Supply Chain Collaboration and Partnerships

Disclaimer: This is a summary of Chapter 7: Industry Collaboration & Multi-Stakeholder Partnerships of a report written by the United Nations Global Compact and Business for Social Responsibility (BSR) entitled Supply Chain Sustainability: A Practical Guide for Continuous Improvement. I have added personal commentary where appropriate (in italics), omitted certain paragraphs, and attempted to maintain general flow and message of the original chapter which can be found here:

http://www.bsr.org/reports/BSR_UNGC_SupplyChainReport.pdf

Personal Introduction (this is not part of the following report)

The future success of global commerce and supply chains lies in maximizing honest, creative and altruistic partnerships among organizations and individuals. The more we are devoted to doing what is good for the world (people, animals and the environment), the less we will have to worry about maximizing profits. Supply chain collaboration and stakeholder partnerships have incredible potential to unleash new solutions to our complex problems. This report, and particularly this chapter, hit on a few key points that can get the conversation going in the right direction. 

7. Industry Collaboration & Multi-Stakeholder Partnerships

The objective of supply chain sustainability is to create, protect and grow long-term  environmental, social  and economic value for all stakeholders involved in bringing products and services to market. [from the Executive Summary]

Pursuing supply chain sustainability is an investment for any business and a return on that investment should be expected. In addition to the financial benefits generated from incorporating sustainable initiatives into the supply chain, businesses should expect to see economic, social and environmental benefits as well. Most companies integrate sustainable practices into their supply chain to comply with laws and regulations, abide by international principles for sustainable business conduct or because society expects them to.

The Context for Industry Collaboration

Great potential to solve complex supply chain challenges lies in industry collaboration and partnerships. Just as any business challenge is best solved by incorporating a diversity of perspectives and skills, so too are supply chain complexities best approached with input from diverse enterprises at all levels in the supply chain. Primary benefits of collaboration include extending a businesses reach, pooling resources, reducing duplication and avoiding conflicting messages.

Industry collaboration has taken two primary forms:

1 - Best Practice Sharing:

Companies focus on sharing knowledge and tools that they have found to be successful in their supply chain progams. Although sharing of resources with all industry stakeholders is not required, an open-source format greatly increases efficiency across an industry and allows for enhanced development and faster evolution of industry practices.

2 - Joint Standards and Implementation:

Aims to create consistency among companies’ expectations and supply chain programs. A shared code of conduct may be adopted to engage suppliers through joint assessments and auditing. In some groups adoption of shared codes of conduct may or may not be required. Additionally, these groups may conduct join capability building for suppliers.

Opportunities and Risks for Industry Collaboration

The opportunities associated with industry collaboration also come with risks. To determine the true value of any collaboration, a company must first decide on which elements of their program to collaborate with other companies.

Opportunities

Leverage with Suppliers.

By collaborating with peers on supply chain sustainability, companies are sending a loud message to both direct suppliers and sub-tier suppliers. This group influence can align expectations and engagement approaches and improve general internal and external communications.

Credibility with Stakeholders.

Indsutry collaboration demonstrates a company’s vigilance of challenges in the supply chain and improves credibility with external stakeholders. A forum in which to discuss controversial topics is also created through industry collaboration.

Risks (with mitigating factors*)

Internal Commitment.

Commitment to collaborating with potential competitors can stir up controversey within a company and defeat the purpose of industry collaboration around supply chain sustainability. *Ensuring internal stakeholders have a complete understanding and buy into the plan as to which companies will be partnered with is essential to successful collaboration. Setting expectations as well as required time and resources early in the process will also garner internal commitment.

Resource Draining.

Just as resources can be shared and cost and time efficiencies created during collaboration, a potential resource sink also exists. Initiating shared action can be time intensive and requires an investment from all partners, but may not always produce results. *Clear planning and transparent goals and expectations can reduce undesired results and amount of time for a project to reach maturity and create substantial impact.

