Green Supply Chain Reporting Dilemma – Putting Information Before Technology

Now that Green Supply Chains have established themselves as the predominant means of achieving action towards sustainability, there is intense focus on how the progress towards sustainability is measured and reported. Why is this important? It is a common refrain that what you cannot measure, you cannot manage. For most part we agree with it. Of course there are some intangible bits such as team spirit or supply chain collaboration which are difficult to measure objectively and directly. Indirect or subjective measures can quite quickly degenerate into pure exercise of bureaucratic nonsense. And, we all have seen instances of that. However, if the measurement methodology is developed, deployed and used properly there is no reason that both objective and subjective measures can form a great building block of green supply chains. Better still, companies can save money and improve productivity, the essential area in a competitive environment.There is a school of thought that puts performance reporting at the centre-piece of the entire action. The reasoning is simple – if you start measuring and reporting, slowly you will start seeing action towards improvement. While there is some soundness in this logic, we caution against a cookie-cutter approach to measurement and reporting – which is often deployed in such cases. Putting technology before information in this manner is akin to putting a cart before the horse.From an organizational perspective, it is crucial to understand processes to an exceptional level prior to engagement of deploying technology to help the business. Too often the technology leads the process leading to poor utilization of the resource at hand, a poor fit to the company business and in terms of information, “Rubbish in – Rubbish out”.Good supply chain technology is inherently linked to clearly defined processes, and through this, excellent improvements in performance ensue,In this article we will discuss how to create, deploy, use, present information and use the output of a good green supply chain performance evaluation methodology. Before we do that, let us briefly examine the benefits of such a methodology to understand in more details why it is important.Benefits of Performance EvaluationA consensus view of the situationWhile all the parties will have their own view on the current ‘greenness’ at any point of time and how the green supply chain project is progressing, only a comprehensive performance evaluation methodology can achieve a consensus view of the situation prevailing at any point of time. There might be minor quibbles with the measurement methodology, timing etc. but in general most parties will agree with most of the findings. International standards of measurement are also helping to improve consensus in areas such as green supply chain practices. This provides them with a common platform to build their further discussions on – whether they are for allocation of resources, for discontinuing some projects or re-enforcing some others, or for incentives alignment. This common platform is extremely important to achieve in order to have an informed discussion within an organisation, as well as, with the supply chain partners outside the organisation.Gauge progressBy their very nature all change programs are times of high turbulence, and it is very difficult to measure progress without any a comprehensive methodology to do so. A well designed green supply chain performance evaluation system should allow the organisations to gauge their progress against peers, against their own goals, as well as against their performance at the beginning. This provides a clear picture of how effective the efforts have been and highlights the areas where they have not been very effective. It also allows organizations to track their performance against competition or alongside legislatory changes.Focus Resources where they maximise impactAligned with gauging progress is the ability to focus the resources on those areas where they can maximise the impact to achieve the overall goals of the organisation. This type of periodic adjustment is necessary in order to optimise the use of resources and results from them.Incentives managementSupply chain partners as well as the key team members must be completely on board through incentives alignment. In the absence of such buy-in the green supply chain change program risks not achieving their full potential. A robust performance evaluation methodology is necessary in order to agree on incentives and in order to distribute them in an objective manner.External Reporting and Green MarketingIt has now become a statutory requirement or a recommendation in many jurisdictions now to report the progress on environmental efforts of the organization. For obvious reasons these reports must be well documented, substantiated and based on a robust measurement methodology. While marketing efforts without sufficient evidence to support to claim will attract charges of green-washing or misleading advertisement, false reporting carries heavy penalties in many jurisdictions. Clearly, then for both external reporting and for green marketing, it is fundamental that all reports, claims, advertising, marketing messages are based on data measured through robust methodologies.Objective Audit TrailFinally, all change management programs need an objective trail of data which is clearly auditable in order to justify the actions and responses taken at any point in time.Certain companies in the shipping industry use leading verification parties such as the Global Reporting Initiative (GRI) to verify sustainability reporting and avoid greenwashing.High profile industries and organizations alike, can no longer afford to internally measure their standards of environmental capabilities without ensuring there are alliances with verification parties that can measure and audit the process and findings. Again, to truly show the worth of the green supply chain system, the audit trail should be aligned to continual improvement with a recognized certification such as ISO 14001 or associated equivalents,A robust performance evaluation system should be able to provide such an auditable information repository for post-hoc use.Performance Evaluation MethodologyEach green supply chain program is unique – just as each supply chain is unique. While there will be a number of common elements across a multitude of supply chains, the differences will make it necessary to create and adopt a purpose build performance evaluation methodology for each green supply chain program. Three key questions need to be answered in order to do so:What to measure?Most people equate green supply chain measurement with carbon emissions measurement. While this is a big part of overall green supply chain drive, there are other, equally important, issues that form the complete picture. As discussed throughout the book GREEN SUPPLY CHAINS – AN ACTION MANIFESTO, transition towards green supply chain involves movement along several core elements:

Green supply chain planning
Green procurement
Green supply chain execution
Carbon management
Green supply chain migration
Green supply chain continuous improvement
Supplier “Eco” Rating programmes
In each one of these core elements of green supply chains there will be multiple sub-elements that will need to be measured. These sub-elements will change over time as the program progresses towards conclusion.The first job of the measurement team will be to establish the key sub-elements which will be measured as part of the performance evaluation program. How will they do that? By studying the key processes that form each element and establishing parameters for measurement of these processes. For example – Green Procurement involves collaboration. A measurement of collaboration is “% of green supply teams which comprise members from two or more organisations across the entire supply chain”. Another measure of collaboration is “time spent co-developing ideas for sustainable sourcing program”. It is imperative to point out that the task is to create a set of meaningful measurements that are relevant, mutually exclusive and collectively exhaustive. At the same time they must be unambiguous, objective and easy enough to measure and report.Another thing we must point out at this stage is that some measurements are input oriented – e.g. the two measurements given above are both input oriented, while others – such as “carbon dioxide produced in the entire supply chain of the product (in kg)” – are clearly output oriented. Both are essential for efficient management of green supply chain programs. Input oriented measurements denote whether we are doing the right things in the right order; while output oriented measurements denote whether we are getting the right results. In other words, input oriented measurements denote whether we are using the right ingredients as per the recipe, while the output oriented measurements denote whether the final dish meets the expectations or not.Finally, it should be noted at a robust measurement program should be able to stand up to scrutiny at any point in time. It takes time, effort and imagination to create a custom tailored measurement program. Short-cut will only lead to frustrated teams who are directed to do run a marathon and then measured in 100m time-slots. That is the reason, we are not big fans of commercially available pre-packaged measurement programs. Green sustainability is too broad to be adopted as off the shelf solutions.. While, in theory they could be adapted to do the job, we find that in reality, it is far easier to start from the scratch and create an imaginative and robust measurement program. Ideally a technology partner should also understand your business requirements and tailor the solution in line with the needs of your firm. This needs to be the case as sustainability is in itself an integral part of the company’s business process if it is to be successful. As such, the integration needs thorough assessment prior to implementation to achieve a successful outcome in improving company performance. Sustainability has to be treated with equal importance to any other business process if it is to achieve the most productive outcome.

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