Corporate Practice in Life Cycle Management
Much effort by corporations and supporting institutions has gone into translating the results of LCA into actual management interventions of their value chains (Remmen et al. 2007). Classic examples include the LCM practice of major manufacturing companies like 3M (2015) as well as of global retailers such as Walmart (2015). Their approaches show many similarities, but also some differences in the way they are managed. While the retailers see LCM predominantly through the prism of supply chain management, the manufacturers are often more focused on using LCM internally to improve product development and reduce production costs. In such cases internal co-ordination and collaboration between different parts of the organization becomes important. The breadth of this collaboration will depend on the objectives of the LCM exercise, i.e. whether it is primarily intended to influence product development or more aimed at addressing external sustainability issues in the supply chain. Like most management exercises, a mainstreaming of LCM in a corporation under the direction of the CEO (Chief Executive Officer) will be more successful than creating a special 'add-on' LCM service. The latter faces too many obstacles of acceptance by the existing mainstream departments.
For the retailers, it is vital to bring the entire upstream supply chain into LCM exercise as this is where many of the major environmental and social impacts need to be addressed. Thus IKEA's Code of Conduct (IKEA 2012) specifies minimum requirements on its 1600 suppliers covering social, environmental and labor-related conditions. While the code of conduct provides a clear statement of objectives, compliance is unlikely to be achieved automatically; much work is needed with supply chain actors to inform, explain, educate and train key partners along the chain. Some 'recognition' instruments can be used to identify reliable suppliers e.g. certification of ISO 14001. While major companies do work directly with their suppliers to facilitate compliance with company requirements, it is not well documented how far up the supply chain the influence is actually exerted.
TRUCOST has undertaken surveys of how many companies publicly report on their suppliers' impacts. TRUCOST found that of the environmental damage caused by the world's largest 3,000 companies annually, 49 % comes from within supply chains (Salo 2015).
Direct suppliers are the most visible. But managing the suppliers of the suppliers remains a complicated exercise for individual companies. Traditionally corporations simply relied on contracts with its supply chain. An earlier study by Seuring and Goldbach (2002) showed that the collective negotiation model for sustainable supply chain management is more successful than a command and control approach. In some cases, the direction of the coordination may also need to be reversed.
Suppliers with a number of different clients may find that the latters' demands are not compatible, or are inconsistent in other ways. This has led to some collective arrangements where several clients and their different suppliers agree on a common agenda, and perhaps also a common communication and certification system.
LCM involving sub-contracting and global supply chain management may face serious political hurdles and trade barriers. Sustainability requirements on suppliers may not be well accepted by foreign governments who see this as interference in their national affairs and an unwanted application of western environmental standards. The political disputes over products manufactured by child labor, and/or subject to lax or unenforced safety and environmental standards have been rumbling on in global trade negotiations for many years. Fair-trade labels are not seen the same way from opposite ends of the supply chain, and LCM has to be sensitive to such issues. While company requirements on their suppliers may appear to be simple contract arrangements between companies, the issues easily spill over into political rancor and trade reprisals. As well, the WTO has a general policy to avoid environmental conditionality in trade arrangements.
Management techniques will depend on which parts of the value chain are included in the LCM exercise. There is a gradual movement, often spurred by legislation, to consider downstream issues of consumer protection, efficiency in use and end-of-life disposal. Managing the downstream parts of the life cycle requires different procedures and skills because the consumer needs to be persuaded rather than commanded into conformity with the LCM objectives. While shaping consumer behavior remains a delicate marketing issue, some corporations are already reaching out to their clients about the appropriate use of their products. The example of Unilever is shown below (Unilever 2015). Unilever's sustainability strategy addresses environmental impacts across the value chain.
“Our commitment to reduced environmental impact extends right across our value chain – i.e. from the sourcing of raw materials through our own production and distribution to consumer use and eventual disposal of residual packaging. Consumer use accounts for around 70 % of our greenhouse gas footprint. Engaging consumers …. will be key to achieving our vision. Metrics for our four priority environmental impact areas across the value chain include greenhouse gas (GHG) emissions, water, waste, and sustainable sourcing. These metrics are designed to measure the impacts of our products when used by consumers, such as grams of greenhouse gas per single usage occasion. During 2009 around 1 500 products were assessed to allow us to understand their water, waste and GHG impacts in 14 of our largest markets. In 2009 we also started to develop a set of metrics covering social impacts. For .. brands with social missions, the metrics seek to measure the benefits they bring to society. In 2010, Lifebuoy used the new metrics, helping track the impact of Lifebuoy programmes on hand washing behaviours over a five-year period”.
We are still a long way from a universal application of his concept, even if some examples are well documented. The notion of downstream LCM is linked also to the idea of Product Service Systems where the manufacturer has replaced a product by a service, as for example in renting products instead of selling them (the story of Interface, SafetyKleen and others).