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IBM Orders 30,000+ Suppliers to Start Disclosing Their Environmental Impact

New Supply Chain Rules Take a Systems Approach to Environmental Management

By Amy Westervelt

Apr 16, 2010

It’s all well and good for a company to build a green headquarters, release annual corporate responsibility reports and track its greenhouse gas emissions. But if it doesn’t extend that tracking to its suppliers, it’s at least partially responsible for the environmental impact of those companies, as well.

Perhaps more important to most businesses, one supplier’s negligence can become a financial risk to everyone up the supply chain. If a supplier is caught, say, dumping toxic chemicals or using child labor, it’s only a matter of time before the news taints a company’s public image (see: , and, most recently, ).

In response to various public health and labor scandals back in the late 1990s, many global companies began to drill down into their supply chains as a way to better understand and manage their own risks. Over the course of the last decade, that management has extended to the environmental performance and impact of suppliers. Wal-Mart has been making headlines for the last two years for its supplier scorecards.

Now, is taking its supply chain management another step forward with a new system of environmental management and public reporting rules announced Thursday.

All of the company’s 30,000-plus suppliers are now required to define a management system around three areas: energy conservation, greenhouse gas emissions, and waste management/recycling. Suppliers are expected to create a system, set goals, measure their performance and publicly disclose their progress toward their goals. They're also expected to set similar requirements for their suppliers.

"This will require companies to think about how their basic day-to-day work intersects with environmental concerns, and for many of them, energy and CO2 will be a part of it, but so will issues like the creation and handling of hazardous waste, or the recycling of waste, or the choice of materials they use in their products," says Wayne Balta, IBM’s vice president of corporate environmental affairs and product safety.

While IBM can't audit all of its suppliers every year, it will be checking up on them, particularly those in industries with the most troubled histories. As with its supplier code of conduct, if suppliers fail to meet the new requirements, they'll get a warning and IBM will try to work with them. If that still fails, their future in IBM's supply chain will be in jeopardy.

Flexibility to Embrace New Systems

This isn't the first time the company has asked its suppliers to take charge of their environmental impacts. In 1998, IBM encouraged suppliers to pursue registration in order to align their environmental management systems with Big Blue’s own. And in 2004, the company published its , which cover everything from labor practices to ethics to environmental impacts.

The difference now, according Balta, is in the company’s systemic approach and its emphasis on the integration of responsible management systems into the core of each supplier’s business.

Balta says it’s also important that the company is focusing on what it wants suppliers to do, not how they should do it. The new requirements deliberately avoid prescribing a particular type of management system or public reporting tool in order to allow suppliers the flexibility to develop the systems that work best in their particular industries and contexts, he says.

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