wal-Mart, another multinational corporation, was a founding partner of the Bangladesh academy, which focuses on fire safety and building safety training following the catastrophic Dhaka garment factory collapse in April 2013. The company has also made supply chain sustainability a priority through a partnership with a nonprofit coalition called the Sustainability Consortium.
The consortium, led by the University of Arkansas and Arizona State University, provides research for a Sustainability Index that Wal-Mart uses to track the environmental impacts of products suppliers make. The index scores suppliers based on the sustainability of their products, which then influences decisions on which products are purchased from suppliers for retail sale in Wal-Mart stores.
Filling the Regulatory Vacuum
Wal-Mart has also become a de facto regulatory entity by filling the vacuum in U.S. regulation for chemical-intensive products. The company is asking suppliers to move away from about 10 chemicals of concern and transition toward greener alternatives in home and personal care products. In the area of fertilizer use, Wal-Mart and the Environmental Defense Fund are working with farmers to optimize usage, which saves money for farmers while reducing greenhouse gas emissions and water quality impacts.
Hewlett-Packard’s SER Scorecard System and Emissions Goal
Hewlett-Packard (HP), a multinational corporation selling imaging and printing systems, computing systems, and information technology services worldwide, has recently adopted a similar scorecard system for measuring suppliers’ social and environmental responsibility (SER). HP has been working with its suppliers on SER issues for over a decade but found that traditional audits did not encourage ownership of SER performance.
In response, HP introduced a five-tier SER rating system in 2013, which draws on the results of third-party audits and other SER performance indicators. Suppliers that receive higher scores on the SER scorecard receive more business from HP, while poor ratings could result in a reduction of business.
Notably, HP became the first company in the IT industry to set an emissions reduction goal for its supply chain in September. By 2020, HP aims to drive a 20% reduction in first-tier manufacturing and product transportation-related greenhouse gas emissions intensity among suppliers compared with 2010.
Driving Industry Alignment
HP is currently working with other businesses in the Electronic Industry Citizenship Coalition (EICC) to develop an industry standard for reporting on suppliers’ greenhouse gas emissions. By driving industry alignment on this issue, HP aims to influence not just its own suppliers but also the entire ecosystem of suppliers common to other electronic or IT companies.
Major multinational corporations are taking significant steps to improve EHS performance within their supply chains, particularly in developing countries with weak government oversight. By implementing new tools, training programs, and management systems, these companies are not only minimizing environmental risks in their operations but also driving industry-wide change towards more sustainable practices.