5.1 Supply chain sustainability performance measurement criteria

Supply chain sustainability performance measurement criteria are the measurable aspects of environmental and social performance that an organisation uses to judge how sustainable its supply chain is, and whether its sustainability initiatives are working. Each criterion is measured through indicators, which need a clear definition, a unit of measurement, a data source, a baseline, a target and a reporting period. Without agreed criteria, claims of improvement cannot be checked.

Performance is usually expressed in two ways: absolute figures (for example total litres of water used in a year) and intensity figures, which relate the impact to the level of activity (for example litres of water per tonne of product or kWh per pallet handled). Intensity figures allow fair comparison between periods, sites and suppliers of different sizes. Data comes from the organisation's own meters, invoices and records, and from suppliers through questionnaires, contract reports and audits.

5.1.1 Water footprint

A water footprint is the total volume of fresh water used, directly and indirectly, to produce a product or service, or to run an organisation's operations and supply chain. Direct water use is water used at the organisation's own sites, for example for cleaning, cooling and sanitation in warehouses and factories. Indirect water use is the water used by suppliers to grow, process and make the goods the organisation buys, which for agricultural products is often much larger than direct use.

Components of the water footprint

• Blue water footprint: surface and groundwater (from rivers, lakes, boreholes and piped supply) consumed and not returned to the same source.
• Green water footprint: rainwater stored in the soil and used by crops and plants, important for agricultural supply chains such as tea, coffee, horticulture and maize.
• Grey water footprint: the volume of fresh water needed to dilute pollutants discharged in wastewater to acceptable water quality levels.

Measuring the water footprint

Direct use is measured from water meters and utility bills, and indirect use from supplier data or published product water footprint figures. ISO 14046 gives principles and requirements for water footprint assessment. A useful indicator is water intensity:

Water intensity = total water used ÷ units of output

Example: a juice processing plant used 18,000 m³ of water in a quarter and produced 6,000 tonnes of juice.

Water intensity = 18,000 m³ ÷ 6,000 t = 3 m³ per tonne

If the next quarter's intensity falls to 2.7 m³ per tonne, water efficiency has improved by (3 − 2.7) ÷ 3 × 100 = 10%.

Why water footprint matters to procurement

• Water scarcity in sourcing areas can threaten the supply of agricultural raw materials.
• Suppliers that pollute water sources face regulatory action and community conflict, which can interrupt supply.
• Customers increasingly ask for evidence of responsible water management in supply chains.

5.1.2 Energy footprint

An energy footprint is the total amount of energy consumed across the supply chain activities of an organisation or in the life cycle of a product: electricity, fuels such as diesel, petrol and liquefied petroleum gas, and other energy sources used in production, storage, transport and distribution. Energy use drives operating costs and, where it comes from fossil fuels, greenhouse gas emissions, so it is an important sustainability criterion.

Elements measured

• Electricity use: in warehouses, cold rooms, offices and production areas, measured in kilowatt-hours (kWh) from meters and bills.
• Fuel use: by delivery trucks, forklifts and generators, measured in litres from fuel cards, fuel issue records and logbooks.
• Share of renewable energy: the percentage of energy from sources such as solar, wind, geothermal and hydro power.
• Energy embedded in purchased goods: reported by suppliers or estimated, for energy-intensive goods such as cement, steel and glass.

Energy indicators

Common indicators include kWh per pallet stored or handled, litres of fuel per 100 km, litres of fuel per tonne delivered and the percentage of renewable energy in total energy use.

Example: a distribution warehouse used 12,000 kWh of electricity in a month and handled 4,000 pallets.

Energy intensity = 12,000 kWh ÷ 4,000 pallets = 3 kWh per pallet

5.1.3 Social accountability

Social accountability measures how well the organisation and its suppliers respect the rights and wellbeing of workers, communities and other people affected by the supply chain, and how openly they account for their social performance. It covers the social pillar of sustainability and is measured through audits, worker interviews, records and grievance data. SA8000 is a well-known international social accountability standard for workplaces, covering child labour, forced labour, health and safety, freedom of association, discrimination, discipline, working hours, remuneration and management systems.