Multi-Stakeholder Partnerships

Whereas industry collaboration can leverage industry specific best practices, multi-stakeholder partnerships focuses on creating opportunities among companies and a broad range of stakeholders. These could include national and local governments, workers’ and employers’ organizations, nongovernmental organizations, advocacy and activist organizations, academic and issue experts and community groups. In more recent years, a higher number of stakeholder groups have demonstrated willingness to partner with companies. Many of these groups bring untapped knowledge about sustainability issues to companies and develop creative solutions to complex supply chain challenges. Beyond addressing the context for understanding sustainability challenges, stakeholder groups help design effective responses and act as local implementing partners. Stakeholder groups can add a layer of additional resources and legitimacy around sustainability efforts that are vital to creating community support, a fundamental piece to a sustainable supply chain.

Individual Connection & Belief...Organizational Mission & Values

As I dive into my 2nd and final year as an MBA student at Bainbridge Graduate Institute (now part of Pinchot University) I have embarked upon a 9 month internship at Seattle Children's Hospital. In a somewhat roundabout way I landed at Seattle Children's in mid-September, although now looking back at the process that took place, I am not at all surprised.

For part of our 2nd year curriculum at BGI we continue our Leadership and Personal Development course series (a course that is the only constant throughout our 2 year MBA). To kick off the year all students engaged in Gallup's StrengthsFinder 2.0. After completing a 45 minute survey of behavioral questions, I was assigned 5 strengths with an in depth explanation of each. The accuracy of each strength as it related to my personal tendencies was astounding. My top two strengths were Connectedness and Belief. In short, I live my life according to a complex set of beliefs based on personal experiences and believe that all of us and what we experience are connected in some way. 

When I set out to find an internship this past summer I sought advice from several friends and family, classmates and mentors. I am not completely convinced I found the balance between controlling the outcome and remaining open to possibility, but at least balanced enough to find my way to an incredible organization who's mission and values I am proud to stand behind and spread into the world. 

Seattle Children's mission - 

"We believe all children have unique needs and should grow up without illness or injury. With the support of the community and through our spirit of inquiry, we will prevent, treat and eliminate pediatric disease."

If I have learned anything from the process of finding this internship it was to follow my heart and tell people about my passion. Knowing that my work this year is to work to improve the lives of children is truly a gift. 

Entering into an organization as a graduate student intern is both confidence-boosting and a bit intimidating. The platform on which I begin my research is buoyed by welcoming sponsors, potential to create real value and the opportunity to build relationships with incredible, passionate people. I commend Seattle Children's for being open to partnering with Pinchot University for this internship program. 

Look Around: Success Is Not What You Think It Is

Sticking with my own tradition of ending the quarter with a more artistic blog post, and with what I feel speaks to this topic most profoundly, I will be defining success and what I feel its relationship is with growth. Take this in the context of the natural world and in the business world, as I feel success vs. growth is a comparison best demonstrated by what surrounds us in nature. To create businesses that flourish in the most beneficial way for all stakeholders, I believe we should be looking to nature which exemplifies a perfect balance of success vs. growth.

As we learned early in the year, a system and all its parts is designed to do exactly what it is doing. This tiny copepod exists in the trillions (probably a few orders of magnitude more actually) around the world’s oceans. What defines success in this case? This miniscule creature has a minute effect as one, but in such great numbers they support ecosystems and provide food for all those animals higher than itself in the food chain. At a few millimeters in length, is growth even worth discussing? How about for those resources that support our way of life and businesses? Can we support and sacrifice certain desires in our lives for the good of the system like the copepod does? And no, I don’t mean we have to be a food source for animals larger than us!

Growth in the case of this sea slug is clearly unusual. Instead of a business growing in physical size, can it grow in complexity and beauty like this animal? A slug standing out among a world of fast, voracious predators is an awesome example of thinking outside the box. Success is defined as a beautiful and bizarre creature here. What does that mean for us?

Success and growth in this interaction are quite unexpected. Camouflage vs. colorful stand-out? Predator and prey or passers by?  

And then there’s the typical growth we think of. The gigantic, towering Seqouia does what it has to in order to reach the sunlight and nutrients. But are the largest, the most successful? I bet not. In every environment this behemoth faces different challenges to grow at the rate it requires for survival. It too must adapt to various limiting factors in the environment, just as businesses must adapt to available supply and varying demand levels.

