Sustainable Procurement is a growing movement, with procurement and supply chain teams increasingly tasked with delivering on their organisations’ ESG and sustainability goals. In this second instalment of ‘What is Sustainable Procurement’, the Vizibl team looks at some key challenges facing procurement functions pursuing increased supplier sustainability, and provides some pointers on how they can be overcome.
To read part one of this two-part series, see What is Sustainable Procurement? Part one: Themes & benefits
In order for any programme to take off and scale – including a sustainable procurement initiative – it must have the sponsorship of executive and senior leadership.
Making the case for how sustainable procurement practices impact the organisation’s strategic goals around ESG, starting with the benefits above, is key for securing this mandate, along with effectively explaining to senior stakeholders how this will enable them to deliver on their own goals.
Without the buy-in of C-suite, procurement leadership, and supply chain leaders, individual practitioners will not be able to effect change at the scale required to deliver on the organisation’s goals.
One way to secure sponsorship is through constructing a sound business case for expanding sustainable procurement practices.
A common method to do this that we’ve seen amongst Vizibl clients is to ensure that the true cost of existing ways of working is accounted for in the business case – such as attaching a carbon cost to these incumbent practices.
Clearly delineating the risks to the overall business that the programme will preemptively avoid (in monetary terms, if possible) can also be helpful in demonstrating the strategic value of this sustainable procurement initiative in the absence of strong metrics traditionally favoured by the function that value primarily operational efficiencies.
This traditional focus on operational excellence and efficiencies can remain a barrier beyond the business case.
Unless key performance indicators which value success in supplier collaboration and supplier sustainability are incorporated into procurement’s processes and their incentivisation systems, any sustainability objectives will inevitably be considered secondary to procurement’s ‘real metrics’ around cost, quality, and compliance.
Not only are there multiple themes when it comes to ESG issues, from supplier diversity to scope 3 to raw material extraction and beyond, there are myriad metrics to select, measure, and track over time.
Knowing what to measure and how to standardise this across suppliers is difficult enough, before procurement organisations can even grapple with data collection, aggregation, and normalisation. This ‘analysis paralysis’ is a key factor in why many organisations are slow to get started on their sustainable procurement efforts, feeling incapable of taking action until they ‘know enough’.
At Vizibl we counsel an approach of "controlling the controllables" and focusing on what you do know. Let’s take the example of supply chain emissions. Most organisations, for example, will know where most of their scope 3 falls – usually under purchased goods and services. They also know which categories within that cohort tend to be emissions intensive, how much they spend on those categories, and which suppliers they work with within them. Though this cannot replace a full, robust dataset detailing the current state of play, it provides a reliable place to start making improvements whilst waiting for the data to come in.
Though many solutions exist which support sustainable choices at the sourcing stage, managing supplier sustainability post-contract can be difficult. But given that it is almost impossible that any business – let alone some of the world’s largest enterprise companies – can entirely re-source in order to find more sustainable products and services, this post-contract work with suppliers is absolutely imperative.
Most existing solutions for managing suppliers also reflect procurement’s operational mindset – using one-sided management of the relationship and of performance in order to judge whether a supplier is making the grade according to cost, quality, and compliance KPIs.
For sustainability, this will not suffice, but procurement frequently lacks the tools required for truly collaborative management of their relationships according to a broader set of metrics. What’s more, it can be difficult to integrate sustainability data into existing procurement tools. As procurement lacks the technology to get an accurate view of supply chain sustainability credentials, or to work alongside incumbent suppliers on improvements, attempts at truly sustainable procurement beyond the sourcing stage get stalled.
For post-contract sustainable procurement to truly flourish, organisations need to forge true “customer of choice” relationships with the suppliers who are most critical to delivering on their sustainability pledges.
“Customer of choice” refers to a buyer-supplier relationship founded on trust, transparency, and robust communication, in addition to the ethos of mutual benefit. By forging this relationship, both buyers and suppliers gain priority access to one another, and can more effectively deliver on both the goals of the relationship, and on the goals of their individual organisations.
Obtaining of “customer of choice” status helps the organisation deliver improved supplier sustainability through Supplier Collaboration in a few key ways:
Positive relationships with strategic sustainability supplier stakeholders make it easier to drive alignment over shared goals, the vision for the partnership, and how success will be measured. This alignment enables both parties to be clear on what their objectives are and to stay on track delivering against them, in addition to making it easier to flag any issues or areas for improvement as the partnership progresses.
We’ve talked more about the benefits of close alignment with suppliers in our blog What is Supplier Relationship Management?.
Close “customer of choice” relationships with suppliers lay the foundations for further collaborative work that enables both parties to take action and deliver on the goals for the partnership. This happens through shared projects, initiatives, and opportunities which allow both parties to do the work side by side required to reach the goals of the relationship.
To learn more about successful Supplier Collaboration, head on over to our post What is Supplier Collaboration?
To address the sustainability challenges facing large enterprises, existing solutions will not suffice. In a market high on ESG hurdles and low on green products and solutions, innovation will be key to satisfying the demand for fresh new ideas.
Given that suppliers come armed with a wealth of subject matter expertise, knowledge of competitors and even whole verticals, their own talent pool, and an intimate understanding of local markets, the supply base will be a key source of this innovation.
As a result, “customer of choice” relationships will be key; this dynamic grants priority access to existing IP and ideation from suppliers, in addition to opportunities to tap their future innovation potential.
Supplier Innovation really comes into its own in truly unsustainable categories, such as those that carry prohibitively high emissions intensity. By leveraging supplier innovation in these areas, smart enterprises are leveraging supplier innovation to transform unsustainable categories into brand new opportunities
To learn more about its benefits, challenges, and how to succeed at tapping this resource, check out What is Supplier Innovation?
To enable enterprise businesses to build “customer of choice” relationships and deliver on their strategic goals through active, collaborative supplier relationships, we built Vizibl.
Our best-of-breed Supplier Collaboration and Innovation platform provides a unique and powerful combination of Supplier Sustainability Management, Supplier Relationship Management, a Supplier Collaboration Workspace, and Supplier Innovation hub. Together, this functionality enables large organisations to align on sustainability targets, collaboratively problem solve with their supplier ecosystems, open source innovation for sustainable transformation and business growth, and gain priority access to scarce green goods & services.
This combination unlocks the ability to collaborate with suppliers on sustainability goals systematically and at scale.
Because we cannot hope to operate sustainability without our suppliers, it’s the Vizibl view that all procurement professionals will be sustainable procurement professionals by 2030. The faster we can make that transition the better; time is running out to deliver on ambitious enterprise ESG pledges. The organisations who successfully get started and make meaningful action against their goals will not only play an instrumental role in securing the safety of our planet and its people, they will secure competitive advantage in an increasingly disrupted business landscape.
To find out more about how Vizibl is helping large enterprise organisations pursue sustainable procurement to deliver on their strategic goals, visit Vizibl Supplier Sustainability Management.
Vizibl is a CDP accredited provider.
