The urgent need to drive sustainability in supply chains
Economic pressures have not discouraged people from wanting to live sustainably, but it is increasingly clear that we can’t buy our way out of the climate and social crises. Businesses must be socially and environmentally sustainable not just because it is the right thing to do but because their long-term economic success depends on it.
While numerous businesses are operationalizing sustainability, many have not even started. Common hurdles include understanding the sustainability requirements and then applying in complex supply chains; within organisations and teams with different sustainability priorities. Unsurprisingly, these companies struggle to communicate effectively with suppliers – a lost opportunity when at least 80% of an FMCG brand’s environmental impact lies in its supply chain.
Clear sustainability requirements drive supply chain improvements
One way that organizations can improve sustainability is by applying external standards. While there are hundreds of standards that add complexity and create inertia, inspiration can be taken from the food industry, which aligned on food safety standards after a series of scandals. The result was GFSI benchmarked certification, a globally recognized precompetitive requirement that continues to improve food safety worldwide. Scandals involving treatment of workers and pollution incidents have influenced the international consumer goods community to agree a social benchmark via the, with an environmental benchmark underway.
Organizations must work faster to implement recognized standards and good practices well in advance of 2030 and contribute to the SDGs. However, competing internal priorities mean that suppliers are left struggling to understand and implement requirements.
What businesses can do to drive improvements in supply chain sustainability?
It’s hard work communicating sustainability requirements and encouraging suppliers to meet them. Having driven product and supplier standards for two global brands, I’ve negotiated demands for sustainability. The pressures of daily business often led purchasing teams to demand we prioritise the requirements: “Last month the quality team asked my suppliers for their food safety certificates and today the sustainability social team asked for the social audit. Which do you want first?” Saying “both and now” was not practical!
Internal decision makers must be equipped to manage evolving standards and to support their suppliers in a spirit of continuous improvement. Progress towards impact happens when teams work together, prioritise issues, engage suppliers, and use data to make and monitor improvements. Specifically, when:
- Procurement and sustainability teams align on supplier requirements.
Teams responsible for safety, quality, environment and social aspects must collaborate on requirements and deliver a unified voice to suppliers with procurement.
- SMART goals are agreed up front and the desired impacts are prioritised.
For example, by 2025 increase the number of suppliers by 50% who operate according to recognised standards or good practices, producing safe products, without polluting and while guaranteeing workers’ rights. A plan is needed to help suppliers with different capabilities reach the requirements.
- Requirements are transparent and embedded into existing systems and processes.
A sustainable sourcing policy consolidates requirements making it easier to communicate within the business and with suppliers. Additional modules can be added as requirements evolve, such as no deforestation for commodities like soy. The policy could be online and linked to a specification or an RFI, or in a comprehensive supplier manual that includes everything from logistics requirements to payment terms. Procurement teams need to be trained and make sustainability requirements part of the negotiating process.
- Suppliers are helped to understand and implement sustainability requirements.
Simply talking with suppliers - finding out what they are already doing and making them aware of the requirements – is good practice. However, implementation of sustainability standards takes long term commitment, resources and communication. Tracking and reporting developments and updating multiple teams with progress is essential.
- Collaboration moves online and is real time.
Businesses with a hundred suppliers or more should abandon emails and excel spreadsheets and use an online portal. These collaborative systems significantly reduce the administrative burden and streamline internal communications and with suppliers. Scorecards showing progress towards multiple sustainability goals are potent tools that gain board support and drive action.
- There’s no time to lose
Hurtling towards 2030 with soaring carbon emissions, diminishing biodiversity and more people falling into slavery, society expect businesses to act and be transparent on all aspects of sustainability. Supply chain activities must be prioritized, which means aligning demands, engaging suppliers and ensuring seamless data collection to make and track improvements.
Just get started
Are you just getting started, but unsure which issues to tackle first? Supply Pilot have developed The Kickstart Assessment, a simple supplier questionnaire will enable you to identify high impact projects and inform strategy going forward. The assessment is completed in just 8 weeks, with industry leading supplier participation levels and response rates.
For businesses wanting to step up their sustainability efforts, Supply Pilot provide solutions to assist businesses in optimizing their supply chain by aligning with their business strategy, gathering precise supplier data, and supporting suppliers during transitions, resulting in reduced costs, increased efficiency, and improved competitive advantage.
Tackling our global challenges requires substantial efforts between and within organizations, and supply chains. The tools are available and if we all act now, we will shape a better future.