New Chapter Assessment Tool

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.

Drivers for Developing the Assessment Tool

“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

Ensure New Chapter’s manufacturing suppliers were being responsible about sourcing and with whom those suppliers, in turn, engaged with as business partners. In particular they wanted to build on NC’s long-term work in environmental performance to also include benchmarks in a company’s social responsibility.
B Corps Certification: In their 2017 audit, NC scored 104, breaking the 100-mark for the first time. One area identified to improve their performance, and thus their score, was in supply chain management and transparency.
Historic mission as an industry leader: NC was the first supplement company to have certified organic ingredients, non-GMO verification, and one of the first to be Certified B Corps. They wanted to leverage their industry leadership and encourage other brands and companies join the socially responsible space.
Business decisions and consequences: They want to be aware of everything going on and potential risks in their supply network so they won’t be blindsided.

Overall Process

Develop system to collect the data.
Analyze that data, drill in, and identify NC’s benchmarks.
Use this information to identify opportunities for suppliers to close gaps towards socially responsible choices.

Getting NSF Involved

“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:

NSF is one of most reputable third-party auditors and certifying agencies in the consumer good industry;
NC had an existing relationship with NSF as NC’s certifier for GMP compliance and gluten-free certification;
NSF has a sustainability consulting arm so this was also an area of their expertise.

Developing the Assessment:

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

Implementing the Assessment

“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

Making the Case to Suppliers:

NC spent months rolling out the program to their suppliers, explaining why it was important to NC’s business and their mission as a socially responsible business.
NC explained that their retail partners and their consumers were demanding more transparency about business practices and sourcing. As part of this growing movement, they wanted to encourage their suppliers to begin measuring their data so they could be ready for future inquiries. They offered to walk their suppliers through the assessment process so that once complete, they would be prepared with the information when asked by other companies. From a risk perspective, NC explained that having this information for their own companies and about their suppliers would help anticipate potential issues.
NC plans to make the assessment available to other companies to encourage more companies to begin to want this type of assessment.

Assessment Process

Overview of Phases

Phase One – Includes yes/no questions to gauge if any work was being done in any of the five main categories. Used as a benchmark for each company.
Phase Two: Goes deeper, asks for more quantitative and qualitative measurements and more document substantiation.
Phase Three: Asks whether they are setting goals and targets. Asks what progress is being made toward those goals and targets.

Pilot program

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.

Onboarding toolkit included

The background of the program and NC’s motivation to do it.
Why NC felt it was important to the supplier and why NC chose to pilot with this particular company.
Why NC involved NSF.
Logistics: project timelines, what they could expect, who they would be dealing with day to day, points of contact for the program, etc.

NSF’s role

Significant amounts of behind the scenes work was done by NSF, including drafting and developing presentation materials.
Administered the assessment in order to provide third party confidentiality for suppliers who didn’t want to share certain information (names, etc.) directly with NC.
NC and NSF then reviewed the supplier information and identified opportunities for improvement.

Follow-up survey

Conducted a post-assessment survey to review the technical aspects of the process, including what worked, what didn’t work, etc.

The feedback they received included:

Too much jargon. Suppliers needed things spelled out more clearly and in layman’s terms. It is important that terms are understood because if they aren’t, you won’t get the information you are looking for.
Feedback about the timing.
NC & NSF realized there were basic things they should have thought about that were overlooked due to administering a multi-faceted project. They agreed that doing a pilot was very valuable.

Assessment Timeline

NC did not set a fixed timeline for completing the assessment because:

One person was managing the entire process.
NC chose to go step-by-step to build engagement and trust with their suppliers, easing them into the process of reporting this type of information. Because the process was new for many of their suppliers, NC didn’t want it to overwhelm them.
NC is the only company using this tool at this time. Because they plan to make it available to other organizations, they want to iron out wrinkles before doing so.

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

Findings

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.

Tier II and III

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.

Verification

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.

Lessons Learned

Use the Expertise that Exists

“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.

Reinforcing Values of Long Term Relationships

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.”