I recently sat down with Wayne Balta, IBM’s VP of corporate environmental affairs and product safety, to talk about a new program to advance sustainability across the company’s huge network of almost 30,000 suppliers in 90 countries. We talked about how a company can help the environment beyond the walls of its own business:
Q: Ten years, ago, we never could have predicted the current state of global sustainability efforts. What are some trends you’re seeing today?
Balta: We’re seeing more activity in areas where business interests intersect with the environment and sustainability. More companies are realizing that what is good for the environment is good for business, especially when it makes a company more efficient and effective. A case in point: if you produce a product — anything from hula hoops to heavy machinery — if you do it in a way that is more efficient, you’ll consume less energy, save money on energy costs, and lessen your contribution to greenhouse gas emissions. We’re seeing this across all industries.
Q: One place a company can make an impact is in its supply chain. Can a company’s purchasing power be translated into better environmental policies?
Balta: Absolutely — we’ve certainly seen that at IBM. This dates back to the 1970s, when IBM was evaluating companies performing waste management and recycling. In 1998, we wrote to our suppliers to encourage them to adopt the new ISO 14001 standard for environmental management systems. Then, in 2004 we published the IBM Supplier Conduct Principles that suppliers were required to follow in order to do business with IBM. Those standards set IBM’s overall expectations for corporate responsibility, because suppliers are a key component of a company’s sustainability efforts.
Q: What is IBM asking its suppliers to do in 2010?
Balta: Starting this year, we are asking each of our suppliers to define an environmental management system suitable to their particular business operations. We’re asking them to establish voluntary environmental goals and measure performance for at least three topics applicable to virtually all businesses: energy conservation, greenhouse gas emissions, and waste management/recycling. In addition, we’re asking them to publicly disclose their results. We’re also asking that these requirements be cascaded down to any of their suppliers who perform work for them that is material to what is ultimately supplied to IBM. So this program will fan out among our suppliers’ suppliers, spreading its impact even further.
Q: I see you are not issuing a blanket mandate. What’s the reason for that?
Balta: A key aspect of this program is that we want suppliers to create a management system that works for their particular business operations. Since our suppliers are diverse, there cannot be a one-size-fits-all solution. Some are huge publically-traded companies while others may be small businesses with much fewer employees. We want them all to build long-term sustainability in a way that is integral to their routine operations, not as an add-on fix.
As we set these new requirements, let me point out that we are not going to publicly “grade” suppliers. This is a carrot, not a stick approach. Our goal is to help them improve their businesses, whether they work with IBM or someone else. We want them to succeed.
Q: Can you give me a few examples of what suppliers could do?
Balta: It varies. Chemicals used for manufacturing must be properly managed from inception through final use and disposition. Products and components can be designed for the environment, considering material selection, energy intensity, and recycling at end-of-life. Even service operations such as call centers can be energy-intensive.
Take the electronics industry, which supplies IBM with components for our servers. As an example, we want them to use environmentally preferable materials. However, that doesn’t happen overnight, and a supplier must put a system in place to phase out a particular material or manufacturing process.
For a services oriented supplier, its environmental management system might identify energy consumption as a significant issue. Upon recognizing that, the supplier might do things like install motion detectors so lights automatically shut off when rooms are not occupied, or installing energy-efficient light bulbs or energy-saving settings on computers. For a shipping company, their routes might be redesigned to save fuel.
Q: Aren’t some suppliers already doing this?
Balta: Indeed, many of IBM’s suppliers already have such systems in place and for them these requirements may not represent anything substantially different from the way they already manage their businesses. For others, however, this approach may be relatively new. Some suppliers may need help and we look forward to helping them succeed.
There is another dimension. In our era of globalization, we find ourselves working with suppliers from all over the world. In fact, the executive who oversees IBM’s supply chain, John Paterson, is based in Hong Kong. We’re finding that suppliers are at different stages of development and sophistication in terms of their understanding of sustainability and environment impact. While these requirements may seem like old news in mature economies, attention to these matter in emerging markets has not been great over the years. It’s very important for suppliers in those markets to get the help they need to put the right systems in place.
Q: Is there anything else you’d like to add?
Balta: Our world is a system of systems — we’re seeing that in IBM’s Smarter Planet initiative, where cities around the world are creating systems to make water cleaner, roads less congested, and populations healthier. That’s what we are doing here; helping suppliers build systems so that they can be sustainable and succeed.