P&G Begins Rating Suppliers

Procter and Gamble has released the second version of its environmental sustainability scorecard, moving from benchmarking suppliers to rating and rewarding them.

The original scorecard was launched last May, and is designed to track and encourage improvement on key environmental sustainability measures among almost 400 of P&G’s suppliers. The measures include energy use, water use, waste disposal and greenhouse gas emissions on a year-by-year basis.

In the first year, P&G says it focused on assessing whether it would receive clear data to measure future improvements and spark innovation. Most suppliers were able to track the requested measures, P&G says.

In addition, about 40 percent of scorecards received offered at least one innovation idea for improving the environmental footprint of P&G’s business. Many of the ideas have become actual projects, P&G said. In one example, a chemical supplier has begun to work with P&G on renewable energy projects, renewable materials development, and ways to reduce emissions.

“Working with our external partners is clearly critical to realizing our long-term environmental vision as a company, and this scorecard is a helpful tool to facilitate that collaboration,” vice president for global sustainability Len Sauers said. “After all, using 100% renewable or recycled materials for all products and packaging will only be achieved through strong collaboration with our business partners.”

Beginning this year, scorecard results will affect supplier performance ratings and therefore their opportunities for future business with P&G, the company said. Suppliers will receive a score from one to five, and those that score a five will be publicly recognized. The scores will also be used to form joint sustainability improvement plans and to measure progress over time.

This year P&G will also expand the list of participating suppliers and agencies to about 600. It said that other changes, based on partner input, include:

• a clearer process to allow partners to exclude measures that don’t apply
• a more transparent and consistent rating methodology
• the ability to compare year-on-year improvement using either absolute or intensity data, or both
• the ability to reward year-on-year improvement regardless of data format or scope preference.

In unveiling the scorecard last year, P&G said the matrix will be “open code” for use by any organization, to help determine common supply chain evaluation processes across all industries.

The scorecard is similar to Wal-Mart’s sustainability index in that it asks questions about the sustainable practices of suppliers including climate change action, greenhouse gas reduction targets, and renewable energy use, among other measures. P&G has been directly affected by Wal-Mart’s efforts – by one measure, made back in 2007, meeting Wal-Mart’s sustainability goals has cost P&G hundreds of millions of dollars.

Just as Wal-Mart’s scorecard has had a large effect on its suppliers, P&G says its rating system has the ability to encourage environmental improvement across its global network of suppliers – which represents approximately 75,000 businesses and $42 billion in spending each year.

The first version of the scorecard relied on protocols from the World Resources Institute, the World Business Council for Sustainable Development and the Carbon Disclosure Project.