A Conversation with Andy Pennoni, Assistant Director, Quality Assurance Compliance/Risk & Sustainability, New Chapter, Inc.
New Chapter Inc. is a Vermont-based vitamin and supplement company with a deeply held mission to honor the wisdom of nature and promote healing. New Chapter works primarily through contract manufacturers and suppliers. Because they are unable to directly verify down the supply chain, they worked with NSF to develop an assessment tool. This tool’s goals were to ensure that their business partners, from manufacturing to sourcing, adhere to the mission, standards, and values of New Chapter. Andy Pennoni outlined the process below.
“At New Chapter we make healing products. We truly believe that a product intended to heal needs to be a healing force in all directions, from the consumer to the field where we’re growing our raw materials.” — Andy Pennoni
“We weren’t in the dark by ourselves on this. We didn’t want to waste a lot of time, redeveloping wheels and frameworks that NSF already had or was interested in creating.” — Andy Pennoni
New Chapter is a small business partner with many contract manufacturers and suppliers. They were asking these small businesses to do additional work so they wanted to be tactful in their approach. They thought a lot about how to get across the message that they wanted their suppliers to seriously consider taking steps to become more socially responsible for the long-term.
NC sought NSF’s help because:
NC identified and assessed existing tools. These included SMETA 4 pillar audit, Sustainability Consortium product tool kits, B Corps metrics. No one assessment tool captured both the social and environmental goals they were seeking and so they worked with NSF to develop their own.
NC divided the information captured from these other audits into five macro categories. Within those, they identified 23 key performance indicators to develop the body of their assessment. The scope of content ranged from fair wages, working conditions, women’s rights and willful employment to Scope 1 and 2 emission tracking, plus waste and energy metrics. Next, they formulated questions to elicit the data they wanted to measure.
NC & NSF tailored the assessment to accurately capture the desired information at each level of supplier:
Tier I: Semi-finished, Finished goods suppliers
Tier II: Parts/value added suppliers
Tier III: Parts suppliers
Not all issues are relevant for all suppliers and so they edited the questions slightly to elicit the information related to the risks associated with each level of the supply chain—to make sure they were asking the right suppliers the right question
“We let them know that this was something New Chapter wanted them to do, but they really should want to do it as well. We told them, ‘We’re here to help you through it, to get your feet wet.’ We learned from a few suppliers that they had been trying for a couple of years to do this work, but they didn’t know how. And they were thankful for our process and that we had done a lot of the background work.” — Andy Pennoni
NC piloted each phase with companies that were 80% spend or more. These are considered a significant supplier in B Corp metrics and so this information could potentially count positively toward their next B Corps assessment, and therefore, their impact in the world.
With NSF on site, they had onboarding meetings about the program. A key learning was to schedule assessment-related meetings during already scheduled meetings, as much as possible, to be respectful of everyone’s time.
The feedback they received included:
NC did not set a fixed timeline for completing the assessment because:
NC rolled out Phase One with all Tier I contract manufacturers in the first year. At the beginning of the second year, they are beginning to pilot Phase Two with Tier I and to roll out Phase One with Tier II. NC gives each supplier around 30 days to complete each Phase, making sure that they have enough time. They asked each company what would help them do the assessment in the most efficient and effective way so that each company could provide the most accurate information.
“One of the challenges in this industry is that not enough players talk openly about key issues. Some organizations are beginning to team up but it’s not enough. We all replicate the same work and advances are slow. Eventually we want to see if we can work with NSF to use this as a published assessment tool to help address these challenges.” – Andy Pennoni
Though there were no real surprises from Phase I with Tier I suppliers, NC did identify opportunities for improvement with all of their contract manufacturers. NC is looking for creative ways to encourage the suppliers to takes steps, perhaps paying a premium for material or somehow provide a business incentive, so that it isn’t just that NC has identified a hole that the supplier now needs to figure out how to fill.
For NC, there was no true high risk to implement Tier I. NC began with Tier I because most of these companies hold the Tier II and III relationships; it was important for them to become familiar with the program. With these Tier II & III relationships, they are entering regions including India and China, which are very high risk historically. Their first-hand experience with the assessments will be valuable in more challenging environments.
NSF identified some patterns with suppliers to watch out for such as a supplier who is not willing to give substantiated data or is only answering every other question. New Chapter has reserved the right for on-site visits, but as cost is always an issue, they will only do so if it concerned a key ingredient or is something about which they felt very strongly.
If during Phase I, a company answers ‘yes’ to the question: Do you track Scope one and two emissions?” Phase II questions will ask for more specific information such as, “How long have you been tracking emissions?” Or it may ask the supplier to submit proof, make a report, or provide a tracking sheet for verification.
“Use the expertise that’s out there. People know what they’re talking about so you listen to them. This isn’t something you need to try to do on your own.” — Andy Pennoni
NSF significantly shaped the rollout. Their expertise included how NC needed to present the assessment to be taken seriously and to have people want to go down this path with us.
Suppliers with whom NC they already had long-term engagement were far more willing to participate, being more receptive and responsive to the program.
As Andy said,
“We really want to spend the time to work with our suppliers and figure out the best approach to addressing the issues that arise. We’re hoping that a real friendship develops out of having this sort of hand holding and the partnership can become stronger.
“When you work closely with suppliers, ideally you start to get in these situations where you begin to help each other out. Let’s say a supplier is having a bad year one year, and prices go up. We can absorb that for a few years. And that’s great, you know, we’ve gone through this, we trust them. We know they do have a good supply chain and we’re willing to do that. Then maybe there are years where we’re not doing so well. And we’re like, Hey, can you come down costs on X, Y and Z? They might be willing to do that.
So, there is business advantage to really taking this slow and wanting to stay engaged. I keep saying that, but I can’t stress that enough. The more you implement this assessment as a partnership, the further you are going to get.”
“We just know that it’s a better way of doing business. Cost is an issue for everybody these days, but to just cast the supplier to the wayside, because this new guy comes on the market and he’s got a better price—even if it’s the same material and has the same potency markers and is cheaper, it doesn’t always mean it’s better.
“We’ve always been very selective with our partners and look for those who obviously, first and foremost can meet our business needs, but who are also somewhat mission aligned and share our internal values. Phase I really reinforced the importance of why these longterm relationships can be beneficial.”