Sustainability Related Indices - Suppliers, Your Customers are Trying to Get Your Number
Recent Activity: over the past two years there has been increased activity by US and European retailers and brands to develop and implement indices for measuring and improving sustainability performance within their supply chains. A growing number of suppliers in various countries are being asked to participate by providing information for sustainability related indices. For suppliers who have or will be contacted, gaining an understanding of indices and how they work can put them in a better position to respond. With knowledge, suppliers can realize they are an important piece of the sustainability equation and not just jumping through hoops.
What are sustainability related indices?
Such indices are tools used to assess the current knowledge, communication and performance, typically of suppliers, on several sustainability criteria. They are developed based on a review of issues that have significant bearing on the environmental or social impact of the retailers’ or brands’ specific products. These issues then become the focus of the information requested of suppliers through a tailored questionnaire based on the product type. For example, a general question could request information on the status of energy management plans and goals at production facilities.
The answers to these questions will be assessed and may then be used in different ways. For instance, the Higg Index is an index developed by the Outdoor Industry Association (OIA) and the Sustainable Apparel Coalition (SAC) to assess not only suppliers, but product and brand performance. The results of these assessments are currently used internally to benchmark performance and improvement.
Alternatively the European retailer Leclerc is implementing an assessment programme covering numerous products through a multi-criteria index. Products meeting all minimum requirements of this index and exceeding certain optional parameters are then given a positive designation in stores. Communicating this information to customers provides an additional basis for them to select more sustainable products, which should benefit suppliers of these products by increasing sales. The Sustainability Consortium (TSC) has also contributed considerably to help brands and retailers collect and analyze product life cycle impact information, and inform the development of indices by member companies. At least one TSC member currently asks suppliers to provide information based on issues the TSC identified.
What are the benefits?
Suppliers may wonder why there is such focus on them, when they may have a much smaller overall operation than the client requesting information. The reason is that retailers and brands today often do not conduct production operations, and given the high volume of products passing through their stores or carrying their labels, they have identified that the major impacts of many consumer goods and foods reside within the supply chain. This is especially true for products that do not have significant impact occurring in the use or disposal phase, such as a pair of shoes. Therefore, to affect the greatest reduction in environmental impact improving the performance of suppliers is very important.
What should suppliers do?
First, suppliers should not look at index requests as a one-time nuisance that they just need to get through and will have no bearing on customer relationships. Different retailers and brands will implement indices differently. However, at least one major US based retailer is planning to ask suppliers to continue reporting to them every six months to monitor and encourage sustainability progress. Over time it is anticipated that the results of the index will be considered when choosing or negotiating with suppliers.
Second, suppliers need to respond honestly, especially since customers can always request an audit to verify responses, but suppliers should not assume that just because they have below average responses they will be cut. Third, if suppliers can improve their measuring, planning, communication and/or implementation of sustainability, this positive change will likely be important, as opposed to only their score counting.
SGS is a member of the OIA and SAC and now works on development of a client’s index. This background allows us to support retailers and suppliers needing to respond to or develop indices.
LCA & Sustainable Design
Senior Project Manager
SGS North America Inc.
t: +1 973 461-1517
SGS is the world’s leading inspection, verification, testing and certification company. SGS is recognized as the global benchmark for quality and integrity. With more than 75,000 employees, SGS operates a network of over 1,500 offices and laboratories around the world.