Nestle: When Endangered Orangutans Get in the Way of Your Supply Chain

Being accosted by Greenpeace activists on the streets of Chicago, who proselytize and beg for donations, is not my idea of a good time -- nor does it give me a good impression of the Acorn of the environment. It appears that Greenpeace is doing good (or bad, depending on your perspective) things when it comes to policing anti-environmental behavior in company supply chains. For example, chasing down palm oil suppliers that endanger the environment of orangutans as part of broader "rainforest destruction," or so they claim. Still, like it or not, companies will increasingly have to watch out for the supply chain green police just as Nestle recently did, when it "stopped buying palm oil from Indonesia's Sinar Mas due to concerns about rainforest destruction, following a similar move by consumer goods firm Unilever," the above-linked Reuters story reports.

It's clear that Reuters didn’t want to engage in a PR battle with Greenpeace, as the dispatch reports that the activist group "alleges that Sinar Mas, Indonesia's biggest palm oil producer and the second biggest in the world, has been responsible for widespread deforestation and peatland clearance, practices which release vast amounts of carbon dioxide." Whether this statement is entirely, partially or not true at all is not the point when it comes to suppliers damaging a company’s reputation. Perception is reality. But had Nestle or Unilever invested in more aggressive supply chain audit, risk management, and performance management programs, they might have been in a better position to confront and dispute Greenpeace’s claims, or take preemptive action before the self-appointed green police took their CSR jihad to the media.

Increasingly, one of the best arguments for investing in supply chain risk management programs in developing markets that put rigorous qualification and audit processes at the core is that they can serve as a strong defense when it comes to countering claims. Given that Nestle "has said it aims to only use palm oil that is certified as sustainable by 2015," it's clear they were not going against current policy by working with Sinar Mas. But if they had a better defense, forming an argument that they were developing their supplier and showing them a path to sustainability -- and had quantitative supply risk management proof of this effort -- chances are this story never would have made the headlines in anything but a positive light.

Jason Busch

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