Tips for Implementing a Sustainable Sourcing Strategy

The increasing importance of the planet and climate in consumer and business decision-making in recent years has resulted in a mindset change in board rooms across the globe. Responsible sourcing is the process an organization goes through to ensure that its supply ecosystem operates to a standard that is consistent with its values and will enable it to increase its competitive advantage by reducing its carbon footprint and leaving a positive legacy on the planet.

The focus on responsible sourcing is largely driven by the shift in the view of the core purpose of a business: traditionally, shareholder value was paramount, now it’s the organization’s “social value”. Social value encompasses all the positive contributions the organization makes to the community and society in general.

Outlined below you will find a straightforward approach to building a robust sustainable sourcing solution. These six steps, if followed diligently, will result in the creation of a supply chain that should enable companies to achieve their sustainability targets.

Step 1 - Create the Critical Success Factors

It's very important to begin with the end in mind. This means setting the tone and providing clarity on your long-term aspirations for your supply chain. The toll gate to leave this step in the process is the creation of a set of key measures and outcomes the supply chain needs to achieve to attain best-in-class status.

This includes the creation of a charter, the sharing of the success criteria with all stakeholders and the soliciting of executive support for the approach. Without support from the whole company, it is unlikely any sustainability initiative will succeed. Once support has been secured, the team will need to create or at least edit the supplier code of conduct to reflect the new sustainability criteria. This will then need to be shared with suppliers at all levels within the supply chain.

As the process of reimagining the supply chain involves significant change, it is important that you allocate appropriate resources to see the process through to a positive outcome.

Step 2 - Gap Analysis & Prioritisation

As with all strategic initiatives it is important to recognize the gaps early in the process; specifically, the gap between the “As Is” state and the desired “To Be” state. Once this action is complete the team can then identify the actions to take and prioritise accordingly. It is okay to give the team time: trying to swallow an elephant whole has never been a good strategy.

It is important to sequence the deliverables into a cadence of reasonable initiatives with those producing the biggest results being prioritised for early attention. It may be appropriate to schedule a few “quick wins” early in the process to facilitate some positive momentum and generate enthusiasm amongst the team prior to tackling the more difficult items. However, remember to schedule the biggest opportunities reasonably early in the process so that you do not appear to be disingenuous in your approach.

During your gap analysis and prioritization it is prudent to look at what is going on in the ecosystem, specifically with regard to legislation (both current and pending), consumer trends and other market trends that may be emerging.

Remember to assess the level of risk inherent in the challenge. Scoping the scale of the work and the resources needed to achieve the outcomes is critical at this point.

Finally, the supply base needs to be engaged in the process. A series of meetings need to be set up with senior executives of the most important suppliers to solicit their commitment to the process and, in some cases, request them to invest in solutions that will improve the sustainability of the supply chain. These won’t be easy conversations, but it is important that they happen early in the process so that the supplier has time to consider the best approach to supporting you in your endeavours.

Step 3 - Strategic Sourcing Approach

In step three, we need to formally integrate the sustainability targets into the organization’s strategic sourcing and procurement approach. Specifically, the supply market research and supplier research must include a focus that will help identify those suppliers who are at the cutting edge of designing best-in-class sustainable products and supply solutions. You might consider employing artificial intelligence tools to help with supply market research. Whatever you choose to do, it must be an integral part of your overall strategic sourcing approach and not just some “bolt-on” initiative.

In terms of concrete procurement actions, it will be important to undertake rigorous supplier profiling to assess their capabilities. Statements of work, tender documents and contracts will need to be revised to include specific commitments to the achievement of material environmental goals. At the very least, these must mirror or improve upon the commitments you have had to make to your customers. The supplier onboarding process must include details of the level of reporting required from the supplier along with examples of what you want to see in terms of relevant and significant data.

Step 4 - Training

Requirements

Step four is all about putting in place a training program to ensure that all participants throughout the company are fully aware of not only the strategic goals but also the plans to ensure those goals are achieved. The initiative will likely be cross-functional so a variety of participants in the organizationation must be exposed to the training, not just the strategic sourcing function. Similarly, a multifunctional approach from suppliers will also be required: make sure to implement a robust internal and external training plan.

Actions/Pathway

It will be crucial to assess the training needs in all locations and regions where a company operates, including supplier locations. The first part of the training will be to raise awareness but will then grow into equipping participants with the ability to understand not only the challenge but also possible solutions that may be available to them.

In essence, you want the training to equip the cross-functional teams with the ability to creatively bring both short- and long-term solutions to the table for consideration. The training will also give suppliers the opportunity to understand the requirements that will be placed upon them and assess their capacity and capabilities to make capital investment decisions as appropriate.

Step 5 - Performance

As with any major initiative, the achievement of results will only occur if all involved are held accountable for the achievement of a clear set of goals and are enabled to be successful through the application of a rigorous project management process.

Strategic sourcing leaders will need to remain engaged in the process, monitor progress and provide guidance where necessary. Participants need to be aware that their work is being appreciated and will be recognised and rewarded appropriately for the achievement of critical milestones, KPIs and delivery of significant outcomes. A regular cadence of meetings will be required to sustain progress and performance.

In the performance management approach, it is important to ensure that the supplier evaluation process sets the company up for success. The selection of the right suppliers is critical to the achievement of the goals, so the supplier evaluation process needs to identify those suppliers that are most likely to give the best results. Targets for the initiative will need to be both qualitative and quantitative involving both internal and external measures.

Visibility to the achievement of the goals and progress towards the ultimate destination will help sustain performance and invigorate participants and others in the organization.

Performance is not a theory: it is very much results-oriented and action based. The strategic sourcing leader will need to be constantly motivating and inspiring those involved in the process to sustain their energy levels and deliver their best work.

Step 6 - Communication

The path to the achievement of industry-leading targets in responsible sourcing should not be a solitary journey. The organization needs to put a robust communication plan in place to share progress with all key internal and external stakeholders.

The cadence of updates needs to be regular so that the recipients feel involved and engaged. This is to ensure all stakeholders are committed to both the short- and long-term goals.

The communications will need to highlight good work being done, the achievement of key milestones and recognise the individual and collective performance of those involved in the delivery of key outcomes. They should also be a reminder for people about the purpose of the initiative and the challenge that lies ahead and secure their continued support. Stakeholder support will be critical where roadblocks are encountered by the team.

Summary

Responsible sourcing is the process of ensuring that a company’s supply ecosystem operates to a standard that is consistent with its values and will enable it to increase its competitive advantage by reducing its carbon footprint. This is not a pious aspiration but a core business performance differentiator as companies are being increasingly obliged to display their “social value”.

The six-step process outlined here will enable companies to build robust sustainable sourcing strategies and implement solutions at no or minimal extra cost.