For more than ten years, some of the large OEMs have provided annual environmental reports alongside their financial statements. Where the terms of such reports were, at one time, fairly nebulous and focused on management systems, now there is detailed statistical reporting of performance, a clear statement of objectives and targets and of company definitions as to what it is to be »Green«. Increasingly, also, suppliers are being drawn into the process with procurement falling within the OEMs’ self-appraisal process.
Over the past year or two, sustainability credentials have come to be an important part of many company’s image
It is becoming common for OEMs to wrap up their environmental appraisal with that of the wider issues of corporate governance and citizenship in what is called a »Sustainability« report, By proving itself to be a »sustainable« company, an OEM is showing that it is able to maximise the benefits of economic growth while minimising its negative impact on the environment, social justice and individuals. Over the past year or two, sustainability credentials have come to be an important part of many company’s image, and are considered relevant by some major investors. OEM »Sustainability« (like Green credentials), has direct bearing on their relationship with suppliers.
The Green credentials of OEMs can be judged in terms of both their products and their manufacturing processes. At its simplest level, being »Green« means a) making products that are energy efficient, do not contain toxic materials, are recyclable, and b) achieving a minimal negative environmental impact during the manufacturing process.
… expect to see an increasing penetration of »Green« cables, which do not produce halogens, hydrogen chloride or dioxin when burned
Legislation such as the EU Directive on Waste of Electrical and Electronic Equipment (WEEE) and the EU Directive on Restriction on Hazardous Substances (RoHS) are helping the process along, but some of the leading OEMs appear to be one stage ahead of legislation in their environmental management.
The growing interest of OEMs in making »greener« products has some direct bearing on the products required of the cable industry. We may expect to see an increasing penetration of »Green« cables, which do not produce halogens, hydrogen chloride or dioxin when burned, and cannot release lead or other toxins in normal use. We may also expect to see more cables designed for energy efficiency and for simple disassembly, including thermal recycling. The scope of the Green initiative, however, goes far beyond a requirement for more environment-friendly products.
… potential suppliers and existing ones may be judged and assessed on the basis of lean manufacturing and environmental management
In describing its environmental initiative, Electrolux, for example, states that it takes a holistic approach. It assesses the environmental load of its product’s through their entire life cycle, from raw material extraction, to manufacturing, transport, consumer use, recycling and final disposal. By looking at the whole picture, it is clear that the choice of materials and manufacturing processes of suppliers have just as much bearing on the environment as the OEMs’ own business operation. With this in mind, potential suppliers may be judged and existing ones continually assessed on the basis of lean manufacturing and environmental management principles that apply to the OEMs’ own operations. Detailed environmental reporting by suppliers is required, which may partially be waived for those companies that gain ISO 14001 certification. OEMs now often express a preference for dealing with ISO 14000 companies. The automakers Honda and Nissan go as far as to target 100% ISO 14001 certification for all of their suppliers by 2008, by 2005 for those in Japan.
… principles of corporate citizenship and governance are being imposed
While procurement contracts are becoming more exacting on environmental grounds, the OEMs drive for »Sustainability« also means tougher social responsibility clauses. Hewlett Packard is not particularly unusual in its statement:
»We expect our suppliers to act as responsible corporate citizens and take a positive, proactive stance regarding labour, occupational health, safety, environment and ethical issues.«
As is true for issues regarding the environment, suppliers are now being asked to impose the same principles of corporate citizenship and governance that their customers impose upon themselves.
…ideally the co-operation between OEMs and suppliers creates a win-win relationship…
These principles are coming to form part of the contract between suppliers and their customers. As a result, we are moving further and further from a situation where a component supplier can be judged solely by the product it makes. Every aspect of how a company is run and how it performs is coming under the spotlight in today’s changing business environment.