Andrew Matthews, Associate, Advisory Services, BSR
In April, Procter & Gamble (P&G) released its sustainability scorecard, which measures improvements in suppliers’ energy and water use, waste disposal, and greenhouse gas emissions. Since its inception, P&G’s scorecard has led to US$1 billion in operational savings. P&G is not the only company keeping score: IKEA, Kaiser Permanente, McDonald’s, and, most notably, Walmart are among the many companies that derive business value from scoring their suppliers.
Given the clear business case to rigorously measure supply chain sustainability, how can a company build a scorecard?
I recently spoke to Pfizer’s Steve Meszaros, director of environment, health, & safety (EHS) and business continuity, and Elizabeth Auda, director of EHS stakeholder relations, to hear about their scorecard rollout. Learning from their experience, companies should keep in mind five lessons when building a supplier scorecard.
1. Focus on capacity building.
Position your scorecard as a long-term, capacity-building program so that suppliers are incentivized to provide accurate, comprehensive information. Pfizer’s suppliers understand that the information they report will help Pfizer make operational improvements and help suppliers cut costs related to energy, water, and waste. They view the scorecard program as an exercise to enhance business competitiveness.
2. Collaborate with procurement and operations teams to align goals.
Make sure that EHS, supply chain operations, and procurement teams are aligned from conception to implementation. Pfizer realized early on that distinct teams shared an interest in helping suppliers improve their sustainability efforts. The company consolidated efforts to ensure that each internal stakeholder’s interests were represented and that suppliers were not overburdened with information requests.
3. Situate the scorecard in a broader sustainability approach.
Integrate the scorecard into your sustainability strategy to gain corporate buy-in and tie the initiative to long-term goals. Pfizer developed a three-pronged approach to drive sustainability in its supply chain: (1) environmental reduction savings, (2) a supplier green network, and (3) employee and supplier engagement. Far from being a pet project or side initiative, the scorecard helps suppliers and employees understand the priority Pfizer places on sustainability and also bolsters Pfizer’s overall sustainability program with hard data.
4. Provide an ROI for your suppliers.
To gain credibility as a constructive partner to your suppliers, demonstrate a tangible return on the investment of time that suppliers make. After scoring their suppliers, Pfizer conducts coaching sessions to improve supplier capacity in the areas of energy, water, and waste management. Through these trainings, Pfizer and their suppliers hope to realize operational efficiencies, which contribute to cost reductions for both.
5. Realize it’s a work in progress.
Set goals and chart progress, but realize that your scorecard efforts can always improve. Pfizer piloted its scorecard with 100 suppliers and only saw a 55 percent compliance rate after the first year. Sustained efforts saw that number rise to 85 percent by year three. Still, Pfizer’s goals are ambitious, with plans to expand scorecard coverage and integrate scorecard results into procurement decisions.