Tips for auditing an ethical supply chain

March 29, 2021 by  
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Tips for auditing an ethical supply chain Jerome Brustlein Mon, 03/29/2021 – 00:01 Many serious concerns have hung over the supply chains of global corporations for decades, ranging from human rights issues to lack of transparency about sourcing and other matters. In the jewelry industry, the issues have ranged from unsafe mining practices and child labor to money laundering through the supply chains themselves.  The rise of conscious consumers has altered how brands compete, and ethical supply chains have become a source of competitive advantage as brands leverage prestigious certifications such as B Corp status to closely align themselves with mindful consumers who value sustainability, transparency and accountability.  But what defines an ethical supply chain and what does it look like in practice?  Put simply, an ethical supply chain focuses on the need to embrace corporate social responsibility and produce products or services in a way that treats both workers and the environment ethically. In practice, this means weaving these principles into the fabric of the business. For example, at Fenton, our teams believe everyone involved in the process of creating the company’s beautiful products should benefit from the value creation and come to no harm.  Unsurprisingly, to adhere to these principles, ethical supply chains require much more vigilance to set up and to crucially oversee (in comparison to traditional supply chains). We’ve regularly conducted unplanned visits to ensure that our conduct expectations are being adhered to and all reports from the team on the floor are accurate and true. Weekly audits remain an integral aspect of the responsible sourcing process and have been shown to improve working conditions, health and safety, environmental sustainability along with bribery and anti-corruption.  It’s Fenton’s mission to bring transparency and accountability to the jewelry industry, an industry once synonymous with opaque supply chains, riddled with middlemen adding no value to the product and driving prices up. The company’s business model centers around diligently overseeing its supply chain and sourcing exclusively from world leaders in ethical mining, such as Sri Lanka. Thus, I take this opportunity to offer tangible advice on how to audit an ethical supply chain and relate it to my own anecdotal experiences at Fenton. Embed internal teams on the workshop floor Audits receive criticism for being deceptive and disconnected from true accountability.  Often audits do not detect unauthorized subcontracting arrangements, and most audit firms have no investigative powers and limited capacity to verify that the information presented to them is both true and accurate. Secondly, auditors usually only inspect specific areas that suppliers choose to show them and are only able to speak to employees that they happen to see. Thus, it begs the question: What is the true state of play? Can a brand be truly vigilant of its supply chain if this is how it is managed? I suggest not.  Fenton has taken a different approach. The company has embedded several people on the workshop floor in South East Asia on a daily basis to ensure its values, ethical standards and best practices are adhered to at all times. This involves ensuring the right production and quality assurance steps for Fenton pieces are being respected along with coaching the team where needed (for example, on how to set a stone correctly) and ensuring the company’s code of conduct is upheld. Of course, this requires a much greater investment from the business, but it is fundamental to ensuring Fenton’s values are upheld on a daily basis. Implement stringent Know Your Customer procedures Know Your Customer (KYC) procedures are a critical function to assess customer risk and a legal requirement to comply with anti-money laundering laws. Effective KYC procedures involve knowing a customer’s identity, the risks it poses and their financial activity.  KYC procedures were first implemented by financial institutions but since have become a core component of ethical supply chain management practice. The process obviously differs depending on the industry, but the core framework behind the KYC procedure remains the same. Establish a mandatory process of identifying and verifying a customer/client/etc. Ensure you know and understand the ownership structure of all your suppliers Validate the legitimacy of their claims Verify or halt the relationship if the KYC standards are not met Fenton scrutinizes the operations of any potential supplier before agreeing do to business with it. This includes requiring it to prove the salaries that it pays employees, the beneficial owners of the business, and making sure it is in good stead with its taxes. Set a strict code of conduct all vendors need to abide by It’s also vital to expect all suppliers to meet — and where possible exceed — all applicable laws and regulations in force in the countries where your company operates.  Having “boots on the ground” will enable your company to remain attentive to this at all times, and encourage your partners to go beyond legal compliance and abide by all relevant international and brand standards with a commitment to continuous improvements. Having our team embedded on the workshop floor has been crucial to this process at Fenton. We’ve regularly conducted unplanned visits to ensure that our conduct expectations are being adhered to and all reports from the team on the floor are accurate and true. Apply for BCorp status There is obviously notable prestige in being granted such a certification; however, there is a lot of value in the application process itself.  As a brand, it forces your company to place itself under the microscope and scrutinize its processes from a third-party specialist perspective. From my own experience at Fenton, applying (and getting approved) for BCorp status really made our teams think deeply about what we do and how we continually can strive to uphold the values of the certification. For instance, we realized we could do more to source gemstones from smaller independent dealers and miners directly in Sri Lanka. As a result, Fenton tries to prioritize these sources as opposed to the larger dealers it works with in Mumbai. Pull Quote We’ve regularly conducted unplanned visits to ensure that our conduct expectations are being adhered to and all reports from the team on the floor are accurate and true. 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Tips for auditing an ethical supply chain

