Achieving Sustainability Through Ethical Sourcing

Companies are under more pressure to make sure their supply chains are ethical and environmentally friendly. There are plenty of steps they can take in-house to reduce their carbon footprint. However, real change can only occur by addressing their supply chain, which can be difficult to manage with suppliers who aren't directly connected.

According to an article by Accenture, supply chains generate about 60% of all carbon emissions globally. That means companies must choose suppliers based on their ability to meet sustainability metrics, use tools to keep track of supplier sustainability commitments, and work with suppliers to help them become more sustainable overall.

This article explores how procurement leaders can adopt sustainable procurement policies to improve supplier selection and collaborate to bring about meaningful change.

The Challenges of Monitoring and Enforcing Sustainability in the Supply Chain

Monitoring and enforcing sustainability policies within the supply chain involves multiple challenges. Procurement leaders often find it difficult to ensure compliance and maintain the delicate balance between sustainability and profitability.

Here are some of the most common challenges to be aware of.

Lack of Transparency

The absence of transparency is a major hurdle in monitoring supplier practices. Suppliers may operate in regions where regulations may be lax, making it difficult to obtain accurate information about their operations and environmental impact. Some spend categories are also less transparent than others simply because they aren't related directly to operations.

For example, according to an article by Supply Chain Review, one study found that 82% of procurement leaders acknowledged their indirect spend is not well-managed, resulting in missed opportunities for cost savings and a lack of policy enforcement. This opaqueness makes it challenging for companies to assess whether their suppliers are truly adhering to sustainable practices.

Inconsistent Standards

There is a wide variation in sustainability standards across different countries and industries. This inconsistency can lead to confusion about what criteria should be used to evaluate suppliers. Furthermore, small and medium-sized enterprises (SMEs) might struggle to meet international standards, even if their practices are relatively sustainable for their context.

Cost Implications

Integrating sustainability into the supply chain often comes with increased costs. These can arise from investing in greener technologies, sourcing materials responsibly, or switching to suppliers who adhere to higher environmental standards. Companies must balance these costs against their commitment to sustainability without compromising their competitive edge.

Resistance to Change

Some suppliers may resist adopting new practices, especially if they perceive them as an increased cost with no immediate benefit. Convincing suppliers to change longstanding operations in favor of more sustainable practices can be challenging. It requires not just a shift in processes but often a cultural shift within the supplier's organization.

Implementing Sustainable Sourcing Policies

Nonetheless, implementing sustainable sourcing policies is crucial for businesses seeking to minimize their environmental impact. These policies serve as a roadmap for procurement teams to select suppliers that align with the company's sustainability goals.

Here are just a few of the potential sustainable sourcing policies that procurement leaders should consider:

• Prioritize suppliers who actively measure and reduce their carbon footprint: Procurement leaders should favor suppliers who have carbon reduction initiatives in place and can demonstrate measurable progress over time.
• Implement a Supplier Code of Conduct that includes sustainability criteria: This policy sets clear expectations for suppliers, detailing the environmental, social, and ethical standards they must meet to do business with the company.
• Adopt a lifecycle assessment approach for purchased goods: This involves evaluating the environmental impact of products throughout their entire lifecycle – from raw material extraction to disposal – and preferring suppliers who optimize for sustainability at every stage.
• Encourage transparency and third-party certifications: Suppliers should be willing to undergo audits and achieve certifications from reputable sustainability organizations, which can then be used as a benchmark for selection.
• Foster long-term relationships with suppliers committed to sustainability: By investing in long-term partnerships, companies can work closely with their suppliers to achieve mutual sustainability goals, including joint investments in greener technologies or processes.

Adopting these sustainable sourcing policies not only helps companies meet their environmental objectives but also sets a standard for ethical practice across industries. By leading with responsibility and foresight, businesses can contribute significantly to the global effort towards sustainability.

Collaborating with Suppliers to Build a More Sustainable Supply Chain

Building a more sustainable supply chain is a collaborative effort that requires active participation from both procurement teams and their suppliers. It's not just about enforcing rules but rather fostering a partnership that focuses on achieving mutual sustainability objectives.

Creating a Dialogue for Sustainability Goals

Open communication is the first critical step in collaboration. Procurement teams should initiate regular meetings with suppliers to discuss sustainability goals, share knowledge about best practices, and jointly identify areas for improvement.

These dialogues can be facilitated through workshops, webinars, or even through the creation of dedicated online platforms where ideas and resources can be shared. By creating an open environment for discussion, companies and suppliers can align their sustainability efforts, ensuring that they are working towards the same goals and utilizing the most effective strategies to achieve them.

Joint Sustainability Projects

Another effective method for enhancing supply chain sustainability is through the implementation of joint projects between companies and their suppliers. This could involve investing in renewable energy sources, improving waste management processes, or undertaking efforts to reduce packaging.

Such collaborative projects not only help in reducing the environmental impact but also strengthen the relationship between the company and its suppliers.

Additionally, pooling resources and sharing the financial burden of these projects can make sustainability initiatives more accessible for smaller suppliers, thereby broadening the impact of these efforts across the entire supply chain.

Build a More Sustainable Supply Chain

While the path to a sustainable supply chain involves many challenges, it is now vital for businesses to enforce sustainability among their suppliers. Adopting comprehensive sustainable sourcing policies and fostering collaborative efforts with suppliers can significantly mitigate environmental impact.

To learn more about how you can build a more sustainable supply chain, don't miss ProcureCon Indirect East 2024. It's happening from September 9th to 11th at Signia by Hilton Orlando Bonnet Creek, in Orlando, Florida.

Download the agenda and register for the event today.