Social accountability indicators

• Supplier code of conduct coverage: percentage of suppliers, or of spend, covered by a signed code of conduct.
• Social audit coverage and results: number of high-risk suppliers audited and the number of non-conformities found and closed.
• Wages and working hours: percentage of sampled workers paid at least the legal minimum wage and working within legal hours.
• Health and safety: number of lost-time injuries per 1,000,000 hours worked at the organisation and key contractors.
• Child and forced labour: cases identified and remedied.
• Grievances: number of complaints from workers and communities received and resolved.
• Supplier diversity: percentage of spend with enterprises owned by women, youth and persons with disabilities, and with local suppliers.

Example: a supplier recorded 3 lost-time injuries in a year in which its workers worked 600,000 hours. Lost-time injury frequency rate = 3 × 1,000,000 ÷ 600,000 = 5 injuries per million hours worked.

5.1.4 Emissions measurements

Emissions measurements quantify the greenhouse gases and other air pollutants released by supply chain activities. Greenhouse gases are normally reported in tonnes of carbon dioxide equivalent (tCO₂e), which converts gases such as methane and nitrous oxide into the amount of carbon dioxide with the same warming effect. Other air pollutants, such as particulate matter, sulphur dioxide and nitrogen oxides from vehicles, generators and boilers, are measured where they affect health and compliance.

Scopes of greenhouse gas emissions

The Greenhouse Gas Protocol, a widely used accounting framework, groups emissions into three scopes:

• Scope 1: direct emissions from sources the organisation owns or controls, such as its own delivery trucks, forklifts, generators and boilers.
• Scope 2: indirect emissions from the generation of purchased electricity, steam or heat used by the organisation.
• Scope 3: all other indirect emissions in the value chain, including purchased goods and services, transport by contracted hauliers, business travel, waste and the use and disposal of sold products. For many organisations, Scope 3 is the largest share, which is why procurement is central to emissions management.

Calculating emissions

Emissions are usually estimated from activity data and an emission factor:

Emissions = activity data × emission factor

The activity data is the quantity of fuel, electricity or goods; the emission factor is taken from a recognised published source, such as national or international emission factor databases, and stated in the report.

Example: a company's trucks used 20,000 litres of diesel in a year. Assume the emission factor from the organisation's chosen source is 2.7 kg CO₂e per litre (an assumed figure for this exercise).

Emissions = 20,000 litres × 2.7 kg CO₂e per litre = 54,000 kg CO₂e = 54 tCO₂e

ISO 14064 gives requirements for quantifying and reporting greenhouse gas emissions at organisation level.

5.1.5 Noise measurements

Noise measurements assess the sound levels generated by supply chain operations, such as loading bays, forklifts, generators, compressors, production machinery and delivery traffic. Excessive noise damages workers' hearing, causes stress and accidents, and disturbs neighbouring communities, especially where warehouses or depots operate at night. Noise is therefore both a social and an environmental criterion.

How noise is measured

• Unit: sound level is measured in decibels, usually A-weighted, written dB(A), which reflects how the human ear responds to sound. The scale is logarithmic, so an increase of about 3 dB(A) corresponds to a doubling of sound energy.
• Instruments: a sound level meter measures noise at a point in time, while a noise dosimeter, worn by a worker, measures personal exposure over a shift.
• Workplace exposure: the average level over an eight-hour working day is compared with the limits set in occupational safety and health rules.
• Boundary noise: measurements at the site boundary, during the day and at night, are compared with the environmental noise limits set under the Environmental Management and Co-ordination Act regulations and any permit conditions.

Noise indicators

• Average and peak noise levels at work areas and at the site boundary.
• Percentage of workers exposed above the action level who have hearing protection and hearing checks.
• Number of noise complaints from neighbours.
• Noise level specifications met by newly purchased equipment and vehicles.

Reducing noise in the supply chain

Procurement contributes by specifying low-noise equipment, acoustic enclosures for generators and electric forklifts, and by scheduling deliveries to reduce night-time disturbance.