Why the ESG bandwagon must embrace adaptation

March 2, 2021 by  
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Why the ESG bandwagon must embrace adaptation Peter A. Soyka Tue, 03/02/2021 – 02:00 With the explosive growth of environmental, social and governance (ESG) investing in recent years, it appears that we may be at or approaching an inflection point. As ESG investing becomes ever more prominent, it may be timely to ask whether, as currently practiced, it considers all issues of material importance to investors. In this commentary, we suggest that current ESG research, analysis and investing practices pay insufficient attention to one of most important issues of our time: how people, societies and companies will adapt to a changing climate, and what that portends for stock and corporate bond investments. The elephant in the room To their credit, the sponsors of several prominent initiatives to promote climate-related disclosure (such as CDP) expressly request information on organizational risks and plans to address them. Accordingly, there is at least some expectation that such disclosures would describe alternatives to business-as-usual conditions and how the reporting entity might respond to them. Perusing a typical annual report or 10-K will show, however, that even today most corporate planning and forward-looking disclosures reflect the assumption of stable business conditions. (Entities issuing securities — stocks or bonds — in the U.S. that may be purchased by the public must provide regular disclosure of important operating and financial information at defined intervals. These requirements include the issuance of an annual report and accompanying audited summary of key financial information [Form 10-K], as well as quarterly financial reports [Form 10-Q].) It’s time for ESG to consider how people, societies and companies will adapt to a changing climate, and what that portends for stock and corporate bond investments. This state of corporate reporting and disclosure poses a problem for investors. Science and recent events tell us that environmental, societal and economic conditions will look very different in 20 years than they have in historical memory. Among the increasingly likely effects predicted by climate scientists and analysts are the following: “managed retreat” — abandonment of major portions the coastline and other low-lying areas in the United States and countries around the globe; potentially severe impacts on water availability, agricultural production, human health, productivity and other fundamental support systems and processes underlying viable societies; vast numbers of climate refugees, including in advanced economies; and failed nation-states. In the face of these threats, it is clear that greenhouse gas (GHG) mitigation is necessary (to minimize future climate changes), but not sufficient. Now, and increasingly as these effects compound, adaptation to climate impacts must receive at least commensurate attention, promotion, support and funding to that dedicated to climate change mitigation efforts. (Indeed, this fact has been acknowledged in the 2016 Paris climate agreement.) Profound changes in climate and severe weather are locked in for the next several centuries and will comprise “the new normal.” Given this increasingly clear reality, mitigation is necessary to keep us from moving too far out into uncharted and very dangerous territory. Equally important though, is how well we will adapt to the inevitable changes. The practice of ESG must adapt If one accepts that climate change adaptation is vital, the next questions are how to make it happen and where to start. Fortunately, some productive steps have been taken, such as the guidance issued by the Task Force on Climate-Related Financial Disclosure (TCFD) regarding scenario planning. Attention to scenario planning as recommended by the TCFD can facilitate greater focus on the adaptation and resilience challenges faced by organizations and, in turn, inclusion as ESG factors. Careful planning and investment decisions that take account of climate impacts and include infrastructure that will better withstand these impacts needs to become standard business practice. Facility-siting decisions should further account for climate vulnerabilities and the adaptation steps that local governments are taking to address them. Similarly, a rapidly changing climate requires some rethinking of corporate sourcing. Many organizations will be negatively affected when previously reliable supplies of materials, energy, workers, components, sub-assemblies and other vital inputs are disrupted. Procurement and distribution systems will need to extensively integrate predicted climate impacts and more agile methods as supply chains become increasingly susceptible to climate change impacts. Thus, adaptation of the supply chain to increase resilience represents an important ESG consideration. Moreover, as the current worldwide COVID-19 pandemic has amply demonstrated, many companies already have over-extended their supply chains and have eliminated redundancies to the point at which they have become insecure and subject to failure, or not resilient enough to withstand additional shocks to the system. The number and scale of looming climate change impacts likely will appear with an uneven spatial distribution, so it will be essential for larger, multi-site organizations (multinational corporations) to evaluate and strengthen existing stakeholder relationships and perhaps form new ones. This, too, is a form of adaptation worthy of ESG consideration. These networks and collaborations will be particularly important in the context of the local communities housing company plants, distribution centers, headquarters, major offices and other facilities. Partnerships with other businesses and governments to encourage collective adaptation actions where they leverage complementary capabilities and are cost-effective also will be essential. At a more general level, the challenges posed by the need for climate change adaptation provide corporate and other organizations with an opportunity to examine important aspects of their current orientation and operations through strategic planning. Performed thoughtfully, such strategic planning efforts can yield a revised or clarified vision and mission; actions indicated through a business, portfolio or asset review; a realigned organizational structure; and an updated understanding of indicated management steps to address business and financial risks. Companies that accept and play this role effectively will prosper in the years ahead, while those that do not will experience increasingly limited prospects and eventual failure. To spur this necessary transition and, as always, provide asset owners with reliable positive risk-adjusted returns, professional investors must demand that corporate issuers provide evidence that they are actively managing their own adaptation to the new world that we are creating. This commentary is part of a series on emerging issues from Adaptation Leader. Pull Quote It’s time for ESG to consider how people, societies and companies will adapt to a changing climate, and what that portends for stock and corporate bond investments. Topics Reporting ESG GreenFin Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Shutterstock

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Proposed model shows potential for circular practices in construction steel

January 29, 2021 by  
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Proposed model shows potential for circular practices in construction steel Niraja Chopade Fri, 01/29/2021 – 01:00 Contrary to popular belief, a profitable business model for reused construction steel is not nearly as impossible as one may believe. Steelmakers have almost perfected the “recycle” element of the four hierarchical elements of the circular economy — reduce, reuse, remanufacture and recycle — with steel recycling rates of almost 90 percent . Despite the recycling success, however, the steel industry is increasingly facing pressure to decarbonize. Recycling steel is still both energy- and cost-intensive, and both steelmakers and their customers must go further to reduce environmental impacts. One way to do this is to shift to a reuse model. Simultaneously, the built environment is working on lowering the embodied carbon of buildings — emissions from the manufacture of building materials — which make up about 11 percent of total global emissions . With steel being a main contributor to embodied carbon in buildings, one approach — the reuse of steel from older buildings in new construction projects — has gained attention, yet the supply of reused construction steel remains low. The practice of steel reuse is not new. For example, the industry has reused train rails and automotive components for decades, but reusing construction steel poses unique challenges. Experts in the steel industry view the barriers to a profitable reused construction steel model as insurmountable. Even if they are not, who are the main players in this new circular supply chain? In particular, is there even a role for a primary steel producer? How will steelmakers adapt their supply chains, manage storage and validate the steel quality? If steelmakers are involved, can this new business model create shareholder value without cannibalizing new steel sales? Our team of four graduate students at the Yale School of the Environment tackled these questions as part of a consulting clinic course and developed one potential business model for our “client,” ArcelorMittal, one of the world’s largest steel producers. Dubbed the “Steel Buyback Bundle Program,” the proposed model we developed on its behalf would enable steelmakers to offer reused construction steel profitably. Circular business model Our suggested business model encompasses the following five steps: partner with demolition contractors; buy back the steel; inspect the steel; bundle reused steel with new steel; and trace all steel specifications. In Step 1, the steelmaker develops relationships with demolition contractors in locations where they operate. These partnerships are meant to encourage contractors to deconstruct instead of demolishing and for contractors to alert the steelmaker that a building is set to come down. In Step 2, the demolition contractor deconstructs a building, incentivized by the premium price that the steelmaker offers for reusable steel over scrap steel. The demolition contractor transports the steel to the closest mill. The steelmaker pays a premium for construction steel that appears reusable based on visual inspection and offers a market price for the remaining scrap steel. In Step 3, the steelmaker validates 100 percent of the recovered steel according to applicable standards using already existing technology at the mills. Steel that does not meet the standards is recycled as scrap, minimizing financial loss. In Step 4, the steelmaker bundles new and reused steel in current orders, eliminating holding costs. The proportion of reused steel in the bundle is based on its supply and the steelmaker’s goal to minimize holding costs. In Step 5, the steelmaker’s customers enter steel bundle specifications into an inventory database for traceability, to promote future reuse. We believe wide adoption of this proposed model would enable the transition from partnerships with demolition contractors to a steel inventory database. The database would track buildings going up or down, and maintain specifications of the steel in buildings. Maintaining the steel specifications in a database would eliminate the need for partnerships with demolition contractors and minimize the inspection burden and cost for steelmakers. As part of our exercise, we demonstrated the model’s profitability using data on steel sections manufactured by ArcelorMittal. We focused on the United Kingdom, where embodied carbon and reuse of building materials is at the forefront of discussions. Based on the company’s numbers, we estimated a profit of about $565 per tonne for reused steel, seven times the profit per tonne for new steel sections. “The thinking out of the box worked with a very straightforward solution,” said Alan Knight, head of corporate sustainability and sustainable development with ArcelorMittal and an adviser for our project. “Many in the construction steel sector have wrestled with how to make steel reuse workable, the simple step of combining the reused with new is a significant step forward. It shows how a fresh look often finds choices that others close to the industry sometimes do not.” The Steel Buyback Bundle Program we proposed for ArcelorMittal successfully mitigates the logistical challenges associated with the sourcing, transportation, storage and inspection of reused steel. This no-regret business model could help steelmakers promote circular economy practices in the steel industry, lower emissions and secure the future supply of reused steel. In light of the changing regulatory landscape regarding building material reuse (such as European regulation EN 15804 , The London Plan Policy SI7 ), it is imperative that steelmakers prioritize decarbonization and implement reuse strategies such as this proposed model. Over time, industry-wide adoption of models such as the one we have proposed could strengthen their financial and operational feasibility and make reused construction steel an industry norm. Contributors Rachel Gould Noma Moyo Urvi Talaty Topics Circular Economy Buildings Decarbonization Reuse Manufacturing Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off An ArcelorMittal steel plant. Photo courtesy of ArcelorMittal

