B&Q: Lessons learned in supplier auditing

Retailer B&Q was one of the first British businesses to launch an environmental purchasing programme, and has been through a steep learning curve with its initial round of supplier questionnaires and audits. Mistakes have been made, but the outcome is a more sophisticated method of reducing B&Q's environmental exposure and increasing opportunities by involving both its buyers and suppliers more fully in the process.

Many companies have taken measures to improve their in-house environmental performance, but a select group, including B&Q, British Telecom, Body Shop, IBM UK and Scott, have taken the process a step further by seeking to reduce the environmental impact of the goods, components and services they buy in. Pressures exerted up the supply chain by these pioneers have led to a proliferation of approaches to environmental purchasing. The problems these are causing have been addressed in guidelines issued in June by Business in the Environment (ENDS Report 220, p 22 ).

Environmental award
Assessing the environmental performance of suppliers by means of questionnaires and sometimes environmental audits has formed the basis of these firms' approaches. One or two, including B&Q, went one stage further by incorporating environmental improvements into their terms of trading (ENDS Report 203, pp 12-15). B&Q's programme won it public recognition in June when it won the Royal Society of Arts' annual environmental management award for a "very substantial initiative by a market leader."

B&Q's programme was launched over a year ago at a high-profile supplier conference. The firm's 450 suppliers were then sent a demanding 40-page questionnaire which could only be completed if they had conducted an environmental audit of their operations and undertaken life-cycle assessments of their products. Each supplier was also told to have an environmental policy and action plan. Backing up these demands was a warning that one in five of the returned questionnaires would be checked by site visits by Dr Alan Knight, the group's Environmental Policy Co-ordinator, and its consultants Aspinwall & Co.

Slow supplier response
The information collected on the environmental performance of each supplier and the commitment it is showing to environmental improvements is kept on a database. Supplier reports are then compiled and given to B&Q's buyers so that they can incorporate environmental factors into their purchasing decisions. Copies are also given to suppliers to prompt action.

B&Q attempted to grade its suppliers on a scale of A-D, and this formed the basis of each report. However, by November 1992, 37% had not returned the questionnaire and were given a fail mark. Another 17% were placed in grade D, indicating very little action, while 38% gained a grade C because they had not really taken environmental management on board despite having environmental policies. Only 8% were felt to have adequate environmental management systems and to understand the environmental impacts of their operations, qualifying for a grade B. No company reached the top A grade.

The poor response rate was due in part to changes in B&Q's supplier base, with some who had dropped out of the reckoning still being on the database, while a number of new entrants had not yet received their questionnaires. Excluding these, the response rate was 87%. With subsequent chasing, only 2-3% of suppliers have not returned the questionnaire by now - and these are about to get a pretty hard time, says Dr Knight.

Despite this patchy beginning, B&Q is claiming some success in pushing its suppliers to improve their environmental management. One of its yardsticks is a recent Institute of Directors' survey which found that only 12% of the companies sampled had conducted an environmental audit (see p 6 ). For B&Q's suppliers who had returned their questionnaires the figure was 30%. Nevertheless, says Dr Knight, the figures "show just how much work there is to do."

The results also reveal which industry sectors have been first to act on environmental management. For example, paint suppliers scored reasonably well because of a historic involvement in environmental issues, particularly over solvent emissions. But hardware producers were not so advanced.

Power tool producer Bosch and light-shade manufacturer Readers (IOW) came closest to scoring an A grade. Indeed, Dr Knight believes, Readers would not have formulated its own environmental action plan and sent questionnaires to 200 of its suppliers without pressure from B&Q's purchasing policy.

Lessons learned
One of B&Q's targets was to assess the environmental performance of each supplier by the end of 1992. This has not been achieved. "What none of us appreciated at the time was what a colossal management exercise it would be," says Dr Knight.

A second delaying factor was that most of the small and medium-sized suppliers had a poor environmental understanding. "They were asked a lot of very complicated questions and they didn't actually realise the context in which those questions were asked." Many needed basic guidance and direction.

B&Q also found itself in a position where it had gathered in volumes of information but had not planned what to do next. The circle had to be closed to enable continual monitoring, feedback and improvements.

B&Q's buyers, who took the decision whether to use a supplier, were also somewhat alienated from the process. As a result, suppliers were hearing inconsistent messages from B&Q's buyers and its environmental team.

Questionnaire drawbacks"The questionnaire undoubtedly kick-started a lot of our suppliers to actually address the environment," says Dr Knight. "But it doesn't actually generate commitment." In addition, B&Q found that a completed questionnaire wasn't necessarily a good reflection of a supplier's environmental performance.

A further drawback of the questionnaire approach is that the information it provides will always be historic. When the suppliers first received one their priority was to complete and return it, and only subsequently would they consider acting on it. This, together with the administrative backlog created by sending the questionnaire to all suppliers simultaneously, meant that feedback was not being given by B&Q for up to nine months after the questionnaires were filled in.

Quicker feedback
Over the past few months, Alan Knight has been working on a more responsive system. Feedback to both suppliers and buyers is now achieved within two months. The new approach is more in tune with B&Q's more focused environmental management philosophy - "generating a supply base that is generally committed to environmental improvements so that B&Q is not exposed."

Today, suppliers are being assessed in batches with the buyers fully involved. The first two groups, garden and showroom products, have just been assessed. Hardware, building materials and tools will be reviewed in the summer, and paints and wall coverings in the autumn.

