By Sumit Kumar
Recent history has presented many examples of reputed organizations, such as Apple, Walmart, Target, Primark and Tesco, facing the ire of customers, investors and governments due to unwarranted incidents in their supply chains. It is increasingly becoming clear that unsustainable supply chains can have negative reputational as well as financial implications.
As a result, sustainability of supply chains is getting renewed attention from organizations worldwide. A part of the credit for this increased awareness also goes to organizations such as the CDP (formerly Carbon Disclosure Project) and Global Reporting Initiative (GRI) for sharpening focus on the sustainability of supply chains.
Unfortunately, the approach for achieving sustainable supply chains has become stereotyped, and most organizations end up only meeting compliance. Buying organizations go by the clichéd “sustainable procurement guidelines” that list expectations from suppliers on common sustainability parameters. They also act as a screener at the time of on-boarding a supplier. This approach defeats the purpose, especially for the critical suppliers, because of its inherent limitations:
In order to derive maximum value out of a sustainable supply chain and avoid supply chain disruptions, responsible organizations need to take the ownership of their supply chain. Here is an alternative approach CPOs can adopt to ensure sustainable performance of critical suppliers:
At the same time, they can uncover opportunities to work with suppliers to improve overall sustainability performance of the buying organizations (through initiatives to reduce environmental footprint of suppliers, using supplier innovation to develop sustainable products, etc.).
As a bonus, this approach would also bring in learnings in the form of best practices adopted by leading suppliers. These lessons can then be shared with other suppliers to strengthen overall supplier relationships.
A very good example to illustrate the benefits of such a system is British Telecom, which adopted a similar approach to create the Better Future Supplier Forum (BFSF) in 2012. The company invites its select suppliers to this forum, where they are assessed and rated. It then engages its suppliers and helps them improve their sustainability practices.
In the first year of BFSF, one of British Telecom's major suppliers achieved 23,000 tons of carbon savings from changes implemented in manufacturing, packaging and logistics (which, in turn, lightens BT’s carbon footprint). The company also educates its suppliers on innovative designs that are not only more sustainable but are also more cost-effective. The platform also facilitates ongoing assessment and rating of suppliers’ sustainability performance, and best performing suppliers are awarded -- boosting relationships with these suppliers and inspiring other suppliers to improve their sustainability performances.
I believe that if organizations start proactively managing the sustainability of their supply chains, they stand to benefit in the following ways:
Image credit: Flickr/Adrian Scottow
Sumit Kumar is the Head of Sustainability Research at Pure Research Private Limited, a procurement intelligence firm. Sumit helps buying organizations build sustainable supply chains by understanding the sustainability performance of their suppliers, and recommending corrective action based on category specific best practices.