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Fighting deforestation should be a top priority for 2021, and here’s how it can be

January 11, 2021 by  
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Fighting deforestation should be a top priority for 2021, and here’s how it can be Heather Clancy Mon, 01/11/2021 – 02:00 One of the biggest stories of 2020 was the rise of the corporate tree-planting movement, with dozens of multinational businesses from virtually every industry pledging millions of dollars to one of nature’s most effective carbon sequestration solutions.  Now, NGOs and investors are urging consumer goods and food companies and financial institutions to devote more resources to addressing the root cause of shrinking forests, deforestation.  Many companies have promised to address deforestation related to their business activities for years, but few have fully delivered on those plans — and an astonishingly high number of companies don’t have an explicit commitment to ending deforestation.  A confluence of factors as we move deeper into the “Decade of Action” is raising the stakes: deepening global concerns over the loss of species habitat and biodiversity; an environmental justice awakening that has more of us attuned to systemic human rights issues, including encroachment of Indigenous communities, as well as child and slave labor; and a heightened awareness among the investment community about the long-term ecosystem and financial risks associated with deforestation. As 2021 begins, more companies are seeing their strategies for addressing deforestation deep down into their supply chains scrutinized.  “We need companies to make commitments that are specific to how they are addressing their supply chains,” says Jessye Waxman, shareholder advocate with Green Century Capital Management, which has so far engaged dozens of businesses encouraging them to improve their “no deforestation” policies and practices. Among those it has targeted: food service operator Aramark, meat company Tyson Foods and consumer products maker Procter & Gamble.  Green Century’s latest shareholder proposals related to deforestation were filed in late December with two of the world’s largest grain traders, The Archer-Daniels Midland Company and Bunge . Both companies already have commitments to eliminate deforestation, but the investment firm would like to see them become even more aggressive with members of their soy supply chains. “There is definitely increasing urgency around this issue,” Waxman says. Palm oil plantation at the edge of a rainforest. Many promises, limited followthrough Here’s what we’re up against. More than 1 million acres of forests have been lost since 1990, leaving the global stock at near 10 million acres, according to a July report by the United Nations Food and Agriculture Organization (FAO). While the rate of annual deforestation slowed to about 25 million acres between 2015 and 2020, the trendlines in several regions — especially countries in Africa and South America — aren’t moving in the right direction. Brazil, for example, recently recorded its highest rate of deforestation since 2008 during the period from August 2019 to July, an increase of 9.5 percent.  The vast majority of that destruction (up to 80 percent) is linked to commodities such as palm oil, soy, beef, leather, timber, and pulp and paper. Cattle-rearing practices in Brazil are of particular concern among multiple NGOs. Yet, many companies hugely reliant on these resources aren’t actively fighting deforestation , according to data from research organizations including CDP and Global Canopy.  What’s more, of the companies that have made commitments, many have failed to deliver or to set deadlines — with some continuously pushing dates into the future or changing the rules by which they judge progress, according to both organizations. CDP’s recent ” Zeroing In on Deforestation Report ” urged consumer products and food companies to devote more energy to this issue. It found, for example, that the supply chains for cattle and soy are particularly opaque — the largest meat processor in the world, JBS, fares “very poorly.” Food and consumer products companies that buy meat from organizations such as these need to become far more engaged in tracing the regional origins of the product they’re buying, says Ling Sin Fai Lam, lead analyst on the report. “CPG companies are going to find it harder to meet their own goals if they don’t seek collaboration from people closer to the ground,” she says.  While new forest strategies have been declared in recent months — Tyson Foods published its forest protection standard in November after a lengthy assessment by nonprofit Proforest — the dialogue around deforestation was relatively muted last year, when compared to the tree-planting movement.  “Are there more companies with stated strategies? Generally, yes, we have seen a few more commitments and improvements,” notes Sarah Rogerson, research associate at Global Canopy and lead researcher for its Forest 500 report , which evaluates corporate deforestation strategies. “But not a step change over what we have seen in previous years. There hasn’t been an obvious gearup. We were hoping [2020] would be a big year for forests and nature.” (The next edition of the Forest 500 is due in late January; here’s last year’s coverage .) Progress takes root There were some hopeful signs over the past 12 months. Cargill, which has been evolving its deforestation policy for decades, reported in June that it was on track to “eliminate deforestation in all commercial palm oil concessions in its third-party supply chain by the end of 2020.” After being contacted for an interview for this story, the company provided several written updates about its soy sourcing strategy including these highlights: More than 95 percent of the soy it purchased in Brazil for the 2018-2019 crop year was “deforestation- and land-conversion free” It had mapped 100 percent of its Brazilian soy supply chain by early 2020 It continues to develop a certification program in Brazil and Paraguay, in order to provide a “large market” for soybeans grown via verified methods Aramark was praised by Green Century in mid-November for its ” prompt progress ” on its no-deforestation policy . Within one year of publishing the strategy in December 2019, the company already has shifted to sourcing 100 percent of its soy and 99 percent of its palm oils from regions with no deforestation risk. So far, 60 percent of the beef it sources is “deforestation-free,” according to Aramark. In written responses to questions submitted for this story, Aramark Vice President of Sustainability Kathy Cacciola noted that Aramark’s biggest challenge in delivering on the strategy is its position of influence in the value chain for the covered commodities.  “For example, we do not source any raw palm oil, but it is present in tiny amounts of a vast number of products that we purchase, thus our ability to influence producers is limited,” she wrote. “Moreover, although our supplier partners are always willing to provide us with the information we ask for, they do not always have full visibility to where their raw commodities are coming from.”  We’re seeing the end of the commodity era, where materials are sourced from largely unknown origins and bought purely for price on a transactional basis. Mars also generated plenty of headlines in 2020 with its claim of a “deforestation-free palm oil supply chain,” an initiative related to the Palm Positive Plan it adopted in September 2019. Getting there required a drastic reduction in the number of mills that the company uses to source palm oil — to fewer than 100 this year, compared with 1,500 previously. It plans further reductions by 2022, according to the press release Mars issues to trumpet this achievement.  In written responses to questions submitted for this article, Kevin Rabinovitch, global vice president of sustainability for Mars, said simplifying the company’s supply chain through longer-term contracts and fewer suppliers was crucial for helping it verify that partners are meeting environmental, social and ethical standards and for laying the foundation for collaborative engagement. “We’re seeing the end of the commodity era, where materials are sourced from largely unknown origins and bought purely for price on a transactional basis,” he wrote. “That model doesn’t address some key elements of the world we want tomorrow. The future will leverage sourcing from known farms, with price, human rights and sustainability impacts evaluated side by side.”  As of this writing, there has been no independent verification of the Mars palm oil claim. Mars is also part of the new Forest Positive Coalition , launched in September by a group of 17 companies belonging to the Consumer Goods Forum — including Danone, General Mills, Nestle, P&G, PepsiCo, Unilever and Walmart. The group has pledged support of collective, systemic efforts to “remove deforestation, forest degradation and conversion from the key commodity supply chains of palm oil, soy and paper, and paper, pulp and fiber-based packaging.”  Another coalition of companies — including ADM, Bunge and Cargill — is working with the World Business Council for Sustainable Development (WBCSD) to improve the traceability of soybeans grown in Brazil’s Cerrado region, one of the least-protected regions in the country, which is experiencing higher rates of deforestation than the Amazon. So far, the Soft Commodities Forum has engaged with about 121 producers, according to a December update .  “Only by bringing producers to the center of the quest for solutions will we be able to contribute to a world without commodities-driven conversion, balancing environmental outcomes with resilient and prosperous rural communities,” said Tony Siantonas, director of the Scaling Positive Agriculture initiative for WBCSD, in a statement.  Soybean production and cattle raising activities are linked to deforestation in Brazil’s Cerrado region. Engagement seen as central to effective strategies That sentiment was echoed by a number of companies that have devoted considerable time and resources to the evolution of their policies for addressing deforestation, including food companies Cargill and Mars, food services firm Aramark, restaurant chain McDonald’s and fashion company Kering.  “I think the headline would be: Don’t work alone,” Yoann Regent, biodiversity and animal welfare specialist with Kering, told me in an interview. “Map your sourcing. You can’t do anything if you don’t know where to do it.” But the companies interviewed for this article have differing strategies for how to handle suppliers that don’t comply with their mandates. As already mentioned, Mars made the decision to pare down its partners to root out those with possible connections to deforestation. Kering also takes a relatively hardline approach, one that’s sewn into its contracts.  “Any leather suppliers that have a link to deforestation, especially in the Amazon, would be terminated,” Regent says. “There are so many other alternatives.”  Kering uses tools from NGOs, such as the Forest Mapper from Canopy, and certification information from the Forest Stewardship Council to guide decisions. It’s also planning to embrace an emerging resource from Textile Exchange called the Leather Impact Accelerator , which uses benchmarks to trace animal welfare and deforestation/land-conversion issues at the farm level. Other companies shy away from outright termination and advocate the notion of big companies using their buying power to inspire and demand change deep down into supply chains. Once you sever ties with a supplier, you lose leverage when it comes to convincing them to change business practices, they say.  “Fortunately, all of our suppliers for the relevant commodities are already working on ensuring that deforestation is happening in their respective supply chains,” writes Aramark’s Cacciola. “We focus on continuous improvement, so we engage with our suppliers to make improvements where relevant. We also expect quick and decisive action from suppliers if they do identify issues.”  “We don’t need to boycott, we need to choose the sustainable commodity,” observes Dan Strechay, global outreach and engagement director for the Roundtable on Sustainable Palm Oil , which represents more than 4,000 members of the palm oil supply chain with standards focused on sustainable production. “It’s time for everyone to uphold their sourcing policies. We need to implement the policies and reward the growers that we’ve asked to take these steps.”   And, companies need to act with more urgency, he urges: “Don’t take the policy you missed and kick it five years down the road. Make it count in the next two to three years.” Traceability transformed through technology The social distancing requirements related to the COVID-19 pandemic have made the already complicated task of tracing and verifying supply chain claims related to forest degradation more difficult — and underscored the critical role that digital technology can play in supporting successful “no deforestation” strategies. Kering is looking to solutions such as isotope tracking, genetic mapping and laser markings as a means of verifying that materials meet health and sourcing requirements, Regent says. McDonald’s is also looking to advanced technologies, notably satellite-mapping, to define its approaches to addressing deforestation. For example, it is working with agtech company AgroTools and Proforest to trace the origin of all Brazilian beef used in McDonald’s restaurants, notes Rachael Sherman, director of global sustainability for McDonald’s, in response to questions submitted for this article. “After determining risk level based on sourcing location, we use a combination of satellite imagery of the farm area and data analysis to assess whether deforestation has taken place and/or is projected to take place,” Sherman wrote. “This enables our suppliers to implement continuous improvement plans with farms that don’t comply with our policy.” McDonald’s is expanding this resource to other regions and has shared it with The Tropical Forest Alliance to encourage broader use, according to the company.  Elsewhere, Cargill is increasingly using a combination of GPS information and satellite imagery to pinpoint where forest degradation is taking place, specifically as part of its cocoa sourcing practices in the Cote d’Ivoire and Ghana. Bar-coding technology helps trace cocoa to individual farms.  “All of this tracking, mapping and ranking leads us to the most crucial step for making change: partnering with farmers and farmer organizations,” wrote Cargill’s vice president of global sustainability, Jill Kolling, in a GreenBiz article about the project . “The insights we collect can help Cargill determine precisely where to invest resources and how to tailor its farmer engagement initiatives to prevent new deforestation.” The integral role of Indigenous communities Indeed, the companies, NGOs and others contacted for this article echoed a similar conviction: That it will take active, authentic and at-the-ground-level engagement with the communities affected by deforestation — particularly Indigenous peoples — to deliver real progress in eliminating deforestation.  “We’ve seen a big movement in jurisdictional approaches, multi-stakeholder collaborations that include governments, NGOs and smallholder companies,” notes CDP’s Lam. She points to two programs that might serve as models for other initiatives. The first, the forest management program nurtured by paper company UPM, works with landowners to help diversify their revenue sources by co-locating activities such as cattle raising and agriculture alongside sustainable eucalyptus production. The partnerships currently cover more than 296,000 acres of lands — about 30 percent of the wood requirements for the UPM Fray Bentos pulp mill. UPM commits to timber purchases and helps with technical skills and seedlings.  I think the headline would be: Don’t work alone. Map your sourcing. You can’t do anything if you don’t know where to do it. The second, focused on the Leuser Ecosystem in Indonesia , is coordinated by the Earthworm Foundation and funded by a who’s-who list of multinationals including The Clorox Company, Colgate-Palmolive, The Hershey Company, Nestlé, Mars and Reckitt Benckiser, among others. It relies on a satellite system to hone which local communities should be priorities for engagement. Within the communities, the focus is on helping local farmers and mill owners secure their economic livelihoods in harmony with conservation practices. “Engagement is very, very important and that is why these multi-stakeholder collaborations are important,” Lam says. A crucial voice in these initiatives should be Indigenous communities, according to the executives and researchers who contributed insights for this article. “You can’t go in with your idea of what sustainability is. … You can’t bring your own perceptions about what will work,” says RSPO’s Strechay.  In particular, businesses should be more diligent about integrating the concept of ” free and prior informed consent ” into their supply chain engagement practices, if they want to take meaningful action on fighting deforestation, notes Global Canopy’s Rogerson.  By considering these rights upfront, companies can surface potential development issues at a much earlier stage. This should be a priority for 2021, Rogerson says, but “far fewer companies have policies for this [than for deforestation], even though these issues are intertwined.” Sustainability teams that feel they are too far removed from those actors to make an impact should engage with organizations that do have those connections, says Kering’s Regent. “Rely on local NGOs, scientific communities,” he says. “They might challenge you, but that is part of the game. Otherwise, you may address the program from the wrong angle.” Rabinovitch of Mars notes that the most important thing a company can do is grasp the reality of the challenges it will face.  “By fully understanding the scale of your carbon footprint and the systemic issues in your value chains, you’ll be able to set science-based targets to guide strategies leading to transformational, not incremental change,” he said. “It certainly isn’t easy work, and you won’t be able to do it alone, so finding partners who share your values and can help you identify achievable goals means your business can make a measurable, meaningful difference.” Pull Quote We’re seeing the end of the commodity era, where materials are sourced from largely unknown origins and bought purely for price on a transactional basis. I think the headline would be: Don’t work alone. Map your sourcing. You can’t do anything if you don’t know where to do it. Topics Supply Chain Forestry Deforestation Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Shutterstock Fires in the Amazon, photographer from space. Close Authorship

