Incorporating Supplier CSR Ratings In The Sourcing Process: The Basics

April 23, 2016 EcoVadis

Today we welcome a guest blog post from procurement practitioner

Alis Hemmingsen, Category Manager at Velux,

who also blogs at Responsible Procurement Excellence

Finding, evaluating and selecting suppliers is a process which is key to any procurement professional. Selecting a supplier who turns out later to have poor performance can mean a lot of unwanted noise and, worst case, disruptions. Now that sustainability has risen to be one of the most highly visible topics for customers and stakeholders, management teams face the challenge of “How do you incorporate CSR ratings in the sourcing process?”

Understand the Facts, and the Market

Start out by ensuring that you understand everything about the spend category. For example, if the category is corrugated packaging you will need to understand the definition of the category, usage patterns and why particular types and grades are specified for each product or use.

The next step will be to identify key stakeholders at all operating units and physical locations. For example logistics may need to know about shipping specifications, or marketing and product management may need to understand certain quality characteristics, or they may have specified specific environmental attributes, where applicable.
The five key areas of analysis include:

  1. Total historic expenditure and volumes
  2. Spend by division/ department
  3. Spend per supplier
  4. Projected future spend
  5. CSR performance

Have a look at the current performance of your supplier base when it comes to sustainability/CSR. If possible, compare current sustainability performance with wanted performance. Also look at the risks in the current supply chain. Are there learnings from the existing base or past incidents such as disruptions you can apply to new selection criteria that could help mitigate some of the current risks?
Use the market analysis to determine where your competitors are in terms of sustainability. You should also use the market analysis to understand key supplier marketplace dynamics and current trends. You could possibly also use the should cost to determine whether there are any items which, not only from a cost perspective, but also from a sustainability perspective, could be replaced in order to give you the desired outcome.

Evaluate Potential Suppliers

Next, develop a supplier survey for screening potential alternative suppliers. This survey will help evaluate the supplier capabilities. At this point, consider using the knowledge that you have about the current supplier base which you have in your CSR scoring system to form the questions.

The survey is to assess the capability and capacity of the market to meet your requirements. It enables you to assess at an early stage whether your proposed project is feasible and can be delivered by the identified supplier. It also provides an early warning of your requirements to the market, and enables suppliers to think about how they will respond. The key aim here is to encourage the right suppliers with the right structure to respond to you.

Build the Strategy

The combination of the first steps provides the essential ingredients for the sourcing strategy.

Armed with the supplier information, you can build the competitive landscape in the supply marketplace.

Where a competitive approach is used, which is the general case for most spend categories, a request for proposal or bid will need to be prepared (RFP, RFQs). This will define and make clear the requirements to all prequalified suppliers. It should include product or service specifications, delivery and service requirements, evaluation criteria, pricing structure, and financial terms and conditions. Here you can also include desired behavior in terms of sustainability.

Selecting and On-boarding Suppliers

When evaluating potential suppliers you should not be afraid to ask for more information. Hence you could ask them for a CSR scorecardhttps://www.ecovadis.com/corporate-social-responsibility/, which you use for existing suppliers. This could give you a more in depth knowledge about the suppliers in scope.

Once the winning supplier(s) are notified they should be invited to participate in implementing recommendations. Implementation plans vary depending on the degree of supplier switches. For incumbents, there will be a communication plan that will include any changes. During the on-boarding process it is essential that the CSR assessment and scorecard is explained in detail, to motivate suppliers to supply information, but also to ensure that they continuously strive to create a lasting impact on their sustainability performance.

Author: Alis Sindbjerg Hemmingsen

Alis is a Category Manager, Metals at Velux (a global manufacturer of construction materials, best know for skylights and windows). She is also the creator of Responsible Procurement Excellence consultancy and blog, where her goal is “to inspire companies, organizations and people around the world to develop impact driven approaches to Responsible Procurement.”

This post was first published in the Sustainable Supply Views blog from EcoVadis

What to read next:

A 5 Step Guide to Building The Business Case for Sustainable Procurement

Best practices in driving supplier CSR improvements: Alcatel-Lucent Case Study

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EcoVadis is the CSR rating platform for supply chains spanning 150 sectors and 110 countries of Global-500 enterprises like Verizon, Coca Cola Enterprises, Johnson & Johnson, Nestle and 100 others.  EcoVadis Scorecards make it easy to understand, track and improve suppliers’ environmental, social and ethical performance. www.ecovadis.com 

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