When it comes to managing relationships with suppliers, businesses are under increasing pressure. Why has this come about? Partially it’s because of evolving standards and legislative requirements related to human rights, social inequality and safeguards for consumers (amongst other factors). These require businesses to be proactive with their suppliers, to ensure compliance.
Alongside this, there is a rising numbers of online commentators, who are using social media, blogging and video to highlight any apparent success or otherwise. While businesses were once less visible, this modern network of influencers means the need for transparency is growing. Now, more than ever, organisations need to understand how the expectations of supplier management are changing, so they can meet and exceed them.
The influence of environmental factors on supplier relationships
As a starting point, complying with legal requirements is a minimum. For most, if not all, organisations it is essential to have a constant flow of information from their suppliers, to make sure that even legally compliant organisations are not acting in a way that introduces risk. For example, even if a supplier is legally compliant, their operations can still be affected by an increased risk of flooding (or similar). Organisations therefore need to understand who will hold the liability, if any disruptions occur as a result of environmental factors and have the necessary data to support this.
External pressure on organisations
News stories get shared faster than ever before, which can lead to an uncomfortable level of transparency for some organisations. On top of this, individual companies can be targeted by social campaigners. These are people looking to influence and change a company’s approach to their supplier management. For example, it might be that a supplier is fully compliant with local requirements, but this a different or lower standard to one expected. As a result, the buying organisation comes under social pressure to change or reform it’s supplier relationship to meet the required level.
Pressure coming from investors
Alongside the risks of environmental and social factors, there is growing pressure from the investor community. Investors are increasingly interested in business sustainability performance and also the benefits that can come from investing into forward-thinking organisations. Not having the evidence to prove to investors that due diligence on suppliers is being conducted could mean potential investors are less willing to commit, without the assurances they increasingly require.
Arguably, we are at a point where we are seeing the growth in a new acceptable standard for business. This is related to growth in transparency and also sufficient risk management. As a result, it is no longer enough to just ensure your suppliers are legally compliant. Holding suppliers to a higher standard than levels set by legal requirements means that organisations are in a better position to meet and exceed the changing expectations.
[image credit: Search Engine People Blog]