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Fighting deforestation should be a top priority for 2021, and here’s how it can be

5 circular economy questions for 2021

January 11, 2021 by  
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5 circular economy questions for 2021 Lauren Phipps Mon, 01/11/2021 – 01:00 As I begin to think about the year of content and coverage ahead, I thought I’d start things off by sharing some big questions I’ll be asking in 2021 — plus some predictions on how they might be answered.   1. Will companies align circular economy initiatives with climate goals, or continue to treat these as discrete initiatives?  Prediction: To date, only a handful of companies (and countries) have meaningfully harmonized circular strategies and climate commitments, presumably given the newness of these programs and the complexity of calculating impacts of new models on carbon emissions. I foresee an increase in the research, tracking and reporting on environmental impacts of circular business models (resale, repair, rental, product-as-a-service), and an increased focus on leveraging circular strategies to achieve climate goals.   2. What role will communities and justice play in the conversation about the circular economy? Prediction: A lot. Building on the foundation of environmental justice work in communities across the world, equity and impact will be at the center of how companies and cities alike consider the opportunities of a circular economy. For cities, circular economy initiatives will be used to drive economic equality and create jobs; and for companies, the same scrutiny used to assess upstream supply chains will be applied to downstream value chains.  3. What role will bioplastics and other bio-based materials play in the shift away from nonrenewable materials for packaging and products?  Prediction: Biomaterials will be a hot topic in 2021 as companies seek alternatives to virgin plastics and race towards 2025 goals. A polarizing subject , biomaterials will be assessed through a more holistic lens and will scrutinize upstream implications including food security, deforestation and petroleum-based fertilizers — plus end-of-life management woes. A greater emphasis will be placed on the distinctions between biomaterials and appropriate use cases for each.  4. Will companies scale reuse models, or focus on smaller-scale pilots?  Prediction: As I shared in my 2020 reflections , reuse continues to gain momentum and attention — and for good reason. I foresee a continued rise in reusable packaging models, although more so in numbers of players than in scale of their programs. More localized, smaller-scale startups will jump on the scene, although truly comprehensive models at scale will remain elusive.  5. Will the incoming Biden administration have any impact on progress towards more circular systems?  Prediction: Given last week’s news, I’m more optimistic than ever about the possibility of federal action on plastic pollution and an increased investment in recycling infrastructure — but I’m not holding my breath on sweeping legislation on plastics production in 2021. However, independent of federal policymaking, compliance will play a growing role in corporate action on materials as NGOs hold companies accountable for state-level shortcomings.  What questions are you asking and answers are you seeking in 2021? I invite you to drop me a note at laurenp@greenbiz.com with questions or proposed answers for the year ahead.  Topics Circular Economy Featured Column In the Loop Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off

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IKEA says sustainable mobility is a business imperative

November 10, 2020 by  
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IKEA says sustainable mobility is a business imperative As companies around the world seek to tackle greenhouse gas emissions, mobility and logistics – including the movement of products and people in the supply chain — is emerging as a key new focus for meeting sustainability goals. But most transportation decarbonization strategies are siloed in company verticals and focused narrowly. This talk by IKEA’s Head of Sustainable Mobility will look at why a holistic sustainable mobility strategy is key and a necessary part of doing business.  This session was held at GreenBiz Group’s VERGE 20, October 26-30, 2020. Learn more about the event here: https://events.greenbiz.com/events/ve…   Watch our other must-see talks here: https://www.youtube.com/channel/UCwW3…   OUR LINKS Website: https://www.greenbiz.com/ Twitter: https://twitter.com/greenbiz LinkedIn: https://www.linkedin.com/company/gree… Instagram: https://www.instagram.com/greenbiz_group Facebook: https://www.facebook.com/GreenBiz YanniGuo Mon, 11/09/2020 – 17:21 Featured Off

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How these 2 environmental justice leaders are connecting communities to the clean economy

November 10, 2020 by  
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How these 2 environmental justice leaders are connecting communities to the clean economy This frank conversation with two respected environmental justice leaders will explore how companies can become authentically involved in shaping economic and environmental development programs at the city and state level. This session was held at GreenBiz Group’s VERGE 20, October 26-30, 2020. Learn more about the event here: https://events.greenbiz.com/events/ve…   Watch our other must-see talks here: https://www.youtube.com/channel/UCwW3…   OUR LINKS Website: https://www.greenbiz.com/ Twitter: https://twitter.com/greenbiz LinkedIn: https://www.linkedin.com/company/gree… Instagram: https://www.instagram.com/greenbiz_group Facebook: https://www.facebook.com/GreenBiz YanniGuo Mon, 11/09/2020 – 17:17 Featured Off

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Semiconductor firm Applied Materials puts supply chain at center of new commitments

