What is responsible sourcing in your view?
Sustainable sourcing is the integration of social, ethical and environmental performance factors into the process of selecting suppliers. Typically, when it comes to selecting new suppliers, it is important for businesses to make sustainability-related expectations clear during the initial engagements. Procurement teams should set minimum eligibility conditions that prospective suppliers must provide some indicator of their engagement in sustainability so they may gain an understanding of sustainability performance.
How important is transparency?
Procurement needs to have insight into the maturity of the supplier’s management system across key sustainability topics including environment, labour and human rights, ethics and sustainable procurement, as well as their willingness to improve over time. This insight will involve not only data collection and validation, but also monitoring of multiple sources of data to assure reliability of provided data, provide a cross check on the supplier’s sustainability transparency, reporting practices and ongoing performance. Suppliers who respond and engage in a sustainability assessment and improvement journey send a strong sign that they are willing to make sustainability part of a long-term relationship.
When it comes to human rights in the supply chain, what do organisations need to be aware of, and act on?
They need to be aware for several reasons, not only risk management (eg. to comply with new regulations) due to stakeholder scrutiny, to assure resilience (eg. avoidance of disruptions) and long-term value creation.
Comprehensive international standards are available to guide corporate approaches to human rights, including the UN Guiding Principles on Business & Human Rights and the OECD Due Diligence Guidance for Responsible Business Conduct. In addition to these standards, it’s important for businesses to be aware of legislative changes that can affect current business operations and practices. Over the past decade, various due diligence laws emerged such as the Modern Slavery Act 2015 in the UK, California’s Transparency in Supply Chains Act and Australia’s Disclosure Act.
Companies can get ahead by understanding their supply chain better and determining where they stand in terms of human rights risk management. Working on your existing supplier relationships now will let you leverage those relationships and react to changing requirements with more flexibility once you are mandated to do so. By focusing on understanding the current supply chain due diligence landscape better, companies can explore strategies to react to existing – and future – requirements.
What is the biggest challenge in responsible sourcing?
Beyond the initial screening process, setting expectations at the beginning of the relationship with the supplier, and ongoing monitoring, companies need to engage suppliers in a continuous improvement journey. No suppliers (or buyers) are perfect in any sustainability topic. Changing suppliers (e.g. discontinuing a supplier with a low sustainability score and selecting and onboarding a new supplier) is expensive, and should be an exception. Long term relationships with suppliers who are committed to progressing on the journey is often a more reliable path, even if they do not have exceptional performance or scores at the beginning.
What is the biggest change you predict in responsible sourcing in the next 12-18 months?
There may be a ‘shakeout’ coming in the procurement sustainability tech space. There have never been more technologies and tools purporting to help procurement teams collect data – such as sustainability metrics – from suppliers. But many of these are not moving the needle on the sustainability journey toward positive impacts, similar to their predecessors; “DIY” programs that companies traditionally tried to run internally using spreadsheets and email.
