Three Key Factors Purchasing Teams Should Consider for 2018 Risk Management Strategy

March 23, 2018 EcoVadis ‏‏‎

 

If we are to believe the supply chain predictions for 2018, there will be plenty to keep purchasing and supply chain managers awake at night.  Even Forbes’ Paul Martyn is chiming in on the topic, observing that worker safety and reputation risk are becoming increasingly important, while transparency and sustainability reshape consumer demand, and intelligence trumps data in supply chain risk management.

 

This is causing many purchasing teams to feel renewed urgency to take action on establishing or expanding a supplier assessment programs.

 

As we look back at the dozens of new supplier sustainability programs our team helped implement last year, three key factors emerge as essential to effectively addressing these shifting conditions of sustainability risks and opportunities.

 

1. The Breadth and Depth of Sustainability and Geographic Coverage

 

When setting up a supplier monitoring system, the assessment methodology should cover all key themes in sustainability and Corporate Social Responsibility. In many cases, homegrown assessment programs started with just one issue, for example environmental sustainability or human trafficking. The system should cover criteria across environment, labor and human rights, ethics/anti-corruption, and the supplier’s own sustainable sourcing practices.

 

In terms of geographic coverage, most modern supply chains span over 100 countries. So the assessment methodology should be appropriately adapted to cover this spread, engaging and supporting suppliers in local language wherever possible, at least for the top regions.

 

The size of the suppliers/third parties you are working with is another important dimension to examine. Many of them will be small- or medium-sized enterprises (SMEs) that are not listed on any stock exchange, and with little required reporting or public information. The monitoring system and methodology should be adapted accordingly to measure these SMEs.

 

For more details check out this white paper.

 

2. Change Management and Integration Into EHS and Purchasing Teams and Processes

 

To make sure your teams adopt indicators on ethics, corporate social responsibility, and sustainability information in their jobs, they must be integrated into processes and workflows.

There are two elements to this:

 

Change management

It is essential that the supplier sustainability monitoring solution vendor be able to support you and your team in the required change management program that will drive adoption of the initiative. This could include consulting on strategy and rollout, program branding, communications and supporting content development, training, support/ helpdesk, onboarding services and reporting.

 

System and process integration

A key enabler to maximizing the impact of sustainability criteria on purchasing behavior is to integrate the assessment system into your supply chain management platforms such as e-Sourcing, e-Procurement, CLM, SRM or similar platforms. Supplier monitoring solutions that come with an API that can be used to integrate the CSR indicators to other platforms are a huge advantage here. This way, you can give buyers and category managers access to current and complete sustainability data within the tools they are using today.  

 

For a deeper dive into these criteria and checklists, get this free Ebook covering “Five Essential Criteria For Selecting A Supplier Sustainability & Risk Monitoring Solution.”

 

3. Value Creation for You and Your Suppliers/Third Parties

 

No matter how thorough the assessment solution, it will only be effective if you can secure  supplier participation. Here are a couple key ways sustainability monitoring programs can provide value to suppliers, which is vital to getting engagement:

 

Alignment with relevant labels, certifications and standards

One core feature of a monitoring system is to ensure suppliers adhere to the relevant global, regional and/or category-specific labels, certifications or standards. Examples might include FSC for fiber-based products, REACH registration of chemicals in Europe, or EnergyStar for appliance makers in North America, and so on. There are thousands of such labels, certifications and standards across the 120+ countries touched by global supply chains. A comprehensive supplier assessment program must take all the relevant ones into account, and keep the list updated regularly (at least annually in each major region/country). This ensures the work suppliers are already doing gets “valorized” in the monitoring process, making it more efficient for them to participate.

 

Actionable results, benchmarks and feedback

The results of a sustainability assessment should be digestible and actionable by both the buyer’s side (procurement and supply chain, EHS&S, risk), but also for the supplier.  A spreadsheet of checkmarks or a list of documents from a supplier is often hard to digest and thus not actionable by a purchasing or category manager. How do suppliers’ sustainability performance compare to their peers?  What is the norm for the industry or geography they are in? Are they improving their sustainability over time? Solutions that make your short list should provide actionable results and indicators, benchmarks for comparing performance, and feedback on areas of improvement.

 

If you have questions or comments on selecting supplier sustainability monitoring tools, contact us here for a consultation.

 

Further Reading

For more details on what questions to ask to look for in a monitoring service, check out this paper on  “Five Essential Criteria For Selecting A Supplier Sustainability & Risk Monitoring Solution.”

About the Author

EcoVadis ‏‏‎

EcoVadis is the world’s most trusted provider of business sustainability ratings, intelligence and collaborative performance improvement tools for global supply chains. Backed by a powerful technology platform and a global team of domain experts, EcoVadis’ easy-to-use and actionable sustainability scorecards provide detailed insight into environmental, social and ethical risks across 190 purchasing categories and 150 countries.

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