Supply Chain’s Role in Developing Sustainable Products

Supply Chain’s Role in Developing Sustainable Products: Q&A with Stuart Hart

Companies large and small have leveraged a wide range of product development methodologies, such as Design for Six Sigma (DFSS) and Advanced Product Quality Planning (APQP), to capture critical-to-customer requirements with the goal of increasing the market adoption of new products. However, pressure from competitors can push an organization into thinking for the short term, ultimately de-prioritizing the creation of sustainable products that maximize longer-term competitive advantage.

Rather than focusing exclusively on continuous improvement, leading companies are finding breakthrough success by integrating sustainability early in the product development process, resulting in business models and products that are truly disruptive.

We recently sat down with Stuart Hart, Professor and Co-Director of the University of Vermont’s Sustainable Entrepreneurship MBA Program, Founder of Enterprise for a Sustainable World, blog Voice of the Planet, and the leading authority on building sustainable strategies for companies, to get his take on ways supply chain can better align with product development to create more sustainable products.

Building in Sustainability

William Crane: What approaches can supply chain professionals take to get an earlier “seat at the table” when products are first being conceptualized so that they can make more of an impact in building in sustainability?

Stuart Hart: This is an interesting question… and a bit of a chicken and egg dynamic. You often hear B2C has advantages over B2B due to their end-user focus, but in my experience there are many advantages for B2B companies for attaining sustainability. Supply chain professionals can help their suppliers think about the bigger picture through supplier development. In the end, its about B2B suppliers thinking innovatively about the entire value chain, all the way to end-use and end-of-product-life.

“Green” vs. Sustainable Supply Chains

WC: Could you describe the difference between “green” – or environmentally friendly – supply chains and sustainable supply chains?

SH: An environmentally friendly (“green”) supply chain is a positive first step, but stays within the current business model, product and process structure, where you are working to continuously improve, e.g. reducing energy use and waste, or reducing carbon footprint by using recycled packaging as opposed to disposable… This is what most OEMs and suppliers engage in.

A truly “sustainable” supply chain is a step change, where you must think about disrupting the current business structure in order to make major changes to address more of the market. This is “blue ocean” thinking. Suppliers and supply chain professionals need to think more like strategists to create new industry structures.

The gold standard of a sustainable supply chain would be “closed loop” acquiring materials, creating products, and then recycling the same acquired materials to create new products.

How to Institutionalize Sustainability in Product Development

WC: In our experience, “greening” supply chains is often discussed at length in the beginning stages of creating a new product, only to lose steam later in the product development cycle. Would you agree? How can companies institutionalize sustainability into their product development process via supply chain?

SH: Supply Chain professionals can act as advocates for suppliers, supporting them in bringing innovations to their companies, supporting trial runs, prototypes, and PPAPing of new technologies.

Professionals can help suppliers navigate their company’s political hurdles; change can be hard and slow without support.

Barriers to Transitioning to a Sustainable Supply Chain

WC: What are the biggest barriers you have uncovered that inhibit companies transitioning from an environmentally friendly (“green”) supply chain to a sustainable supply chain?

SH: Creating a sustainable supply chain takes big-picture thinking that often requires major mindset and process changes.

You should think about the whole product lifecycle, “cradle to cradle,” what new company capabilities, skills, competencies, processes should we develop to compete in the future?

Supply chain professionals can help their companies by conducting an honest assessment of suppliers, along with the complete supply chain, to identify where the company is at and what initiatives should be put in place.

Innovation: Ford & Novelis

WC: What is one of the more novel improvements you have seen supply chain professionals implement to make a product more sustainable?

SH: Ford and supplier Novelis’ partnership on aluminum supply for the current Ford F150 is a good example.

In the case of the F150, their innovative collaboration lead to a 1,000+ pound weight reduction, better fuel economy, and a more sustainable product.

Aluminum, as a sustainable lightweight material, has a compounding effect on the F150, the engine and exhaust system can be smaller, due to a lighter weight vehicle body-in-white.

