Regulated by Your Customers Reply

The words environment, health and safety can bring thoughts of “compliance” to one’s mind.  The regulatory agencies MassDEP, EPA and OSHA are a reminder to us that compliance requirements are being enforced and must be met to avoid penalties or fines. This was true until companies that you sell your products to (i.e., your customers) began getting serious about something they call “supply chain management.”  Supply chain management is when your customers try to manage their risks by becoming regulators themselves.

The biggest company in the world, Wal-Mart, is one of the companies that have been pushing the envelope by “greening” their supply chain.  The company has developed a rigid 15-point sustainability index that must be met by more than 61,000 suppliers and all the factories that they use.  Failure to meet these environmental and social requirements and maintain or lower the price of your products, could result in termination of your Wal-Mart contract.

CAPACCIO recently became involved in helping a Wal-Mart customer, a leading snack food industry manufacturer, prepare for a Wal-Mart audit. Utilizing Walmart’s 15-point sustainability framework, CAPACCIO helped the client prepare for the audit by assessing the company’s current sustainability state against Wal-Mart’s index.

As part of the 15-point framework, Wal-Mart grades companies on four broad categories: energy and climate; material efficiency; nature and resources; and people and community. CAPACCIO found that the company’s current state was already quite “green.” As a family-owned business, the company opted not to promote their environmental and social successes. Wal-Mart, however, was very happy to hear their stories and learn that the snack food company was exploring a number of opportunities to further improve their operations.

CAPACCIO provided the client with an analysis of how they would be scored based on Wal-Mart’s 15-point sustainability framework at the current time. CAPACCIO also provided a number of specific action items that could be considered to help improve the score. Some recommendations were to prepare water and carbon footprint reports and disclose the results to the Carbon Disclosure Project and the newly formed Water Disclosure Project.  CAPACCIO also recommended that the client reach out to its supply chain to learn more about energy and water use in order to complete the disclosures.  We also advised the client to consider creating documentation to present the completed sustainability initiatives and post this information on the company web site or include it in a sustainability report.

CAPACCIO helped this client make an internal business case for these sustainability initiatives.  By going through this process, the business has prospered, and all of the client’s retail customers, not just Wal-Mart, have reaped the benefits.

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