Ford Beyond Four Walls

“We realize that we have influence beyond our four walls and that any challenges or opportunities we have related to energy or greenhouse gas (GHG) emission reductions extend to our supply chain as well.”

– Sherry Mueller, Supply Chain Sustainability, Environmental Program Lead, Ford Motor Company

Ford Motor Company, an automaker operating in over sixty countries with up to ten levels of suppliers in its supply chain, has emerged in the past decade as a leader in sustainable supply chain management. With over $100 billion in global spend to thousands of both production and indirect suppliers, Ford’s carbon footprint extends well beyond its own facilities and operations.

In 2003, Ford was the first automaker to establish a code of conduct for human rights, working conditions, environmental stewardship, and corporate social responsibility (CSR) for both its own operations and the operations of its suppliers. By 2007, the code was formalized in a policy letter, “Policy Letter 24,” a significant designation as one of only twenty-five policy letters created in Ford’s113-year history. With commitment from the highest levels, Ford’s global Supply Chain Sustainability team has been able to improve the environmental management systems and overall environmental sustainability of its supply chain through participation in the CDP-Supply Chain program and the creation of the Partnership for A Cleaner Environment (PACE) supplier program.

Ford joined the CDP Supply Chain Program in 2010 to ensure that its commitment to environmental stewardship was also reflected in the actions and efforts of its key suppliers. Since joining CDP, Ford has gradually increased the number of suppliers surveyed from just 35 to 250, representing about 80% of production spend. As it would be impractical for Ford to attempt to survey all suppliers, Ford initially focused on their Aligned Business Framework (ABF) suppliers, its most strategic suppliers, and have added additional suppliers to the CDP request each year, selecting suppliers based on industry data about typical energy use and water consumption and the suppliers’ geographical locations.

CDP and Ford alike operate under the assumption that if the data is measured and monitored, in this case through CDP’s supplier questionnaires, action to manage GHG emissions can be taken more effectively. CDP’s climate change supply chain questionnaire solicits quantitative and qualitative information about suppliers’ management of climate risks and GHG emissions. With the growing trend of companies prioritizing environmental accountability, one of the greatest benefits of adopting CDP’s uniform questionnaire is the ability for suppliers to report to multiple customers with a single form. This reduces the time and cost of answering customers’ individualized requests. Ford has an above-average response rate compared to other members of the CDP Supply Chain Program and Sherry Mueller, Environmental Program Lead at Ford, attributed Ford’s exceptional response rates (more than 80% of suppliers who were asked to complete the questionnaires voluntarily did so) to the additional support it provides to its suppliers:

“We provide them with a frequently asked questions document and we offer two webinars each year, one for the climate change questionnaire and one for the water questionnaire. We provide guidance about what questions are the key ones for Ford and we also provide our technical expertise. For example, if suppliers are having trouble with calculating their GHG emissions or if they aren't sure what data is requested, we can provide them with assistance. We send a few reminders to respond to our request by the deadline but we are not trying to flood their email inbox.We are aware that other customers as well as CDP are sending them reminder notices... ”

Once Ford understood the scope of GHG emissions from the automotive supply chain, they went on to launch the PACE program in 2014 to improve supplier capabilities and facilitate continued emissions reductions. Mary Wroten, Senior Manager of Ford’s Global Supply Chain Sustainability Program, explained, “Once we started evaluating our suppliers’ footprint, we realized that we needed to do something to reduce it.” Ford found that some of its suppliers lacked the resources to develop their own best practices list for GHG emission reductions opportunities. The PACE program was therefore created to help suppliers reduce their emissions by sharing Ford’s experience and expertise, “At a company level, we have taken such aggressive action to reduce our global environmental footprint that we wanted to share those lessons learned with our suppliers.” In addition to receiving best practices and the PACE Reporting Tool, a spreadsheet-based roadmap planner, suppliers are encouraged to share the resources provided with their tier suppliers. Ford has committed its own resources to teaching its suppliers and anticipates that PACE suppliers will be better equipped to accurately and more completely respond to the annual CDP questionnaires.

ABF suppliers with the largest GHG footprint and/or highest water use were invited to participate in the PACE program. “We wanted our efforts to be very targeted because we are looking to leverage and build on our existing supplier relationships while making the largest reductions to our collective footprint,” explained Mueller. Of Ford’s 107 ABF production and indirect suppliers, twenty-five of them representing a total of 800 manufacturing sites in 41 countries are participating in the PACE program. “It is a two-way street,” Wroten added, “We share the leading practices with the suppliers and then they develop a reduction target and report annually their progress. ”

Ford’s approach to supply chain management centers on strong supplier relationships, engaging and educating the most strategic suppliers, and developing a shared commitment to emission reductions. Wroten observed, “We are teaching [our suppliers] and bringing them along on this environmental journey, because we know there are only so many natural resources on this Earth. If we don’t take action today, some of the regions where our suppliers operate may face resource challenges within the next five years.” This sense of urgency and Ford’s ambitious 2020 goals have significant implications for how Ford does business and maintains operations. Ford views supply chain management as a continuum, continually adding new suppliers to its portfolio, and passing on its expertise. Ford built its supply chain management program from the ground up, starting small and expanding upon success. As a final piece of advice, Wroten suggests, “Commitment has to be at the highest levels in the company and be driven throughout the entire organization. Everyone should have a piece of sustainability in their daily lives.”