Sustainable Supply Chains and the 7 Trends you Can't Miss

September 15, 2015

As professionals in the sustainability sector, a big part of our job consists of keeping up-to-date with the latest news and developments in our field. Some time ago, we attended a compelling discussion forum on responsible supply chains and we thought it would be a great idea to round up the main trends we identified:

1. Responsible purchases are central to CSR

According to the Reponsible Purchasing ObsAR Barometer (Paris, 2015), responsible purchases were a priority for 33% of polled Purchasing Managers, 84% reported having a responsible purchases policy in place, and 5% were developing one at the time of the survey.

Responsible purchasing is becoming an increasingly strategic point for businesses worldwide. After all, a company is only as green as its supply chain and business performance is continuously impacted by supplier conduct (as much as an estimated 10% of your CSR “weight” rests on your suppliers – Source: ObsAR). Weak links and poor practices across the chain can have catastrophic and costly consequences. Without going further, many are the multinational clothing retailers that have needed to clean up their supply chains after disastrous consequences on workers’ lives, safety and wellbeing. They have succeeded in varying degrees (most calling it “a work in progress”) but the main point remains: adopting a holistic approach to business operations and engaging suppliers in sustainable practices (starting with responsible purchases) are the cornerstones of a fully functional CSR strategy.

2. Building a sustainable supply chain: long-term payoffs but cross-cutting benefits

Sacrificing present-day gains in favour long term benefits is easier said than done and it doesn’t help that seemingly contradictory needs and demands are at odds (the needs of your clients, your own budgetary constraints, complying with regulation, striving for innovation…). The good news is that once you’ve adopted the right course of action, the potential societal and social effects (promotion of human rights and positive working conditions, enhanced local employment and professional integration, fighting concealed work, etc.) as well as the environmental ones (improved, efficient and demand driven processes, namely through adopting the principles of the circular economy and integrating the 3Rs to the supply chain) are profound and cross-cutting.

While creating and setting up indicators to measure your responsible procurement policies will take you a relatively long time (6 to 9 months) – and there’s no denying that establishing a truly sustainable supply chain is a time-intensive process – the decision to make your supply chain ‘green’, if done right, will positively impact a whole host of CSR aspects in the long-term: corporate image, regulatory compliance, territorial development and expansion, human rights, and quality (just to name a few).

3. Pricing as an obstacle to adopting sustainable supply-chain practices

Concerning sustainable purchases, once the time has come to negotiate a contract, pricing often remains a contentious issue between client and supplier. This, although research suggests that making the sustainable choice does not necessary equal “spending more money”. The pay-off is in the long-term and, as was recommended at the Forum, starting by subtracting negative externalities from positive ones when establishing your price can help.

4. Regulations and standards will tend towards greater integration

You may know that the ISO 20 400 standard on Sustainable Procurement is currently under development. Organizations adhering to this future regulation will be proactively (and voluntarily) steering their operations towards responsible purchasing and will certify their compliance with ISO’s definition of sustainable procurement. As companies increasingly seek to use credible, integrated benchmarks, we can certainly expect to see a streamlining and greater consolidation in regulation on sustainable procurement.

5. Timely supplier payments as the first step towards responsible business practices

Measures for a more sustainable supply chain often go against the grain of not-so-sustainable but well-established business practices, such as buying the bulk of raw materials abroad or pushing the legal limits of supplier payment deadlines.

In France, for instance, while the maximum delay for payment is of 60 days, the average is closer to 72 days (generating an astounding 600 billion Euros in inter-payment credit and triggering bankruptcy for 1 in 4 SMEs). In other words, as a business owner, if you yourself fail to meet basic regulatory requirements and best practices, it seems contradictory (not to mention hypocritical) to hold your own suppliers to even the most minimal of sustainable supply chain standards. Timely supplier payments are the first step towards more responsible and sustainable purchasing practices.

6. Enhanced client-supplier relationships will work in your favour, especially if you’re a small or very small business

In advancing towards an improved supply chain, the quality and nature of client-supplier relationships have a great role to play and much remains to be done in this direction. For truly sustainable partnerships (and purchases), more collaborative, balanced and mindful client-supplier relationships are needed. This, however, is impossible without a team effort, where each party contributes constructively and on equal terms. The result, however, is mutually beneficial to both client and supplier.

Day-to-day exchanges in the context of this enhanced associative model, could either rely on the good faith of both parts or be based on the adoption of more formal written agreements (such as a ‘Business Code of Conduct for Suppliers’).

It’s also worth noting that, while small and very small businesses are especially susceptible to benefit from a more conscious partnership with their suppliers, their size and exposure also make them particularly vulnerable. By striving to respond to an increasingly sustainability-conscious market, small businesses can indeed become easily overwhelmed by the abundance of normative and financial requirements currently in place, as well as the rising CSR-related demands from their principals (often in the form of large corporations – who have a habit of strongly pushing their suppliers and subcontractors to share a bigger part of the “CSR pie”). Faced with this, together with a lack of means, resources and information, they struggle to keep up with sustainable development clauses included in most calls for tender.

7. Technology can support higher supply chain standards

Other than reporting and evaluating their supply chain the conventional way, businesses should make an effort to embrace what technology has to offer. There are a number of software solutions, designed to help corporations make better decisions by gaining operational insight based on the input of raw data (think “supply chain analytics”).

At Enablon, for instance, we help companies better manage their on a daily basis. From our unique viewpoint, we see first-hand how companies benefit from using technology to deal with supplier risk and its implications across the supply chain.

The underlying discourse of the points made throughout the day was clear: responsible purchases are both the starting point and the core of a sustainable supply chain. In this context, and in today’s world, for a company to be truly resilient, efficient, compliant and engaged with its stakeholders, sustainability must start from within and extend to the global value chain.