Sustainability has become an increasingly important topic in recent years, with businesses recognising the need to address their impact on the environment and society. As a result, sustainability is now relevant to all aspects of an organisation's operation, and companies are starting to integrate sustainable practices into their supply chain. However, embedding sustainability into a company's culture is a significant undertaking that requires a strategic approach.
In this article, we will outline five practical tips that businesses can take to start the process of embedding sustainability into their supply chain.
1. Identify which supply chain related regulations affect your company
The first step is to identify which regulations and standards apply to your company. This includes country-specific legislation, as well as any voluntary commitments. Companies must also understand which areas of their business are affected by these regulations and which are responsible for compliance.
In February 2022, the European Commission issued its proposal for a Directive on Corporate Sustainability Due Diligence (CSDD), aiming to encourage ethical and sustainable business practices throughout all global value chains. These new regulations will provide companies with legal security and increase transparency for investors and consumers. Learn more about this mandate here.
2. Create and assess suppliers against a code of conduct
Companies must develop a code of conduct that aligns with their corporate strategy and legislative requirements. This code should be used to assess suppliers, and supplier attestation should be mandatory in the supplier selection process. Live compliance statistics should be recorded.
The UN Global Compact (UNGC) is a United Nations initiative to encourage responsible business. Supply chain sustainability can be applied through its 10 principles, covering human rights, labour, the environment, and anti-corruption. The UNGC recommends embedding the 10 principles into a supplier code of conduct. Organisations should identify relevant impact areas based on their sector, and tailor supplier codes of conduct accordingly. Once a supplier code of conduct has been established to reflect areas material to a company’s sustainability reporting and business risk, the Global Reporting Initiative (GRI) provides a framework to allow organisations to measure and report on key impact or risk areas.
3. Develop a consistent approach for more responsible supplier assessment
Companies should develop a consistent approach to supplier assessment that is based on global reporting frameworks such as the Global Reporting Initiative (GRI), United Nations Global Compact (UNGC), and Sustainable Development Goals (SDGs). This approach should also include cross-business compliance requirements such as risk, legal, sustainability, health and safety, and information security.
The sustainable procurement landscape is constantly evolving. Businesses reporting their sustainability performance can refer to or use a variety of international and national frameworks, standards and guidelines such as CDP, GRI, SASB, and the SDGs. Get the latest industry updates and learn more about the available sustainability frameworks and standards to support your company's reporting here.
4. Utilise assessment information
Companies should utilise the assessment information to identify non-compliances and communicate them to the relevant business areas and suppliers. Performance metrics should be used to embed sustainability in supplier selection and review processes. The driver for this could be to ensure a supplier’s ability to deliver services to you, for example by having the correct certification in place. Or it could be that you require further information from particularly high-risk suppliers.
Ideally, the chosen solution should enable you to store this information against all of your supplier records so that it can be accessed across the organisation. If it does not then you should look at ways to ensure that the key information from supplier responses is made available either through integration or internal processes.
5. Create a deeper supplier review or audit process
Finally, companies should create a deeper supplier review or audit process that links further assessment to the review process. High-risk or poor-performing suppliers should drive deeper assessments or audits. This is also an opportunity to work through improvement plans with suppliers.
These steps are by no means exhaustive, but they will help any organisation to begin to work more coherently and to have more confidence in their supply chain. At Greenstone, we work through these early stages with our clients to create a compliance-based approach to supplier assessment and management. Then, as your organisation becomes more mature you can start to work with suppliers more closely and embed sustainability in all purchasing decisions.
Greenstone’s SupplierPortal solution supports our clients throughout this journey, from a simple starting point right through to a fully integrated approach.
As such, the goal of your strategy should not only be to reach a point where short-term risk is minimised, supplier compliance maximised, and sustainable selection criteria are used, but to also have the confidence and maturity to be focussed on the long-term risks and opportunities.
Greenstone provides software and services that enable sustainable procurement and responsible supply chains. Greenstone’s SupplierPortal supply chain sustainability software solution enables the collection, management and analysis of supplier data (including carbon emissions calculation). It consolidates supplier networks in one secure and easy-to-use platform and provides companies with a comprehensive supplier management solution that can be highly tailored to suit requirements.