July 28, 2020 by  
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Semiconductor firm Applied Materials puts supply chain at center of new commitments Heather Clancy Tue, 07/28/2020 – 02:00 The sustainability ambitions of the world’s largest cloud software companies — Amazon, Google, Microsoft and Salesforce — have been well-documented. The broad semiconductor industry’s position to date, however, has been less transparent and less ambitious, with the highly visible exceptions of AMD, IBM and Intel.  That stance is shifting, as the sector contemplates the explosive growth projections for connected computing devices, including sensors, smartphones, tablet computers and personal computers, not to mention the massive server hardware needed to process artificial intelligence algorithms.  By 2030, there could be a half-trillion such devices “at the edge” of the digital networks driving business innovation around the planet, Applied Material President and CEO Gary Dickerson noted last week in a keynote address during a virtual edition of the industry’s annual conference, SEMICon West .  The association behind the gathering, SEMI , projects semiconductor revenue could reach $1 trillion by that same timeframe, more than double last year’s sales of about $470 billion. It previously took 20 years for the industry to double in size.  The big question for the sector at large and Applied Materials specifically, Dickerson said, is how to support accelerating growth without dramatically increasing the industrywide carbon footprint associated with creating all those components — currently estimated at 50 million metric tons of CO2 annually across more than 1,000 fabrication facilities worldwide (a.k.a. “fabs”).  We are going to hold our supply chain to the same standards that we hold ourselves in the areas of environmental impact, labor standards, and diversity and inclusion. “I’ve been amazed at the increasing amount of power required to manufacture these ever-smaller chips, and I would join with others in encouraging all of the equipment manufacturers to work together to reduce carbon emissions in the manufacturing of these advanced semiconductors and finally continue decarbonizing the power supply on which the data centers operate,” former Vice President Al Gore  told me last week , when I asked him how the semiconductor industry could step up. Applied, which specializes in materials engineering, sells equipment and services used in the production of virtually every new chip and advanced display in the world. It generated more than $14.6 billion in annual revenue in 2019, and Dickerson estimated its Scope 1 and Scope 2 emissions — mainly from the power used to run its labs and factories — was the equivalent of 145,000 metric tons of CO2 in 2019. (Disclosure: Al Gore’s investment firm, Generation Investment Management, holds a position in the company. Applied was responsible for my invitation to lead an interview with Gore last week during the same conference.) “The first thing we need to do is decouple our growth from our environmental impact,” Dickerson noted. “If we double or triple the size of our company, it would be irresponsible to double or triple our carbon footprint!” That conviction resulted in the company’s decision to adopt a series of new policies designed to shore up its environmental, social and governance (ESG) story, including a commitment to use 100 percent renewable energy worldwide by 2030 (by 2022 for its U.S. operations) and to cut its Scope 1 and Scope 2 emissions by 50 percent over the next decade. Moreover, Applied has created a sweeping new initiative intended to bring other companies in the semiconductor supply chain along for the ride. “We are going to hold our supply chain to the same standards that we hold ourselves in the areas of environmental impact, labor standards, and diversity and inclusion,” Dickerson said. “We’re introducing a sustainability scorecard into our supply selection process, alongside our traditional metrics for performance, cost and quality.” Making improvements of this magnitude and — at the same time — driving the technology roadmap forward is not easy and requires deep partnerships with customers. The new program, SuCCESS2030 (short for Supply Chain Certification for Environmental and Social Responsibility) will extend to all aspects of Applied’s operations, from procurement to packaging. It will now require these shared commitments from its suppliers, according to the press release about the program: A shift to intermodal shipping to reduce the industry’s reliance on air freight, aiming for an interim emissions reduction of 15 percent by 2024. A transition to recycled content packaging, with a target of 80 percent of such materials within three years. The complete elimination of phosphate-based pretreatments for metal surfaces within four years. The creation of a diversity and inclusion strategy to increase Applied’s spend with minority- and women-owned businesses by the same time frame. (There is no disclosed percentage for this goal.) “The response has been great, and we have six key partner suppliers already signed up to help us kick off this program,” Dickerson said. Those companies are Advanced Energy, Benchmark Electronics, Foxsemicon Integrated Technology, NGK Insulators, Ultra Clean Holding and VAT. Technically, Applied doesn’t yet have an official emissions reduction target in place for its Scope 3 footprint, but the company has joined the Science Based Targets initiative with the intention of doing so within two years, according to Dickerson. To improve its own competitive story with customers, Applied will use risk scenario analysis recommendations from the Task Force on Climate-related Financial Disclosures, and it has adopted a new “ecoUP” policy that includes a “3 by 30” goal for improvements in its own manufacturing systems on a per-wafer basis: a 30 percent reduction in energy consumption, a 30 percent cut in chemical consumption and a 30 percent increase in “throughput density,” the number of wafers that can be produced per square foot of cleanroom space. “Making improvements of this magnitude and, at the same time, driving the technology roadmap forward is not easy and requires deep partnerships with customers,” Dickerson said. Among those actively working with Applied on the new approach include Intel and Micro Technology, which is stepping up its own commitments. The latter intends to dedicate 2 percent of its annual capital expenditures over the next five to seven years — about $1 billion — on environmental and social stewardship.  Pull Quote We are going to hold our supply chain to the same standards that we hold ourselves in the areas of environmental impact, labor standards, and diversity and inclusion. Making improvements of this magnitude and — at the same time — driving the technology roadmap forward is not easy and requires deep partnerships with customers. Topics Information Technology Corporate Strategy Technology Manufacturing Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Courtesy of Applied Materials Close Authorship

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How Cargill’s new science-based water targets go with the flow

