SER Conference Analysis, April 22, 2008

Responsible Supply Chain Innovations

Can Benefit People, Profits and the Planet
By Sonali Rammohan

S
ome of the greatest challenges and opportunities
of our time have a direct impact on companies’
supply chains. For example, climate change,
globalization, and the rising cost of food and
energy influence actions taken by supply chains every
day. Now, more than ever, companies are looking to their
product design, sourcing, manufacturing, and logistics
operations to identify opportunities to reduce their
carbon footprint and save on energy costs. Along a more
human dimension, companies that manufacture goods in
emerging economies must also consider factory health
and safety issues, workers’ rights to organize, and the l to r: Judy Glazer, Buddy Polovick, Lee Kindberg, and Richard Alloo
unique issues faced by migrant workers. Finally, continued
outsourcing and subcontracting within increasingly
complex supply chains can lead to product safety issues, Be sector-blind when seeking good ideas. Throughout
which often end up in headlines as front page news. the day, several examples highlighted how the govern-
How do supply chains proactively manage all of these ment and nonprofit sectors are providing leadership in
challenges and find opportunities within them that can supply chain responsibility. Buddy Polovick of the U.S.
enhance business performance and deliver benefits to Environmental Protection Agency SmartWay Transport
a broader group of stakeholders? These are some of the Partnership discussed how his group partners with
questions that set the stage for the 2nd annual Stanford over 600 companies to share best practices on reducing
Socially and Environmentally Responsible Supply Chains: logistics emissions, and shared innovations such as truck
A Source for Innovation conference on April 22, 2008. idle reduction technologies with the audience. Shawn
Cosponsored by the Stanford Global Supply Chain Rosenmoss, from the City of San Francisco Depart-
Management Forum and the Stanford Center for Social ment of the Environment, discussed how the City’s green
Innovation, 280 people attended this dynamic gathering purchasing practices are influencing not only the demand
of thought leaders and industry executives from across the for green products (given the City’s purchasing power)
country. Participants heard from three keynote speakers, but also the supply, since vendors are highly motivated
and also attended several breakout sessions where they to develop more sustainable products to meet the City’s
delved into specifics. Here are some key takeaways from needs.
the day’s events.