The process begins with a meeting between Dr Knight and the controller of each purchasing section to discuss the issues. This is followed by a further meeting with all the buyers in the section. Here the environmental performance of the suppliers is discussed and the buyers recommend one of three courses of action for each one.

For high risk and/or important suppliers a site visit may be recommended. Others may just be asked to attend a training seminar. The third option is for the supplier to complete a basic "yes/no" four-page questionnaire. This also has to be completed with the first two options. Two months later, the buyers are debriefed and given reports on each supplier.

Ranking supplier risks
The report begins with a list of improvements made by the supplier - "a bit of a 'feel good' factor." It then reviews the main areas where the supplier exposes B&Q to environmental liabilities or external criticism, and finally describes minor issues, such as over-packaging and whether the supplier complies with the "duty of care" regulations on waste.

Two grading systems have also replaced the previous A-D scores. The first is for the suppliers' environmental management initiatives, based on an A-F scale (see box). The second deals with the environmental sensitivity of the product range. Buyers can then immediately identify suppliers who have not acted to reduce B&Q's exposure despite producing a "sensitive" product.

The report also gives the supplier's record of involvement with B&Q's environmental programme so that buyers can identify those who have a poor excuse for claiming "we don't understand where B&Q is coming from."

Finally, a section on key opportunities is included for suppliers who have made environmental initiatives. B&Q may suggest, for example, that a plant pot supplier using recycled plastic might label the product "recycled" to encourage sales.

Cultural change
The revised process has kindled a cultural change within B&Q, Alan Knight believes. Buyers are now behind the initiative and accept the environment as their responsibility. Suppliers are also more responsive to environmental messages from buyers. The environment is "no longer a specialist project - it's mainstream. We are acting more like a team," he says.

The process is also more manageable for Dr Knight's environment unit. Where in 1992 half of his team's time was spent on adminstration, now it is only 20%, and the goal is to reduce it further to 5%. The trend is away from questionnaires towards interacting with suppliers.

Suppliers who do not meet B&Q's requirements face the ultimate sanction of being delisted. But until now B&Q "hadn't intellectually got to the level whereby we could make that value judgement," says Dr Knight. "Do we delist a supplier who has filled in a bad questionnaire, or one who hasn't filled in a questionnaire at all?"

Delisting is now a real option. B&Q's buyers will have the responsibility of ending the company's commercial relationship with suppliers posing the greatest risks, or ensuring that they come up to scratch.

Product improvements
Other than in product packaging, it is still early days for evidence of the purchasing policy to have filtered through to items on B&Q shelves, says Alan Knight. The first 18 months of the programme has concentrated on putting the environment on suppliers' agenda, but he expects to see significant changes by this time next year.

However, action has been taken on some high-profile products. Peat extracted from Sites of Special Scientific Interest has not been stocked by B&Q since the end of 1992. And timber from unknown sources will not be stocked from the end of 1993. Some additional water-based paints have been introduced, as well as a water-based woodcare range produced by Kalon. While these products were being developed well before B&Q launched its programme, "our stance has given the suppliers a mandate to put them on the shelves," says Dr Knight.

Minor changes in products are more difficult to monitor, but these are also filtering through. Readers, for example, changed a solvent-based tape used to attach canvas to the metal frames of light-shades to a water-based version.

Progress on packaging
The most obvious environmental improvements made as a result of the scheme can be seen in the packaging of products in B&Q stores. A foot-pump, for example, which was once sold in a cardboard box is now sold loose. Blister packs are being removed because they are not recyclable, and B&Q's own-brand paints are sold in metal cans rather than plastic containers because these can be recycled more easily and also contain recycled steel. Suppliers have been urged to question the need for packaging and also to discriminate in favour of water-based inks and solvent-free labels.

B&Q recognises that it is potentially a major consumer of recycled plastic, either in products such as trellis and door frames or in packaging. Between 75-95% recycled plastic is used in carrier bags and some peat products are packaged in co-extruded bags which include recycled plastic. However, some suppliers have reported difficulty in finding recycled plastic of adequate quality.

However, B&Q's target of buying solely from suppliers with environmental policies has not yet been met. The dilemma, says Dr Knight, is that "there are those suppliers who have an environmental policy and actually do sod all. Some have no policy at all but do a lot." The target is seen as too crude.

Instead, a more refined objective is being set. All suppliers will have to produce a policy that reaches a certain standard. This has yet to be agreed, but may include a list of the environmental impacts of processes and products and a demonstrable commitment to environmental improvements.

Third World challenge
Many of B&Q's products are obtained from Third World countries. New purchasing guidelines have recently been devised to cover issues considered to be more appropriate to these countries, such as health and safety and ethics. B&Q says that these need to be addressed before sophisticated environmental management systems can even be considered.

The guidelines require manufacturers to comply with relevant legislation within the country concerned, and to ensure that employees' physical well-being and health is not harmed or exposed to unacceptable risk. Companies will also be asked to provide for external monitoring of their compliance with these guidelines, although B&Q acknowledges that this will be difficult to enforce.

B&Q is most exposed on the issue of tropical timber. Ideally it would like to obtain its timber supplies from small-scale community forestry projects, and is funding research into this method in Papua New Guinea. It also stocks timber from the Ecological Trading Company, which is developing trading arrangements that are socially beneficial and environmentally sound. The result of B&Q initiatives in this area could be fair trade agreements with Third World producers.

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