Do you hear more and more companies talking about Sustainable Procurement?
Sustainable Supply Chain initiatives are surprisingly resilient to the economic and political difficulties our world is currently facing… but they are also changing.
EcoVadis is supporting companies in all sectors (from Finance to Chemical Industry), and suppliers in 94 countries. We would like to share some of the key trends we see.
- Regulations are back!: In the past Sustainable Supply Chain was mostly a voluntary initiative, but we see the number of regulations being signed increasing… and surprisingly more and more coming from the US. Two weeks ago the DoddFranck Conflict Minerals regulation was finally approved. The “California Transparency Act” is also active since January 2012 and in the UK the UK Bribery Act in 2010.
- Going beyond Social Compliance: In the past Sustainable Procurement Initiatives, were largely focusing on social audits, but more and more companies realise that they need to cover the complete Sustainability agenda, including environmental, product stewardship, fair business practices issues. This also means going beyond factory audits (i.e. where are the fire extinguishers?) and truly analyse the sustainability management systems of companies (as pioneered by EcoVadis). Even in the FMCG/Retail sector, which was a key user of “social audits” companies are more and more asking us for Sustainably Scorecards, such as the one developed by P&G.
- Better integration in Procurement Processes: Sustainable Procurement Initiatives were often side projects managed by the CSR department, and deployed on a handful of suppliers. One of the surprising consequences of the economic crisis was to push companies to reduce project management costs, and therefore make those initiatives more integrated and systematic. We now see customers asking us to deploy EcoVadis suppliers’ ratings on 5,000 suppliers in a totally automated way, fully integrated with their SRM or RFP processes.
- Pushing “ownership” (and costs) to suppliers: In the past CSR Audits were mandated by purchasing organizations which were often owning the results. But more and more the ownership of Sustainability ratings is transferred to suppliers, as well as the costs of the audits. 80% of EcoVadis customers (and 95% of the new projects launched in the past 2 years) are now using our supplier funded model. In the FMCG sector, the leading multinationals are now all using “supplier paid factory audits”. While this might be seen by some as an unfair way to push costs to lower tier of the supply chain, we observe strong benefits: the adoption of Sustainably by suppliers is becoming stronger, and improvements are faster.
- From “Risk Management” to “Value Creation”: While most of the initiatives were (and in some cases still are) focused on “Risk Management”, we see more and more companies looking at Sustainable Supply Chain as a way to identify innovative environmental practices from suppliers to develop new products, or differentiate from competition. This is especially true in FMCG, or IT/Telecom sectors, but we also see more heavy industrial sectors looking at ways they can tap into this more “positive” view of Sustainable Supply Chain management.
This article was written by Pierre-François Thaler, co-founder and co-president of EcoVadis
You can follow him on twitter @pierrov
Top photo credit Jami Dwyer on Creative Commons license.
Bottom photo credit to Mykola Swarnyk on Creative Commons license.