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Supply Chain Compliance: What are the rules, who is making them and how far are the big guys prepared to go?

GCX Africa in partnership with greenOFFICE hosted the first Better Business Forum in Durban on the 21st of August 2014. The forum took the form of facilitated discussion on supply chain sustainability issues.

Startup Stock Photos

The hugely successful session was moderated by Kevin James of GCX Africa, and included the following panelists:

  • Justin Smith (Head of Sustainability, Woolworths)
  • Vuyo Kona (Head of Sustainability, Tongaat Hulett)
  • Quade Corder (Senior Manager of Quality, OHSE, Sustainability, CHEP SA)
  • Elspeth Donovan (Deputy Director (CISL)

Here are the highlights:

Success in supply chain compliance

Success in supply chain compliance can be achieved by choosing local suppliers over foreign ones, and rolling out successful training practices or techniques to other suppliers. In doing so, we can share in the information needed for compliance. Also needed is a solid understanding of measurement and important environmental indicators by smaller suppliers. There needs to be an emphasis on the benefits i.e. cost reductions from compliance or sustainability initiatives, and a long-term approach in making the process work.

Risk in supply chains

Risk in supply chains can be based on the type of product or commodity based on limits from climate change impacts already affecting businesses. The availability of products and commodities will require a strategy based on this. Local companies can use their influence on a supplier depending on whether it is direct or indirect. Indirect suppliers often have to use the local industry’s approach as change can be limited as an individual acting company (e.g. palm oil). Direct suppliers can control supply chain compliance more so than indirect suppliers.

Traceability

In terms of traceability, there is still no established industry influence, approach, or labelling of GMOs. Producers should enter into supply agreements based on client preferences (i.e. no GMOs) and source compliant suppliers. Technology can also be used to test the quality of a supply chain product (GMOs). Consumers should question the traceability in other products and services too (i.e. clothes). It is advantageous to have long-term, exclusive direct supplier relationships, and a supply code should include labour and environmental conditions, and be audited independently by a third party. Working with suppliers can improve the quality of the product and thereby supply chain performance.

Enterprise development (small-medium supplier challenges for market entry)

To assist in the development of enterprise, there needs to be mentorship between primary and secondary suppliers. Time is needed to get small suppliers into compliance and supply chains. We can apply the Pareto principle here, working to develop the 20% of suppliers who produce 80% of supplies/services. We need to set objectives to suppliers and customers, and also realise that certification for organic produce, for example, may not be not viable for every single crop or farm. It may require a balance and trade-offs to drive a balanced process.

A change in mindset to sustainability

Overall, a change in attitude towards sustainability is needed. This can be aided by a personal objective in leadership development to shift company objectives. Sustainability needs to be part of the corporate strategy and requires collaboration between competitors, and sometimes requires a compromise between sustainable and traditional processes. The correct establishment of infrastructure can help facilitate a change in mindset (e.g. environmental metrics to be measured like financial metrics).

Climate change adaptation

To prepare to adapt to climate change, retailers need to work with suppliers on supply chain security and crop yields. Climate change requires strategy and long-term approaches to secure production, as well as increasing acknowledgement that limits to future resources and climate changes ultimately affect business dependencies and thereby financial indicators.

Waste and packaging

Although the Waste Act is well written, it is not implemented effectively. Waste management needs to start right at the beginning with the design of packaging. Some companies prioritise different waste over others e.g. food over packaging, but the key to waste reduction is to reduce the use of virgin materials by demanding more recyclable materials from suppliers and thereby shift an entire value supply chain.

A carbon tax

South Africa is the 2nd largest responder in the Carbon Disclosure Project (CDP). A tax could be placed on imports to protect the local economy and businesses, but we need alternatives and ‘cannot underestimate the appetite of governments to introduce more taxes’. Ultimately, the success of the carbon tax depends on its intention, i.e. if it’s used to incentivise the green economy it could be beneficial. South Africa needs to create ‘a stick with a carrot’ as there cannot be regulation and compliance without incentivisation. South Africa can have a public opinion and influence on the carbon tax and its intention for use in South Africa. An internal carbon tax is being introduced by leading companies, but Eskom has a monopoly that limits the industries in the market and available resources.

South Africa’s green economy

To stimulate the development of a green economy in South Africa, we need sound measures of sustainability in place, such as on the JSE, King III, etc. We also need infrastructure to attract Foreign Direct Investment (FDI) from developed countries. The good news is that companies are embracing green economy concepts, and there is a real opportunity to make businesses better in the long-run.

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