T he S tanford G lobal S upply C hain M anagement F orum V ol 14 I ssue 3 – S ummer 2008 P age 1 of 4
 Responsible Supply Chain Innovations Can Benefit People, Profits and the Planet
Since social responsibility is embedded within the
mission of Raising A Reader, a nonprofit that sells book
bag kits for young children, when they faced a lead hazard
in their book bags, Executive Director Carol Gray reacted
quickly and proactively—she contacted the Consumer
Product Safety Commission, conducted a voluntary recall,
and then worked with an innovative company called
Rickshaw Bagworks to design responsible, safe book
bags in a timely fashion so that their business was not
interrupted.
Look across your network for partners in innova-
tion. When auto refurbishing and auction giant Manheim
was faced with local government pressure to use less
water in its refurbishing process, it turned to supplier
Ashland for ideas. Manheim’s Vice President of Best
Practices David Munnikhyusen and Ashland Water
Technologies Senior Technical Consultant Kevin Bice
shared with the audience how Ashland designed an
innovative wastewater treatment and reuse system, which
resulted in a 60 percent decrease in water consumption
and a reduction in costs. Sometimes, partners outside of
one’s immediate networks can also provide innovative
ideas. Karl Walk, chairman of the World Cocoa Founda-
tion, discussed how his organization looked to a nonprofit
organization for innovation—the foundation uses farm
field schools to educate cocoa farmers on better farming
techniques. In one instance, the foundation learned from
one of its nonprofit field school partners about an innova-
tive solar dryer used by coffee farmers to prevent mold
damage. The result of employing solar dryers for cocoa
beans was a 60 percent increasing in cocoa bean pricing.
l to r: David Munnikhyusen, Kevin Bice, Larry Coburn, and Karl Walk
T he S tanford G lobal S upply C hain M anagement F orum
l to r: Julie Juergens, Priya Haji, Shawn Rosenmoss, and Adrienne
Moser
Social responsibility should not be forgotten. As the
general public continues to embrace “going green” and
the corporate world implements sustainable practices in
their supply chains and beyond, it is important that we
also remember the social side of the supply chain respon-
sibility equation. The conference highlighted a number
of examples of how companies both large and small are
finding ways to treat workers more fairly and still make
profits. World of Good sells ethically sourced artisan
products from around the world. Priya Haji, cofounder
and CEO, discussed how the company’s foundation arm,
World of Good Development Organization, has developed
a transparent fair wage guide to ensure that artisans
are compensated fairly for their work. In the spirit of
increasing the standards for the entire industry, World of
Good shares this guide publicly, and Priya mentioned that
profits have not been hurt by implementing this guide.
Instead, it is helping the company to meet the growing
demand for ethical products.
Keynote speaker Dan Henkle, senior vice president
corporate responsibility at Gap Inc. discussed the
evolution of his company’s ethical sourcing program
and how the Gap strives to make social responsibility a
regular part of doing business by rewarding responsible
suppliers with more orders, among other things. He also
discussed the incident last year in which child laborers
were found making clothes for the company in India. The
Gap employs 90 full-time inspectors that make unan-
nounced visits to factories. In this case, an unauthorized
subcontractor was operating the factory in question, and
the Gap dealt with the issue swiftly and didn’t sell any of
the clothes made by that factory.
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 Responsible Supply Chain Innovations Can Benefit People, Profits and the Planet
Lessons can be learned from smaller organizations.
World of Good, Nau Inc., Raising A Reader, Dagoba
Organic Chocolate, and Rickshaw Bagworks—these
organizations were founded on holistic principles of
integrating social and environmental responsibility into
their business, making it a natural process for them to
build responsibility into their supply chains. Several of
the executives from this group highlighted their belief that
sharing responsible innovations can “raise the bar” for the
entire industry. For example, World of Good promotes
“open source” practices by sharing its fair wages guide
with others so that the standard of living of workers can
improve across industries and across the world. Adrienne
Moser of Nau Inc. (which sadly recently closed its
business) discussed how Nau shared sustainable fabric
formulations publicly, as part of their strategy to be a
leader in responsible product design practices throughout
the garment industry.
Social and environmental responsibility touches
all aspects of the supply chain. Supply chain respon-
sibility begins at the product or service design stage.
Ideo, a firm based in Palo Alto, is at the forefront of
sustainable design. In one workshop, Ideo designers led
conference participants through a creative exercise that
explored sustainable design using a human-centered lens.
Participants were asked to engineer a more sustainable
emergency room, after exploring the particular wants
and needs of one specific customer. Using this human-
centered design approach helps to ensure that a company
gives a consumer what he or she wants, and increases the
likelihood that sustainable products and services have a
market. Tim Bailey, vice president of Product Supply at
Clorox Inc. also discussed product design and the chal-
lenges around defining and sourcing natural ingredients
for its new sustainably focused product line, GreenWorks.
From the manufacturer’s perspective, researchers from
the nonprofit forecasting firm Institute for the Future led
participants through a strategy workshop that explored
techniques for long-term benefits of manufacturing in
China. Participants were introduced to strategy tools
that tap new trends of the open economy and models
of cooperation rather than competition. Focusing more
on logistics, Maersk Inc. shared an innovative carbon
calculator tool that can track the carbon emissions a
product generates from the point it leaves the factory to
T he S tanford G lobal S upply C hain M anagement F orum
Tim Bailey
the shipping dock to the ocean journey to the port to the
warehouse, and finally to the retail location.
Looking ahead. While the day showcased many
examples of organizations employing innovative tech-
niques for being more responsible, various speakers
highlighted the challenges that accompany supply chain
responsibility. Dan Henkle from Gap Inc. emphasized the
need for global regulation on manufacturing compliance,
in order to avoid an excess of audits and monitoring costs.
As supply chain complexity continues to increase, product
safety monitoring will remain of top concern. Speakers
such as Kevin O’Marah, chief strategy officer at AMR
Research; Frederick Schilling, founder of Dagoba
Organic Chocolate; and Mark Dwight, CEO of Rickshaw
Bagworks shared ideas on how to handle a crisis once
it has occurred and how to reduce the likelihood of
an occurrence in the first place. A key takeaway from
their discussion was that one cannot outsource supplier
monitoring. Having strong relationships and personal
connections with suppliers is increasingly important and
helps ensure that suppliers are vested in the company’s
goals and are responsive to company expectations.
With the rising cost of energy and potential future regu-
lation of carbon emissions, alternative energies will have
to be explored in more depth. Chris Field, professor of
biological sciences at Stanford University and director of
the Department of Global Ecology at the Carnegie Institu-
tion discussed the science behind biofuels and emphasized
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 Responsible Supply Chain Innovations Can Benefit People, Profits and the Planet
Chris Field
that companies must look at the source of biofuels and the
total ecosystem of a crop before determining whether a
crop is good for the environment. He stated that biofuels
can be a good alternative energy source under the proper
conditions, but that, ultimately, they will not make a
T he S tanford G lobal S upply C hain M anagement F orum
significant impact in satisfying the growing demand for
energy.
Given the vast array of topics being explored at the
conference, it was clear that supply chains are making
important strides up the continuum of social and environ-
mental responsibility, but that more guidance was needed
on which aspects of these efforts made business sense.
Many attendees indicated that they could implement more
responsible practices if there were a clearer business case,
and that therefore more metrics and research in this arena
were needed. With the active cross-sector networking that
took place over the day, it was clear that the conference
provided a rich environment to spark new ideas, connec-
tions, and networks to continue innovating in the future.
* For more information and resources from the 2nd
annual Socially and Environmentally Responsible
Supply Chains: A Source for Innovation conference,
please visit www.gsb.stanford.edu/ser.
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