Productive, or prohibitive?
Quantifying supply-chain sustainability impacts is the most time-consuming yet uncertain part of an organization’s sustainability assessment. In order to estimate supply-chain impacts, a list of inputs to an organization that includes products, services, equipment, and logistics needs to be compiled. Traditionally, such a list has been compiled based on multiple interviews with relevant employees and suppliers. Such an interview-based approach relies on the interviewee’s knowledge and judgment, and is exposed to potential omissions of important inputs. Even once inputs have been identified, and usually after significant lapsed time, the appreciable task remains to gather appropriate conversion factors and assign a boundary to the task of analysis at hand.
- Bottom Up
- Significant Lapsed Time
- Resource Intensive
- Arbitrary / Partial Results
- Limited # of Impacts Assessed
- Good but Limited Specific Data Points
Figure 1 visually represents the Process approach, bottom-up, survey-based data collection, supplier-by-supplier, i.e. often good quality (in clear focus) specific data points, but very partial results within an arbitrary ‘system boundary’.
Process analysis focuses on some first-tier, and sometimes second-tier impacts. Since the boundary is subjective, this may lead to significant underestimations of impacts when it comes to cradle-to-gate or cradle-to-grave scope 3 impact assessments. Spend Analysis benefits from a assessing a complete system boundary, thereby removing the truncation errors that arise from erroneous boundary setting.
VitalMetrics offers a two-phased approach, the first phase being a comprehensive sustainable Spend Analysis.
This approach utilizes only an organization’s general ledger, a reliable and complete source of information, and maps it to the Comprehensive Environmental Data Archive (CEDA®) (see: Spend Analysis • Data) via VitalMetrics’ proprietary software. This dramatically reduces the time and resources usually required to complete a supply-chain sustainability impact assessment, while simultaneously improving the completeness and accuracy of the results.
Figure 2 visually represents the Spend Analysis approach, i.e. the big picture - complete ‘system boundary’, based on multiple industry averaged (hence slightly blurred) data points, multiple sustainability impacts analyzed, delivering foundational business information, and a foundation for next step planning.
- Top Down
- Time & Resource Efficient
- Complete Results
- Multiple Impacts Assessed
- Industry Averaged Data Points
Spend Analysis traces the economic flows and associated sustainability impacts between a company and its tier 1 supplier, that supplier's suppliers, the suppliers to those suppliers and so on across a complete chain of interactions. Assessing these impacts manually via a process based approach is impossible. Spend Analysis resolves the issues of truncated system boundaries and multiple assessment approaches, and makes sustainability impact assessments across products, services, and companies consistent and comparable, utilizing as it does a consistent supply chain accounting approach.
This approach can be optionally extended to an Integrated Hybrid approach to deep dive for more specific data to iteratively refine the initial Spend Analysis results, and further inform the deployment of interventions i.e. from the big business information provided by the Spend Analysis phase.
Figure 3 visually represents this approach of a combined top-down and bottom-up Hybrid approach, i.e. the big picture - complete ‘system boundary’ from Spend Analysis, with specific primary data points from identified ‘hot-spot’ suppliers, materials, services.
- ‘Best of both’ Top Down & Bottom Up
In short, VitalMetrics’ 2-phase approach can be likened to figure drawing, as seen in Figure 4. It is essential for a good figure drawing to capture the main characteristics and proportion of a figure (Spend Analysis) before elaborating on any particular details (Hybrid Approach). Capturing the main characteristics and proportions also helps prioritize which parts should be further elaborated on. Without such prioritization, too much time is often wasted on elaborating unnecessary details, while the drawing loses overall proportionality, and ends up looking “wrong”