July 27, 2020 by  
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How Cargill’s new science-based water targets go with the flow Joel Makower Mon, 07/27/2020 – 02:11 Cargill, the giant food and ag conglomerate, last week announced a new set of 2030 corporate water targets, the latest to do so among firms in its sector. But this was no me-too kind of endeavor. Rather, it put the company at the front of the pack, going well beyond its own operational footprint to engage its entire supply chain, and to do so using a novel science-based approach for water. Specifically, Cargill said that by the end of the decade it would restore about 158 billion gallons of water, reduce about 5,500 tons of water pollutants and boost access to safe drinking water — all in what it refers to as  priority watersheds , regions around the world where the company has a significant operational or supply-chain water footprint.  This isn’t small potatoes. Agriculture represents about 80 percent of freshwater use in the United States and about 70 percent globally. Ag also is a major contributor both to water pollution and climate change; the water sector, which includes the collection and treatment of wastewater, accounts for 4 percent of total global electricity consumption,  according to the International Energy Agency . Few food and ag companies have taken on the full measure of their water footprint the way Cargill seems to have done, and by using a science-based approach. “If there’s a more robust enterprise level ambition for water, I haven’t seen it,” said Jason Morrison, CEO of the Pacific Institute and head of the United Nations  CEO Water Mandate , who advised on the project. “This is a really impressive piece of work that they’ve done and a pretty ambitious commitment they’re making. It’s got a lot to it.” If there’s a more robust enterprise level ambition for water, I haven’t seen it. Cargill has made water commitments in the past, but they covered only the company’s direct operations, a relative drop in the bucket of the water needed to bring to market the $114 billion or so of products and services it sells each year. About a year ago, the company set out on a journey to understand its water risks relative to its supply chain and operations, explained Jill Kolling, the company’s vice president for global sustainability. “Where does water really matter for us in our business?” she explained to me recently. “And where should we really be putting our efforts?” The goal, she said, “was to come out of this and have some aspirational goals to work against and also to make sure we’re working where it matters most. So, having that strong prioritization, backed up by science.” Science-based targets have become de rigueur in setting corporate greenhouse gas commitments. In effect, they ask what level of carbon reductions represents a company’s fair share, given its contribution to the climate problem. It was inevitable that this approach eventually be applied to water. Indeed, for the past two years a group called the Science-Based Targets Network has been looking at how to apply such methodologies to  a range of environmental impacts , including  water . But water is unlike climate gases in several fundamental ways. First, water is inherently local, with droughts in some areas and a surfeit in others. With climate gases, any improvement anywhere in the world helps alleviate the global problem; not so with water. Water is also temporal, with conditions changing throughout the year and from year to year, based on both normal and abnormal climatic shifts. And while the aggregate amount of available water is important, so is its quality. Having millions of gallons of water isn’t helpful if it is toxic, brackish or otherwise unsuited for human use. Rivers of data In the case of Cargill, these and other factors were applied not just to its own operation, but also to its more than 250,000 suppliers, ranging from multinational corporations to single-family farms in developing nations. They provide the raw materials for everything from cocoa and cotton to salmon feed and sweeteners. Cargill already had dipped its toes into water issues. It has invested in such programs as the  Soil and Water Outcomes Fund , which helps farmers adopt soil health and water conservation practices. It also participates in the  Midwest Row Crop Collaborative’s efforts to support and accelerate sustainable agricultural practices in Illinois, Iowa and Nebraska, including on improving water quality across the Upper Mississippi River Basin, which supports nearly 44 percent of U.S. corn, soy and wheat production. Still another Cargill initiative is  BeefUp Sustainability , which focuses in part on restoring grasslands, which perform many ecosystem services including filtering water. To develop its latest commitments, the company turned to World Resources Institute, with which it had previously worked on water issues. The first step was to aggregate the data Cargill needed to prioritize locally relevant decisions. “We’ve got  globally comparable data on water risks that we help companies leverage in order to look at water risks to their supply chain, and now increasingly use that same data to help think through what an effective science-based target could look like,” Sara Walker, WRI’s senior manager, water quality and agriculture, told me. “They’re kind of our science partner,” Kolling said of WRI. “What they bring to the table is datasets, tools and scientists who are able to help do the analysis. It’s also good to have an NGO partner working with you to push you to be more aspirational. They’ve provided tremendous guidance through this.” “There’s quite a lot of good data out there,” explained Truke Smoor, director of water at Cargill. “But if you look at the number of companies who have said they want data for water quality and costs, for both operations and the supply chain, you see there are very few.”  600 billion liters — it’s insanely large. It’s more than the total amount of water that we use in all our operations.   That may be in large part because the available data isn’t always consistent across watersheds and borders. Smoor said that Cargill ended up “combining a global data set with a better data set for the U.S. to meet our needs. And now we have the data we need to help us prioritize.” The commitments Cargill settled on were stretch goals, Smoor said. For example: “Six hundred billion liters — it’s insanely large. It’s more than the total amount of water that we use in all our operations. So, we’re basically offsetting double our total water use in those priority water systems in the regions where it’s needed most.” Down on the farm In some ways, getting the data was the easy part. Working with farmers — from Big Ag behemoths to smallholders in far-flung economies — is another matter. Promoting change can be hard work, although some farmers are beginning to realize the need to adapt new kinds of practices to ensure the long-term viability of local water supplies. “I think farmers are starting to realize that it’s ultimately the consumer who’s starting to care more and more about this,” Kolling said. “Over the coming years, those pressures and those desires from consumers to want to know more about how their food was produced and having greater expectations, we believe it’s going to grow and will continue to trickle back to the farmer. I think some of those more resistant farmers may realize that this is the way things are going.” Most farmers aren’t yet feeling those market impacts, she said, but there are other compelling arguments for their linking arms with Cargill on water. “At the end of the day, farmers are businessmen and women,” Kolling said. Toward that end, her company is helping farmers understand the business case today for improving water management practices, ranging from improving soil health to ensuring community water supplies. “It helps us make the change we want to make for the environment and for social and economic reasons.” And, of course, there’s climate change. Specifically, its relationship to both water quality and quantity, as well as the role of farming in sequestering carbon dioxide, which, in turn, improves soil health. “Water is so critical for nature, for agriculture, for communities,” Smoor said. “And it has that synergies with climate change.”  For example, she said, “Look at soil health practices. They help in carbon sequestration and they help in reducing greenhouse gas emissions. That is tied to fertilizer use, water quality and runoff. So, soil health practices provide water quality benefits. And through increasing soil moisture, we actually make sure that more water can recharge, so you have improved water availability. They really go hand in hand, which is such a powerful thing. Through combining these, you have so many touchpoints, whether it’s through farmers or regulators or the community.” Pooling resources As with every sustainability issue, one company’s leadership action is but a start. It will take collective action to achieve global goals, but also to ensure each company’s efforts aren’t undermined. For example, Cargill’s water conservation efforts in a particular basin may be for naught if other companies, large or small, aren’t similarly engaged there. In April, Cargill  announced that it would contribute $2 million to the next phase of its partnership with WRI. The two entities said they will combine their expertise to accelerate the development and improvement of tools, including a new Water Management Toolkit, to enable companies to set science-based targets for water. The toolkit “will allow us to address shared water challenges and promote sustainable water use within planetary boundaries across the industry,” they said in a statement. Cargill is already making its methodology publicly available. “We’re hoping we can invite others — customers, competitors, whomever — to collaborate with us where their sourcing and focus may intersect with our same watersheds,” Smoor said. But companies seem to be uncertain about when to jump into the pool. “We’re getting a lot of questions from companies like, ‘Should I wait for better data or should I wait for the Science-Based Target Network to tell me what exactly to do?’” WRI’s Walker said. “We’re really trying to encourage companies to act now. I think Cargill is a good example of this.” On the other hand, Smoor said, companies can wait until — some day. “You can continue to analyze everything forever, and especially in water, with all the different aspects. You can get stuck in risk analysis. You can get stuck in needing better data. Our approach is, we’re starting now; we’re going to drive the change. We will validate if we are doing the right thing.” I invite you to  follow me on Twitter , subscribe to my Monday morning newsletter,  GreenBuzz , and listen to  GreenBiz 350 , my weekly podcast, co-hosted with Heather Clancy. Pull Quote If there’s a more robust enterprise level ambition for water, I haven’t seen it. 600 billion liters — it’s insanely large. It’s more than the total amount of water that we use in all our operations. Topics Food & Agriculture Water Efficiency & Conservation Science-based Targets Featured Column Two Steps Forward Featured in featured block (1 article with image touted on the front page or elsewhere) On Duration 0 Sponsored Article Off Shutterstock

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Secrets for circular supply chain partnerships from Interface and Aquafil

