More Companies Set Sustainability Standards But Supplier Challenges Remain, Execs Say

Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...

By Che Odom  

June 24 — Although companies may report paying more attention to environmental and social impacts of suppliers, risks involving supply chains remain among the greatest sustainability challenges for the future.

“The supply chain is definitely going to be the major issue going forward,” Paul Boykas, vice president of public policy for PepsiCo, said June 23 during a webinar sponsored by Ceres. “It is a major issue now, but I think it will get even bigger going forward.”

The webinar presented findings of a 2014 study, “Gaining Ground: Tracking Corporate Progress on the Road to Sustainability,” which Ceres conducted jointly with Sustainalytics Inc. The study looked at the practices of 613 of the largest U.S. publicly traded companies and concluded that although there has been incremental improvement, it has not been at the scale or speed required.

Boykas was joined by Michael Jacobson, the director of corporate responsibility at Intel Corp. The two discussed how their respective companies are facing sustainability challenges.

‘Uptick' in Standards

The study found a “clear uptick” in companies setting sustainability standards for suppliers,” said Eric Roston, sustainability editor at Bloomberg and the webinar's moderator. Of the companies covered in the study, 58 percent are setting supplier sustainability standards, up from 43 percent in 2012, he said.

More companies are also establishing board oversight for sustainability, demonstrating how these issues continue to “rise on the executive agenda,” Roston said. In 2014, 32 percent of the companies covered by the study reported such board oversight, compared with 28 percent in the 2012 study.

PepsiCo Educates Suppliers

PepsiCo has long had sustainability policies and human rights actions in place, but it continues to grapple with getting its suppliers up to speed on its standards, Boykas said. The company has provided training through its website and holds supply chain summits to help suppliers understand “what PepsiCo expects of them,” he said.

Included in PepsiCo's standards are expectations involving land use and deforestation, he said.

“These are specific things that we want” suppliers to improve upon, he added.

Intel Issues Report Cards

Intel issues report cards that grade its suppliers on sustainability issues, Jacobson said. The report cards follow metrics created by the Global Reporting Initiative, a nonprofit that advocates for corporate disclosure on environmental, social and governance issues.

“Just as you would grade them on cost and quality, we grade them on sustainability,” Jacobson said. “Based on those gradings, it is going to impact their ability to do business with Intel.”

The computer processor maker is spending considerable time with suppliers to “really move beyond compliance to really a two-way conversation,” discussing the value of sustainability and corporate responsibility, he said. The goal is to help suppliers improve, he added.

“The easy answer is to say, ‘I'm just not going to do business with the supplier anymore,' and there are instances when that is necessary, but you really do want to invest,” Jacobson said. “Everybody benefits if the supply chain is meeting the standards and you work with them to get them there.”

Compliance Can Be Demanding

Vendors need help learning about compliance matters and standards, which can be complicated to maneuver, Boykas said.

“The more we can do as sectors and industries so that we are not asking the same supplier to fill out 15 different questionnaires and such” will help, he said. “And it does seem to be moving that way with the help of some organizations, so hopefully that will make it easier on the supply chain to do the right things as well.”

To contact the reporter on this story: Che Odom in Washington at codom@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

The 2014 report is available at http://www.ceres.org/resources/reports/gaining-ground-corporate-progress-on-the-ceres-roadmap-for-sustainability/view.