My mind is so often blown when I look to nature for examples of how to live for a healthy future. I encourage you to do the same.

Corporations: For Better or Worse?

To start, a few words and phrases: Corporation, corporate offices, corporate law, “Call corporate, they have the answers”,  “Some day, I’ll work for corporate”, limited liability, separate entity.

Corporation: a company or group of people authorized to act as a single entity (legally a person) and recognized as such in law.

Whether or not you have worked for a corporation, it is nearly certain that you have interacted with or been affected by one in some way. After reading through these prefacing remarks, I wonder what thoughts or emotions arise in you. For me, a few thoughts that come to mind:

Safe Haven: A corporation provides structure and benefits for its employees.

Reliable: This type of organization typically has a reliable source of goods throughout the year and we can rely on them for our own needs.

Predictable: The corporation will do what is best for its own survival. Considering it is legally a person makes for an interesting subset of rules and reactions to society.

Global: A corporation has global reach and influence, often affecting millions of people in a complex web of wonderful and terrible actions simultaneously.

Hierarchy: Top down management with the majority of power and money belonging to the few at the top.

The corporations of the world wield great power. That is a fact. Corporations are much like a lion in the wild. They are a keystone species, meaning they play a critical role in the survival of all other species in an ecosystem. All the suppliers, distributors, manufacturers, buyers, customers and community members rely on large corporations in many ways. As much as I hate to admit it, they have a massive influence in any communities considering the amount of money that flows through corporations and the attention they get. As an employee for one of the larger transnational corporations, Costco Wholesale, I have mixed feelings about their existence. I believe in the power of communities and our reliance on one other for our well-being. Time and time again, we see political issues arise over corporate “personhood” and the ability of these organizations to act like a community member and voice their opinion. This stirs my emotions because I don’t believe corporations have the same interests as humans, and yet they carry arguably more weight than each of us in societal decisions. On the other hand, many people rely on their corporate employer to provide a steady income and benefits for them every day. It is clear how quickly this can become a complex issue and how much corporations affect our communities, countries and the world.

How Do We Determine the True Value of a Business?

The value of an enterprise can be interpreted in many ways. Traditionally, "enterprise value" represents the real MONETARY value of an organization after all debt and cash is taken into consideration. When compared to the market capitalization of a company (share price times the number of shares), enterprise value indicates the worth of an organization to interested investors and shareholders. Although there are a number of other measures of financial capital, enterprise value is seen as one of the most valuable. But is it misleading? Does it truly tell us the value of an organization? When you stop and think about it, the term “value” means something different to everyone.

Sure, shareholders and investors want to know what they are getting for their money. And this makes complete sense! In addition to various other indicators like EBITDA, P/E and sales, enterprise value is an accurate representation of a company’s monetary value. But does the enterprise value (calculated as market cap + total debt - cash and cash equivalents) give us the whole picture of what else is going on in a company? Could it be that enterprise value is similar to GDP which measures everything in terms of growth? In Nature, Journal of Science, Costanza et al. state, “If a business used GDP-style accounting, it would aim to maximize gross revenue – even at the expense of profitability, efficiency, sustainability or flexibility.”¹ By solely looking at financial indicators like enterprise value, it is possible that businesses are also overlooking natural resources that allow for the flow of critical raw materials, proper equipment or work/life balance for employees and positive culture development.

In my last post, I examined the five capitals model (natural, human, social, manufactured and financial capital). Most firms either have all these types of capital within their organization or interact with them very closely. Could human capital, the health, knowledge and skills of individual employees, be seen as value? What about the culture and community created within a company? Is there a way to measure this? The way an organization utilizes its natural capital is arguably the strongest indicator of longevity. As goods or services are produced, the volume of resources that provide raw materials are invariably affected. If the primary source of raw materials (the stock) is extracted beyond the rate of reproduction or replenishment, then the company will face certain demise. Surely, decision makers would want some way to measure their resource stocks. This is valuable to them, right? To put it in terms of enterprise value, an investor wouldn’t want to get involved with a company that carries tremendous debt in natural capital, an accumulation of employee complaints or poor relations with the surrounding community.

