While supply chain risks continue to proliferate across many industries, businesses are discovering that assessing and managing them — as well as helping their trading partners improve — is a considerable challenge.
At the same time, sustainable product categories are becoming a strategic growth area in many industries, with Unilever, who found significantly higher growth rates for sustainable brands, being a perfect example. In fact, value creation from sustainable procurement practices may add up to a 5-20 percent revenue uplift, 9-16 percent supply chain cost reduction and 15-30 percent brand value increase, according to Beyond Supply Chains — Empowering Responsible Value Chains, a study from World Economic Forum, which we have discussed previously.
But in order for companies to tackle risks and take advantage of these upside opportunities, CSR assessment tools and practices for the supply base must also evolve apace. Many procurement teams have been tempted to pull together their own supplier CSR self-assessment questionnaires (SAQs), collaborating with their sustainability, environmental health and safety or compliance colleagues, and launching them via online survey tools.
Selecting The Right Tool For The Job
Mark Stevens, Director of Corporate Social Responsibility at Ciena Corporation, who runs the telecommunication giant’s supplier assessment program, has seen both sides of such solutions.
As part of his job, Mr. Stevens, based in the U.K., manages the process of responding to assessment questionnaires for their telecommunications, government and corporate customers. As he noted in this case study, the EcoVadis assessment is “more thorough” and took longer to fulfil. However, once it was completed, he said, “the reward is that the accomplishment is acknowledged and Ciena is respected for great practices.”
As Ciena started to receive more requests from their customers regarding transparency into their own supply chain, Mr. Stevens began to consider how they would do this.
At the edie event this year in London, Mr Stevens presented insights from their program. “We had our own self-assessment questionnaires, which had mixed responses from suppliers,” Mr. Stevens explained. “After completing and seeing the value of EcoVadis assessments, we decided to move away from the ‘trust me’ process. We now use EcoVadis to assess 95 percent of our spend”
Choosing a Sustainable Solution: Gains and Trade-Offs
Having heard about the sustainable procurement journeys from Ciena and others, we have assembled some common questions and answers when considering trade-offs of these solutions:
I’m already collecting data from my trading partners. Why do I need an outside firm to do a CSR assessment and rating?
There are several issues to think about here:
- Multiple surveys and duplicated work. Your trading partners work with other companies, who are asking for similar data. For some of them, it may be hundreds of surveys a year. This leads to survey fatigue, often resulting in poor-quality responses or none at all.
- How useful and actionable is the data? Many procurement teams find that having a database of CSR survey answers is difficult or impossible to act on. Data alone does not equal information. Buyers need clear indicators, which they will be able to easily understand and apply consistently.
- Expertise. The other side of the “what you do with the data” coin is who will analyze it. CSR is not a core expertise for most buyers and may lead to queries about the validity of the CSR evaluation. Building an internal team to analyze it is an expensive challenge and rarely provide global benchmarks. This is where external expertise from a credible organization with a robust methodology, plays a key role in establishing the independence and integrity of the assessment.
- Scale. How can you scale up to evaluate thousands of suppliers? It’s far more costly to do it yourself for equivalent results. Even if you hire a team of CSR experts to develop and run a comprehensive program, it is difficult to scale. See How Much Does a Supplier Monitoring Program Cost to find out more about the costs for both, buyer organizations and the entire value chain, when compared to a centralized, standardized system, staffed with independent CSR experts.
- Value to the supplier and motivation to participate in earnest. Your trading partners will be far more likely to engage with processes that provide value for them. The CSR rating and scorecard is designed to provide not only the benchmarks of how performance compares to other companies in similar business or location, but also specific feedback on strengths and improvement areas. You can track and measure progress, celebrate successes — internally and externally, and ultimately turn your CSR performance into a business advantage and differentiator.
|Self-Assessment CSR Questionnaire||EcoVadis CSR Rating|
|Scope||Sustainability data collection||Sustainability management system evaluation|
|Objective||Identify risks from non-compliances.||Identify, validate and understand trading partners who may represent risks — as well as innovators –on a rich rating scale that is easy to use for buyers, and engages suppliers. Transforms sustainability into a positive performance and value driver.|
|Who Is Evaluated?||Sites (for audits and most SAQs)||Companies/business entities and sites|
|Data Collection||Standardized questionnaire
Challenges: Unnecessarily long survey, Supplier muddled/ lost with irrelevant questions, reduces engagement rate and quality of responses.
|Customized questionnaire adapted to 190 industries and company size, taking into account relevant local laws, regulations, industry standards, certifications and labels, etc. to ensure questions are as relevant as possible.
Key benefits: Increased rate and higher quality of responses.
|Evaluation Methodology/ Verification||Buyer (or an auditor) determine methodology||Data analyzed by subject experts via a robust methodology covering all material issues (21 criteria, 4 themes) on all relevant management indicators, aligned with global standards, continually updated and supervised by a scientific committee, refined for more than a decade on over 50,000 businesses.
Key benefits: Reliable, globally-recognized indicators and benchmarks
|Output: Buyers Get||Access to the self-reported answers data sheet (or audit report), often without documentary proofs; Automatic ‘scoring’
Very low actionability.
Buyers lack expertise to interpret
|Access to their portfolio of supplier/trading partner scorecards (download a sample here) with easy-to-read ratings, benchmarks, strengths & weaknesses. Dashboards with onboarding status, Live-news alerts, interactive corrective action tool; Option to integrate ratings directly to procurement software.
Key benefits: Understand risk, while also maximizing engagement by transforming CSR to a positive ‘race to the top’ with mutual value for all trading partners.
|Output: Suppliers Get||Platform to share data with multiple clients||Single assessment with a CSR rating & detailed scorecard (available in 10 languages) — shareable with all customers & stakeholders – with benchmarks, feedback and collaborative tools to improve. Globally recognized credential to promote and differentiate their business performance.|
|How can data be integrated into procurement processes?||Buyers must manage this, often via manual processes (little or no automation).||
EcoVadis provides a complete software platform, which integrates directly with leading procurement networks such as SAP-Ariba, Synertrade, Ivalua, riskmethods, as well as custom programs. It allows users to request assessments and visualize ratings and scorecard results from within their procurement software.
This integration enables, for example, automatic calculation of scores that apply ‘weighting’ to sustainability (alongside other criteria) in processes such as RFP/RFX (like Credit Agricole Bank) and Supplier Relationship (like Coca Cola European Partners). Ratings also facilitate clear, trackable and enforceable integration of CSR/ sustainability performance criteria in contract clauses. (Read more about CSR clauses)
|Supplier Engagement||Purchasing organizations need to dedicate additional resource to do invite, onboard, manage and support suppliers through the SAQ platform process.||EcoVadis provides a turnkey solution with program management and full supplier engagement and support services in 10 languages.|
|Monitoring and validating with external data sources||It is up to the purchasing organization to find a solution for monitoring.
After a supplier completes the SAQ there’s no intrinsic pressure/value in updating the information. This can result in a lot of old/stale data.
|EcoVadis Scorecards include up-to-date 360° Watch Findings from external sources and clearly show when they were issued. Suppliers are incentivized to keep their data up to date by being reassessed in an effort to improve their scores.|
|How Is Information Verified?||SAQ information has to be verified by buyers, eventually using third-party auditors.||EcoVadis has a team of 100’s of sustainability experts who verify data including documentary proofs submitted by companies, as well as analysis of 3rd party external data sources to create the ratings and scorecard according to the EcoVadis Methodology.|
Want to learn more about the value of sustainability ratings and Ciena’s journey with EcoVadis? Read the full full case study.
Or find out more about EcoVadis Methodology.
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