THESIS Index assesses supply chain sustainability

The index allows brands and manufacturers to understand the sustainability story of their products, to quickly identify ways to improve, and to communicate that story to retailers, customers, investors, and consumers.

If you’re a sustainably minded consumer, you want to choose products that are sourced and manufactured responsibly. But how do you peek into a product’s supply chain to get that information? Professor of Supply Chain Management Kevin Dooley is the chief scientist of The Sustainability Consortium (TSC), and even he struggles with the task. “I was looking for a sustainable T-shirt the other day,” he says, “and I had a heck of a time finding any sustainability-related information about the different products.”

Now, multiply that frustration by the tens of thousands. Walmart, which sells upwards of 50,000 individual products, also found itself struggling with making sustainable choices. That challenge led to the creation of TSC, which started 11 years ago as a joint venture between Arizona State University and the University of Arkansas to help Walmart develop an index that would measure the sustainability of different consumer products it was selling. In 2019, the index was rebranded as THESIS, which stands for The Sustainability Insight System.

After launching with Walmart, TSC grew quickly and now includes 45 of the top 100 consumer goods manufacturers, retailers like Kroger and Amazon, as well as NGOs, academic institutions, and governments. These companies, plus the 1,500 suppliers who use THESIS, represent almost $1 trillion in annual retail sales. TSC also added a key partner, Wageningen University in the Netherlands, Europe's top agricultural University.

Assessing and discussing sustainability

Depending on the product type — fruit vs. refrigerators vs. running shoes — companies answer about 15 questions regarding their response to environmental and social issues that exist across their supply chain. Topics include labor rights, worker health and safety, greenhouse gas emissions, energy efficiency, water use, wastewater management, chemical selection, fragrance safety, ingredient disclosure, and packaging design.

“We use scientific evidence to determine what is relevant to each category and to identify what we call hotspots,” explains Dooley about the survey’s methodology. Energy efficiency is going to be a hot sport for products that use electricity, for example. So you’ll find that manufacturers making products that have attributes like an Energy Star certification will score higher. For those making food products, a lot of the hotspots are things that happen on the farm, he says. A company will get a higher score if its farming suppliers are using precision agriculture to minimize how much water or fertilizer they are using ‐ or even if they simply know how much water or fertilizer they are using.

If a company finds it’s falling short in one or more areas, TSC is there to help with training, resources, and a group of certified suppliers who serve as consultants.

In addition to identifying and improving issues, one of the biggest benefits coming out of THESIS is that both retailers and manufacturers are talking about sustainability more. “Many manufacturers haven’t engaged their suppliers about sustainability issues before,” Dooley says. “There typically hasn't been much of a conversation, so that's the first step.” Once everyone in the supply chain knows that sustainability will be an important part of how performance is measured, data sharing will be more commonplace and sustainability will become a predictable part of the decision-making process for retailers.

The thing we’ve learned about sustainability is the same thing we learned 30 years ago about quality. If you want an organization to focus on those things, it has to be part of everyday business. It can't be anything different or special.

– Kevin Dooley, professor of supply chain management

Challenges in the chain

When you’re talking about green, not everything is black and white. Dooley says there are systemic challenges to supply chain transparency that can prevent retailers — and individual consumers — from seeing a product’s full sustainability story.

On one end, consider the distributor who buys from a farm to provide private-brand fruits and vegetables to a retailer like Walmart. In this case, there’s a direct contractual relationship with the farm and there are few or no distributors or other manufacturers in between. That supply chain is pretty straightforward, Dooley says. “You know who they are and if you need to know what they are doing about irrigation, you can ask them.” Plus, food products that might be susceptible to diseases like produce have traceability as well as federal laws regarding food safety, which is another reason why they tend to score well on the index.

On the other hand, consider a frozen pizza manufacturer. That much longer supply chain includes tomatoes, cheese, sausage, wheat, and other ingredients. In the case of the grain for the crust, for example, they may only know what country it’s coming from. In that case, Dooley explains, you would have no idea who is growing the grain or what they’re doing from a sustainability or social perspective.

Gaining greater transparency will take time, but technologies like blockchain could help create traceability.

Guiding consumer choices

Let’s get back to Dooley’s search for a sustainable T-shirt. He says when TSC first started, the original vision was to put some type of simple-to-understand rating system on product packages based on quantitative indicators like the product’s carbon footprint or water footprint. That turned out to be an overwhelming project. “At the time, the market said loudly ‘We’re not interested in this’ and the science said ‘We're not ready to do this,’ especially at an individual SKU level,” Dooley says.

At TSC, Dooley says they continue to think about how to expand their voice to different audiences, including consumers. “There are still very large gaps in the information that consumers have to make more sustainable choices if they want to,” he says. “It's great if a refrigerator has ENERGY STAR certification or for a food product to be labeled as organic, but if you’re buying a lamp or a kid’s toy, there is a lack of information for consumers who want to purchase green.”

TSC recognizes that students — from high school to the university level — are in the sweet spot for its message. “You have an eight- to a 10-year period where those individuals are forming their economic behavior patterns, which includes consumption,” Dooley says.

So, we think if you want to target an audience to educate them on how to more sustainably consume, that if you can get this information into academic programs in various ways that could be impactful.

Dooley also believes that as a university-led initiative, TSC enjoys a level of trust it might not have as a purely commercial entity. “Universities should be proud of the fact that companies consider academic institutions as an honest broker to bring fact- and science-based arguments, and see them as a safe place to engage in debate and controversial issues.”

What the future holds

In addition to technology that improves transparency, Dooley sees some supply chain changes on the horizon—a few potentially given a boost by the disruptions caused by COVID-19. One is a rise in automation replacing labor. For companies that have problems with worker health and safety, whether due to a pandemic or other issues, Dooley is afraid that they may turn to robotics rather than trying to improve their safeguarding of human workers.

Dooley adds that the recent environmental benefits resulting from stay-at-home mandates could drive demand for sustainable products.

I don't think it’s inconsequential that people felt good experiencing cleaner air, less noise, and less traffic. I think it showed people what's possible in the future, and we also showed ourselves as a society that we could change our behavior overnight when we need to.

So, what’s next for THESIS itself? At the top of the list is improving the index to create more business value. “No one is doing this for tree-hugging reasons,” Dooley says. “Businesses are focusing on sustainability not just because of pressures, but also for opportunities. Companies have lots of options for measuring and reporting their sustainability performance. We have to continue to improve our product and services so we stay top-of-mind to help companies make better decisions.”