Introduction:
As procurement becomes data-driven, its role in growing firm profitability, market share, and competitive advantage becomes clearer. High-quality, relevant data is essential for these purposes. Based on an interview with EcoVadis Co-Founder and Co-CEO Pierre Francois Thaler, this article examines how data and analytics may improve supply chain sustainability. Thaler shows how firms may scale demonstrable improvements to satisfy supply chain sustainability goals.
Definition of Sustainable Procurement
Sustainable procurement emphasises environmental, social, human rights, ethics, and more in supplier evaluations beyond product/service cost and quality. Suppliers must engage in their own sustainability practices and manage the sustainability of their supply chain, including the impacts of the commodities and goods they use and manufacture (“product sustainability”).
Sustainability and supplier diversity may be independent or combined depending on where a firm is headquartered. The US divides them, whereas Europe mixes them. However, all efforts have a common concept and business return regardless of management and ownership.
All organisations are reexamining their supply networks holistically and as tiers due to expanded responsibilities. This is becoming the norm: you are accountable for everything in your supply chain, from human rights to environmental issues.
A corporation often launches a sustainability programme to enhance its supply chain’s environmental and social effect. Only by understanding the supply chain’s baseline performance can such an attempt begin. Companies should not declare initiatives until they have addressed supply chain basics. Supporting sustainability efforts from the bottom up and with a broad executive mandate are crucial.
One possibility to integrate standards is the sourcing process, but there are others. Supply base should be assessed during contract negotiation, relationship management, annual or quarterly performance reviews, and “preferred supplier” programme criteria, not just for RFP suppliers.
As the organisation innovates with suppliers, sustainability should grow and change. The forms of ROI are as numerous as the sources of knowledge procurement analytics helps decision makers obtain and utilise.
Required: Digital Scalability
Scaling a sustainable programme requires digital tools. Integrating ratings data with daily-use information and technology increases its value. This covers cost analysis, supplier data management, opportunity evaluation, and performance tracking.
The following image shows digital scalability. Sievo automatically links EcoVadis sustainability evaluation data with vendors in its spend analytics system. The ratings together with expenditure per supplier, supplier fragmentation by category, and spend per business unit make procurement insights more actionable. Users may go back into EcoVadis’ supplier scorecards from Sievo to see how they scored and where they might improve. Sievo users may also submit assessment requests for suppliers not in EcoVadis’ database via this API interface.
While working, distributed buyers improve organisational sustainability by seamlessly integrating insights, procedures, and business goals. Information is centrally managed yet disseminated, ensuring quality and dependability without losing usability.
How to Assess and Influence Supplier Sustainability
Oversight body, nation, and spend category affect sustainability ratings. Global Reporting Initiative (GRI) sustainability standards, Sustainability Accounting Standards Board (SASB), and ISO 26000 for social responsibility enable data compilation. Most big firms use one or more of these frameworks to publish their statistics to investors and stakeholders, thus their supply chain evaluation programme must comply with those criteria and management system indicators. Even keeping up with these requirements is difficult, and sector and geographic dispersion makes it challenging for directors to focus on commercial results.
Due to this complexity, EcoVadis created one rating that measures a supplier’s sustainability across 21 variables. Digital tools can handle the large amount of data and data sources needed to establish such a score and maintain its dependability. Automated notifications and pre-set tolerance thresholds are needed to flag supplier sustainability rating changes as well as analyse them.
Strategic Partner Sustainability
A company’s competitive advantage may depend on its tight collaboration with these suppliers. With their biggest clients’ backing, these suppliers should have excellent ratings and commit to ongoing development.
Low Sustainability and Tail Spend
Replace low-scoring suppliers, especially in long-tail spend, with more sustainable options. This shows that the organisation is adopting a sensible approach to sustainability and shields them from unfavourable headlines if even a tiny supplier is accused of wrongdoing.
Management, measurement, and organisational ownership are related. The owners and reporting locations? Thaler says “a sustainable supply chain leader should report into the Chief Procurement Officer.” It requires a clear executive mandate and a methodology for involving tens of thousands of suppliers. In addition, the director cannot operate only in procurement. They must collaborate with supply chain and operations to make sustainability center-led and dispersed.
Conclusion:
Companies must combine defensive and aggressive efforts. Importantly, significant partners must maintain high sustainability ratings and replace or improve low-scoring suppliers. It demands an ongoing, value-based approach. Organisations may improve their supply chain’s environmental and social effect by using digital technologies and incorporating sustainability standards into procurement methods, creating long-term value and competitive advantage.