June 29, 2020 by  
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Secrets for circular supply chain partnerships from Interface and Aquafil Elsa Wenzel Mon, 06/29/2020 – 02:00 It’s an enviable alliance that has outlasted most marriages. For two decades, Interface and Aquafil have worked together to close the loop on carpeting, an example that other companies have followed. The carpet maker and the nylon supplier moved long ago past the early steps of engagement and strategy. They’ve innovated on raw materials, resulting in Aquafil’s Econyl yarn that it recycles from ghost fishing nets, carpet fluff and other would-be waste. They’ve co-launched pilot projects that have reshaped their supply chains, including the Net Works program, which pays fishers in the Philippines and Cameroon for turning in castoff nets used to create new nylon. They’ve expanded their markets and slashed carbon footprints along the way, cementing reputations as innovators. What are the secrets for the successes of this longtime collaboration between Interface and Aquafil? A virtual GreenBiz event June 23, “How to Get Your Supply Chain to Embrace Circularity,” moderated by GreenBiz co-founder and Executive Editor Joel Makower, revealed insights. Buying 100 percent-recycled nylon from Aquafil has helped Interface reduce the carbon footprint of its carpet tile by 69 percent. Learnings from this partnership also helped Interface to move forward with other initiatives, such as being able to count recycled or bio-based ingredients in 60 percent of the material used in its carpeting and 39 percent of its luxury vinyl tile, the latter of which took only three years to achieve. It’s not easy to be ahead of your time “When I see a landfill I see a goldmine,” Aquafil Chairman and CEO Giulio Bonazzi told a banker in 2008, pitching his circular vision for using waste materials instead of oil to produce nylon yarn. “The guy was so shocked he jumped out of his chair, I’m not kidding, and said, ‘I will not give you one penny.’” Ten years earlier, Bonazzi was on the other side. When he heard Interface legend Ray Anderson position Interface as a regenerative company by 2020, he thought the man had lost his mind. Eventually, though, something tugged at Bonazzi. He began to find value in that audacious goal, a notion that eventually led Aquafil to collaborate with Interface on common working teams to tackle one problem at a time. The companies share a long-held desire “to engineer a product with the end in mind just like nature does,” as Bonazzi put it. For Interface, the journey was a solo one that began back in 1994. That’s when founder Anderson set “Mission Zero” goals to remove negative environmental impacts by 2020, an ambition that largely has been achieved. These include three goals of a zero carbon footprint, zero use of virgin materials and zero use of chemicals of concern, in addition to the “reuse or re-entry” of materials in each of Interface’s markets. The company took this commitment a step further by applying these same metrics and goals to its suppliers in what it called the Suppliers to Zero program. Reaching out to suppliers to get them on board took Interface a great deal of creativity and early consciousness raising. How can other companies find success in winning over their suppliers toward eliminating the very concept of waste in their products? Moving toward circularity is a tough sell if the concept is new to certain stakeholders, but know thyself and consider data your friend, urged Interface vice president and CSO Erin Meezan: “Look at your components individually so you can target your first steps toward what’s most material.” For example, in the early steps toward its Mission Zero path, a life-cycle analysis blamed nylon for being Interface’s largest environmental impact. In 1996, the company began working with suppliers toward using nylon produced from waste. Aquafil, in the meantime, fine-tuned a depolymerization process that it says sidesteps the use of toxic chemicals or dyes, relying largely on a food-grade catalyst to help separate waste material from nylon. Interface eventually unveiled its first recycled nylon carpet tile, using Econyl, in 2010. No-cost or low-cost ways to get the conversation going with suppliers include simply meeting with them, Meezan noted. Interface invited suppliers into its factories for sustainability summits in 2003, showing off practices that suppliers themselves could mimic. It raised awareness during these events and in other conversations, which included suggesting relevant webinars and other resources. Interface also requested new types of data from suppliers that often never before had been asked about the carbon footprint of their products. That introduced a new lens through which to view their approaches. As for higher impact results, Interface early on promised bigger purchases for suppliers that ramped up their recycled content.  How can the business case be made? “What we did with suppliers is share what we had learned about our own footprint and how we did that analysis,” Meezan said. “That was our best weapon and the best capability we had.” For Interface, 92 percent of its products’ environmental impacts come from raw materials. Knowing such figures is the first place to start, she added. “Data is really your friend, being able to map out for the senior leadership team how important your supply chain is.” Next, if you’re thinking of pitching something ambitious, start small. Don’t overwhelm stakeholders with a major reinvention of complex systems. Instead, consider a pilot project. “It’s a way less threatening way to pitch a senior leader,” Meezan said. And while a pilot keeps both the targets and the opportunity for failure modest, success can encourage new possibilities. Finally, don’t forget to bring strong examples of supply chain progress and innovation to senior leadership. Interface was the first carpet maker to use Aquafil’s Econyl, now widely used among competitors, too. Yet it’s common for arguments to spring up internally over when to open up an innovation to the greater industry, she said. Meanwhile, years ago Aquafil attempted to spark a parallel partnership toward circularity with its own supplier, a chemical giant. Once again, Bonazzi said he was laughed at and told he would fail. “Basically they were not happy, they were feeling more a competitor than a customer and made a big mistake,” he said. Today, Aquafil is selling the solvent-free nylon processing technology that it created back to that supplier. Bonazzi didn’t change suppliers, in part because he didn’t need to. The very nature of the progress Aquafil helped to advance with Econyl shifted the sourcing needs away from big petroleum. Instead, a widely distributed crew of fishers, carpet collectors, waste pickers and post-consumer material suppliers including Gucci and Stella McCartney have become primary suppliers. “Instead of oil, we use waste,” he said. For Aquafil, the costs of regenerating nylon initially were more expensive than for the process of producing virgin-oil nylon, but no longer. Bonazzi noted that it’s important to look at price trends over the course of several year when considering an innovation of this nature instead of reading too much into a recent rock-bottom price for petroleum . “If you take into account all the costs, sustainability is never too expensive because if we pay the cost of landfilling or incinerating or the raw material we take from the planet, the actual costs are much higher than the costs we are paying nominally,” he said. Both Bonazzi and Meezan noted that their customers are far more savvy than a decade or two ago about the fact that the cost of raw materials doesn’t reflect the negative effects caused by extracting them from the earth in unsustainable ways. Ahead of the times What happens when your circularity efforts are ahead of what most consumers are demanding? Interface and Aquafil have found themselves in the position of consumer educators, which requires ongoing diligence.  For example, Interface’s sales personnel bring the message to potential customers about why products designed for circularity make for greener, low-carbon buildings. In the last five to 10 years, Meezan has found these efforts amplified by an adjustment in popular sentiment led by advocacy from the likes of the Ellen MacArthur Foundation. Circular messaging by fashion companies such as Gucci, Prada and Stella McCartney — all Aquafil customers, by the way — have helped too. Despite speed bumps in the early days of figuring out nylon recycling, Bonazzi said the market and customers have been supportive along the way. He said working with a client with exacting sustainability standards, such as Interface, brings far more benefits than headaches. “They challenge us a lot but also the most challenging clients are the ones making the best products,” he said. “The more challenging the customers, the better they are. We work together to learn how to be better companies. This is really what we are trying to do.” Topics Supply Chain Recycling Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off A colorful fishing net. Shutterstock Anton Gvozdikov Close Authorship

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