Sourcing and Procurement

Impact of Sustainability on the Supplier Relationship Management process

As brands and market leaders become more conscious of their social and environmental responsibilities sustainable practices and Corporate Social Responsibility (CSR) have gained prevalence in business strategies and policies. Sustainable practices have thus found their way in Supply Chain Management also.

While sustainability can be achieved with cumulative efforts of all stakeholders, the supplier-buyer relationship plays an intrinsic role in creating an effective strategy based on it. Could adoption of sustainable practices strain the camaraderie between the two crucial stakeholders of supply chain?

Prima facie, the answer is no. On the contrary, the need to build a strong supply chain has encouraged the two stakeholders to enhance Supplier Relationship Management processes from merely being a transaction to now being a valuable Strategic Partnership. Currently, several international corporations are implementing CSR-based programs, building set criterion, to be able to select the best suitable supplier and to further support new sustainable requirements from clients. A few instances of such initiatives are:

• A group of electronic business leaders has established the Electronic Citizen Business Coalition to provide access to data analysis and insightful reports related to supplier evaluation process.
• Another food industry leader has decided to support cocoa farming communities by investing $1 billion over 10 years (2018-2028) to ensure sustainable cocoa production. The program also aims to offer a holistic development for farmers and their families, in areas of education, earning, training, and lifestyle.
• A world-renown consumer corporation set up the Sustainability Partnership Fund, and proposed to invest 50% of the budget of any agreed project, in order to financially support their suppliers and farmers. The aim is to encourage, facilitate, and oversee implementation of sustainable practices into the production processes. The company also offered monetary support and skills training to tea farmers in Kenya, and helped over 580,000 farms achieve the certification standard set by the Rainforest Alliance.

Collaboration is key

So far, businesses have valued suppliers as an important stakeholder of a supply chain. However, the current times demand a more holistic approach to maintaining healthy supplier relationships. Today, businesses aiming to adopt sustainable development, are seriously considering supplier feedback, and are carefully hearing out the challenges faced by them. The evolving supplier-buyer relationship is anticipated to result in streamlining of an effective supply chain, which can further reduce costs, increase customer satisfaction, and differentiation against competition.

Therefore, to ensure right selection and monitoring of suppliers, it is crucial for organizations to develop a strategized Supplier Relationship Management Process. While selecting suppliers, organizations have followed a reactive approach till now. Suppliers were roped in as per the demand situation faced by the management. However, the current times have created the necessity to adopt a strategic approach that would emphasize on improving the overall performance through collaboration and partnerships.

Adopting a strategic approach will help businesses deal with suppliers in a systematic way that includes insightful analysis of their background, performance, and credibility.

Over the years, sustainability in Supply Chain has emerged as a key factor to building resilience for businesses. Organizations are reporting sustainable KPI’s such as GHG emission, water usage, human rights protections, local community support or food and safety security, next to their standard business metrics. The change has also pushed the supplier-buyer relationship to undergo an evolution and grow stronger. Today, suppliers are no more perceived as mere partners in the procurement process, and are now an integral part of the supply chain process. The symbiosis helps suppliers overcome challenges in meeting the sustainable requirements, while it also enables organizations in reducing their carbon footprint and build resilience.