A network of businesses has unveiled a way for companies to calculate the impact of their supply chains on the natural environment which it hopes will improve decision-making and inform investors.
The metric has been developed by firms including Kering, Interserve, Mars and Asda. The firms are all members of the Natural Capital Impact Group (NCIG) and the Investment Leaders Group, an international network of investors.
‘Companies are starting to realise that they’re improving their impact on the natural environment, but they have no way of measuring this. This is important for investors, who have been asking questions about this issue,’ explained Gemma Cranston, director of the natural resources security portfolio at the University of Cambridge, which convenes the NCIG.
Despite government guidance and advice for companies wanting to reduce their impact on the natural environment, an appropriate way of measuring results did not exist, she said.
The metric should help companies identify where they have sufficient information, and where there are gaps, she added.
The group has so far focused on biodiversity, since it is the most complex issue, but is planning further work on soil and water.
Luxury and sportswear clothing brand Kering is piloting the metric. Head of sustainable sourcing innovation Helen Crowley described the test as ‘ground-truthing’ the metric against existing supply chain data.
She said Kering was already using environmental profit and loss accounting to understand its impacts on natural capital, but wanted more information to measure and mitigate impacts on biodiversity: ‘We recognise that there is a lot of information in academic and conservation sectors that isn’t getting to business. We’re tapping into that information and translating it into something business can use.’
Where a company finds problems in the environmental impact of raw materials in its supply chain, it can usually engage with suppliers and influence a change in production processes, such as asking them to become certified against a standard, she said. ‘I don’t think at this stage we would consider dropping a product [where problems are identified] as we can work with other companies in the supply chain to leverage change,’ Crowley said.
The NCIG has published a working paper, which details how the metric is constructed and provides insight into the impacts of business operations on biodiversity.