Perhaps a new calculation for enterprise value could be created. One that takes into account not only financial metrics, but natural, human and social capital as well. One possible solution could be the expanded enterprise value calculation below, which includes all types of capital.

Enterprise Value = Financial Solvency + Liquidity + Resource Ratio (Use/Stock) + Employee Happiness + Community Involvement

Source:

1) Costanza, R. 15 January 2014. Development: Time to Leave GDP Behind. Nature.com. Retrieved on 26 April, 2014 from www.nature.com/news/development-time-to-leave-gdp-behind-1.14499

Five Capitals Framework - An Appropriate Guide for Business?

The Five Capitals model provides a strong platform for sustainability, but is not enough on its own. While there are many alternative names for the five capitals, (physical capital, knowledge capital, intellectual capital, spiritual capital, organizational capital, etc.) it seems the main point of this framework is to encourage decision-makers to pursue a much more balanced approach to business. I think this is an intelligent approach that can help businesses look through the sustainability lens and learn new ways to create value, but I also think the creator of this framework, Forum for the Future, could do more to allow the idea to be effectively utilized by business. However, perhaps the simplicity of the framework permits a degree of freedom for the user making it more useful to a larger crowd in the end.

In the context of business and the economy, these five capitals: natural, human, social, manufactured and financial, have the potential to make waves in any community. My initial impression upon reading the Five Capitals Model document (https://forumforthefuture.org/sites/default/files/project/downloads/five-capitals-model.pdf) was that it is pretty obvious THIS is what business needs to be doing to survive and make a positive impact. It all comes down to striking a balance, just as we humans need to eat a balanced diet, exercise, sleep sufficiently, and socialize with family and friends among other things. A few questions that arose in my mind were:

-       How can a company define for itself which capital it should capitalize on (save financial) while still keeping the others in tune?

-       Is it possible for a business to survive on just enough and fulfill its purpose, or is it written into the mission of every business to maximize on all fronts?

To run an organization as a machine as if all it depended on were inputs and outputs and to seek one goal, profit, is completely shortsighted. To make this even clearer, businesses exist because of humans, are run by humans, and interact with everything that is living either directly or indirectly. So, the five capitals model is a step in the right direction for business and the economy, but there is so much more to be accounted for than just what falls into these five categories.

Natural capital sustains all other types of capital, but I believe it is also part of all other types of capital as well, most notably human and social capital. This means businesses would do well to focus MUCH more on their interactions with nature because it directly affects their long-term survival and the good of the economy. Furthermore, the enhanced relationship with nature would serve as a compass for strategy and major decisions. For example, as seasons change and nature provides varying levels of resources, businesses would be more adept at predicting where to utilize assets and how to reduce costs. Educating employees on how a company relates with the natural environment would create a pool of ideas for business practice improvement and generate a healthier workforce.

What would happen if....?

What would happen if we did just enough to survive, like nature does?

Maybe we’d be hairy and fairly hungry, but lean and a little mean.

Maybe we’d be lean and a little mean, but resourceful and forest-bound.

Maybe we’d be resourceful and forest-bound, but grateful and spiritual.

Maybe we’d be grateful and spiritual, but uneducated and thirsty.

Maybe we’d be uneducated and thirsty, but hopeful and discouraged.

Maybe we’d be hopeful and discouraged, but community-oriented and content.

Maybe we’d be community-oriented and content, but tech-free and healthy.

Maybe we’d be tech-free and healthy, but cold and preservationists.

Maybe we’d be cold and preservationists, but hairy and fairly hungry.

What would happen if nature maximized everything, like humans do?

Maybe nature would be grandiose and overwhelming, but it already is.

Maybe nature would be efficient and gratifying, but it already is.

Maybe nature would be forgiving and merciless, but it already is.

Maybe nature would be intelligent and complex, but it already is.

Maybe nature would be mystifying and calculated, but it already is.

Maybe nature would be predictable and confident, but it already is.

Maybe nature would be selfish and selfless, but it already is.

Maybe nature would be loud and destructive, but it already is.

Maybe nature would be predator and prey, but it already is.