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Determining the Direction of Travel for Sustainable Procurement
This article is an edited extract from Sustainable Procurement.
If you are reading this, I think it is safe to say that you get the need for better sustainability practices across the whole spectrum, from citizens to multinational corporations.
Many organizations have already decided to adopt better sustainability practices and have made positive changes in attitude and behaviour. If you are one of these, you may already be seeing results and are looking to build on your success for the next level of sustainable innovation.
Given mounting consumer, investor and employee expectations - multiplied by the general groundswell of populace pressure - change is not only worth doing, it is now inevitable (if not mandatory) in order to maintain competitive advantage and commercial viability.
There is a delicate balance to achieve between:
- Sensitivity to shareholder expectations
- The needs of the business (especially regarding cost management)
- The ability to change amongst suppliers
- Mounting pressure for conspicuously greener practices from customers and consumers
- The inevitable resistance to change from pretty much everyone.
If you have already started implementing sustainable practices in your organization, you have taken a major step in the right direction. You need to look:
- All the way down the total length of the supply chain to the raw materials
- All the way through all tiers of distribution to our customers and right to the end user and how they use and ultimately dispose of our products
- All the way to shareholders, investors, industry bodies, associations, commentators and influencers
- All the way to employees, potential employees, recruiters and those educational establishments from whom we seek to source future employees.
What is needed is a tried and tested process.
The OMEIA® process
Take a look at the OMEIA® process diagram below.
The OMEIA® methodology is a roadmap to implement sustainable procurement and to determine, realize and accelerate the value from individual sustainable initiatives, right the way up to full-scale enterprise-wide projects.
This is a tried and tested approach for creating or upgrading your sustainability vision. It can be used as a roadmap if you are starting your sustainability journey, or as a sense-check for new initiatives.
Needless to say, we cannot change everything and therefore prioritization is essential. I would suggest an approach on three levels:
- To avert or mitigate critical risks
- To meet sustainability goals
- To unlock new opportunities.
Procurement and the SVCN
Scaling your sustainability commitment will eventually and invariably elevate procurement and the supply chain into a far more strategic role. In essence, truly sustainable procurement must consider not only what you’re buying, but the way your organization works, from product design right up to your overall strategy.
Consequently, this necessitates a fundamental change in how the organization works with its supply chain, or as I prefer to call it, the Supply and Value Chain Network (SVCN).
In fact, procurement and the SVCN must progressively become central to a company’s drive for sustainability. This is, however, no small undertaking given that what happens outside our organization is both far less visible and beyond our direct control making things hard to monitor, measure and change; where supplier change is required or even contractually mandated, it may not actually happen due to a lack of will, resources or ability; enforced changes may initially increase our costs.
This will require more than just buying something different or from an alternative source; it could mean an evolution of the organization’s proposition, including:
- What you buy
- Who you buy from and how
- How your organization uses goods/services
- Your brand proposition and communications
- Your product/service offering
- How your customers use and dispose of your products.
Deepening the relationship with key suppliers
Ultimately this change of approach will require a shift towards more collaborative, relationship-based procurement. This is a positive evolution, as it creates a platform from which you can generate new and incremental value.
Getting genuine collaboration from external partners can be challenging. Begin gradually with attainable requirements that demand commitment and resources from both parties while providing tangible advantages to each, and be transparently prepared to make the first move (this includes providing training, technological support, sharing information and possibly helping with any resulting costs).
Consider offering incentives either in increased scope of business or actual financial rewards for successful achievements, and create simple verifiable metrics.
Evolving the SVCN checklist:
- Sharing of the vision for the ideal future supplier relationship
- Simple quantified goals and timelines
- A clear and concise explanation of how it will work
- Specifics of what’s in it for them
- Details of what they need to do
- Full disclosure of what you will invest in, in terms of strategic support, training, mentoring, information sharing, technical support and cost sharing
- New opportunities for increased business and even additional financial incentives
- Demonstration of how you will take the first steps to lead the way.
Set up new suppliers for success from the start
When considering new suppliers, look for the positive attributes common amongst existing key suppliers who are most successful in achieving effective sustainability initiatives.
You can design a new way of working from the outset, by creating a collaborative joint team and encourage two-way sharing of data. This can help you explore potential innovations, such as improved speed to market and environmental, social and governance improvements.
In addition, evaluate and discuss the outputs at regular business reviews. The benefits realized from the successes already achieved, combined with the shared data generated, will inform and support planning for the next round of initiatives. Finally, when you take on new suppliers, make the provision of specific metrics a contracted requirement and ensure you build in practical ways of auditing or verifying the data.
Get the right talent to drive the program
If you are looking to go up a gear in your sustainability program it is vital to find the right person to manage it. If you are recruiting new talent, then find a sustainable procurement expert. If you are using an existing resource, they don’t need to be a sustainability expert (if they are it’s a bonus), but they do need extensive complex project and change management experience, good EQ and to be able to get people onside. You can buy in external specialist sustainability expertise as and when required, likewise, data management and analysis skills.
Once you have your sustainability head, they can build a flat, compact, cross functional steering team, with good representation across the organization. Then consult with key stakeholders (and shareholders if possible) and take their views, suggestions and concerns on board for each round of initiatives.
Nothing succeeds like success
The direction for sustainability with an organization needs to be relevant and resonate with what the firm does as well as the overall global sustainability picture.
To increase momentum, start with those projects that are easiest to implement but still deliver significant and quantifiable sustainability results. This will generate good news success stories which can be widely merchandised to attract wider interest. Basking in the reflective glory of a widely publicized successful outcome can seduce even the most sceptical and reluctant team members into becoming at best a positive contributor and at worst less of an impediment.
Never underestimate the power of a good story
Telling the right story to the right person in the right way is vital to ensuring:
- Continued executive buy-in and support
- Maximum positive brand equity enhancement is derived and maintained
- The SVCN remains engaged, supportive and committed
- Consumer/customer awareness is earned and managed.
- Optimal awareness amongst wider internal audiences to ensure employee benefits are realized
- Key stakeholders are informed and engaged
- Target influencers are informed and offered an opportunity to engage
- Positive contributors are recognized, widely and conspicuously appreciated and further encouraged.
A good communications manager is key to creating buzz and ensuring all target audiences are informed. These include: paid media and earned media/influencers, clients, consumers and customers. As well as employees or potential employees, trade bodies and associations, stakeholders, shareholders. And finally, potential investors and SVCN/Commercial partners.
Data and technology
Smart data management analysis will allow you to aggregate all your disparate data sources and distil real actionable knowledge from your “data lake”.
Getting the right talent to allow you to drive this will be key. Outsource initially but start the search for key team members as early as you can as they can be hard to find. As you get better at generating insights you can utilize A.I. type capability to turn data and insights into predictive outputs, with proactive prompts for specific actions.
What you should be thinking about
Education – Upskilling your procurement team and SVCN in sustainability best practice. Sharing your sustainability good news stories to generate interest, ownership and buy-in to future initiatives.
Cooperation – Look at ways to co-create initiatives with suppliers right across your SVCN. Think about co-operating with competitors to support greater overall category or vertical sustainability.
Smart Incentives - Consider new ways of reducing sustainability resistance or inertia through introducing smart incentives.
Acquiring and sharing data – Data really is more valuable than oil - look at how you can acquire it, interrogate it, enhance it and let it speak for itself. Then look for ways to help your SVCN by sharing data-based insights.
A.I. predictive modelling and prompts – When you get really good at listening to your data, build algorithms to seek new data for you. A.I. type functionality can distil insights and ultimately prompt action.
Data security – Everybody needs to be thinking about data security.