The aluminum that Novelis makes for the F150 is recycled from scrap aluminum, i.e. a closed loop system. Typical stamping waste is about 40%, but in the case of the F150, all aluminum scrap waste goes back into the Novelis Oswego Plant to be remade into more F150 aluminum. Ford and Novelis thought strategically about the F150 supply chain and the result was a more sustainable “cradle to cradle” product life cycle than typical mined aluminum, further reducing the cost.

Sustainable Value Framework

WC: We have seen a wide range of reasons companies have adopted environmentally friendly best practices: customer requirements, marketing, etc. Could you provide some reasons why companies should implement a sustainable supply chain earlier in the product conception stage?

SH: Over the past two decades, I developed, along with my colleague Mark Milstein, a Sustainable Value Framework that directly links the societal challenges of global sustainability to the creation of shareholder value by the firm.

The framework shows how the global challenges associated with sustainability – viewed through the appropriate business lens – can help identify strategies and practices that contribute to a more sustainable world while simultaneously driving shareholder value. This “win-win” approach is defined as the creation of “sustainable value” by the firm.

There are four core dimensions of sustainability strategy with different linkages to firm performance and value creation:

  • Pollution Prevention: minimizing waste and emissions from current facilities and operations;
  • Product Stewardship: engaging stakeholders and managing the full life cycle of today’s products;
  • Clean Technology: developing and deploying “next-generation” clean technologies; and
  • Base of the Pyramid: co-creating new businesses to serve the unmet needs of the poor and underserved.

Speeding up Sustainability Adoption

WC: What can B2B suppliers do to speed up sustainable innovation adoption with their OEM customers?

SH: Suppliers can do their homework to “shop” early adopter OEM customers so they are more efficient with pitching their innovations. Suppliers can then proactively compress their sales cycle by selling to the right OEMs.

B2C OEMs can often have handcuffs because they are “experts in their markets.” B2B suppliers are in a unique position to leap frog B2C OEMs because they are not held back by customer blinders.

Suppliers are thus freed to think about the entire end-to-end product life cycle and ways to save: resources, costs, and materials.

Supply chain professionals’ skill sets in designing complex value stream maps uniquely position them to craft these new business models to help OEMs visualize new ways of doing business.

How Supply Chain Professionals can Take Action

WC: What should every supply chain professional absolutely do to become more involved in building in sustainability into future product supply chains?

SH: Supply Chain professionals need to look for supply partners that are more open to collaborating. In addition, professionals need to enthusiastically create an environment that fosters trust.

WC: What should every supply chain professional absolutely avoid when first starting their involvement with product development to build in more sustainable supply chains into new products.

SH: Supply chain in this case needs to take a supply partner approach vs a traditional transactional approach to procurement. In order to achieve a transformative sustainable supply chain, you must collaborate closely with supply partners and internal stakeholders.

Strive for Transformational Sustainability

WC: The tasks of implementing, enhancing, and maintaining a sustainable supply chain can seem daunting. What parting words of wisdom could you impart for those looking to make an impact in the supply chain field?

SH: Avoid being complacent in the lower left-hand side of the Sustainable Value Framework, i.e. staying in the “greening,” continuous improvement part of supply chain—pollution prevention, eco-efficiency and CSR. If you don’t have some initiatives that are positioning your company for where the world is going, you will probably get left behind. If you focus solely on the 1-2% continuous improvement, you will eventually get hit in the back of the head with a baseball bat by a competitor that will attain a transformational sustainable model. Transcend incremental sustainability and strive for transformational sustainability. Supply chain professionals are well positioned to contribute to the development of ground-breaking sustainable products. Celebrate this fortunate position and aggressively pursue this opportunity to make an impact in the world.

Conclusion

We hope that Stu’s remarks on how implementing a sustainability mindset early on benefits the product development process help you and your supply chain team identify ways to contribute to a step change in the sustainable distributive innovation of new products.

-William