Sourcing and Procurement

Enhancing enterprise sustainability through supplier management

Prioritising sustainability is more than an ethical necessity. It is fast emerging as a crucial driver of growth. In a world beset by climate change, depleting resources, and social inequity, organisations seeking to thrive in the long term must look beyond profitability and cost-effectiveness and add sustainability to their business goals.

To align with international climate change policies, governments are increasingly pushing businesses to comply with green norms. Additionally, the thrust towards conscious consumerism and ESG investing is also driving organisations to adopt sustainable practices to stay relevant to their customers and competitive in a global market.

This article explores the role of supplier sourcing and supply chain sustainability management in supporting green practices and upholding human values.

The role of supply chains and suppliers in enterprise sustainability management

Over 90% of a business’s greenhouse emissions stem from its supply chain network. Managing supply chain sustainability, therefore, is pivotal in reducing the organisation’s carbon footprint.

Besides the environmental impact of corrupt supply chains, businesses must also consider the socio-economic violations that may originate from unethical sourcing and labour practices across their supply networks.

Sustainable supply chain management (SSCM) involves embracing environmentally, socially, and financially viable practices across all sourcing and procurement processes. It thus forms a vital part of a business’s comprehensive sustainability strategy. >/p>

Since suppliers are at the core of supply chains, SSCM starts with them. By involving suppliers in sustainability goals, businesses can make them strategic partners in unlocking growth through ESG practices while mitigating the risks associated with unethical sourcing and procurement.

Driving sustainability through supplier management

Enhancing enterprise sustainability through sourcing and supplier relationship strategies is a continuous process, starting with first-tier supplier selection. Here is a holistic framework for supplier sustainability that includes environmental, social, and ethical considerations:

  • Prioritise sustainability in supplier selection
  • Unethical sourcing corrupts the supply chain and puts your organisation at financial and reputational risk.

    Recently, three of the world’s largest electronics brands faced hard scrutiny for sourcing from supplier organisations that forced employees to work in unethical conditions. Two footwear and apparel giants faced public outcry for partnering with suppliers that discharged toxic waste in China’s rivers.

    While it is difficult to ensure that your entire supply network aligns with your sustainable commitments, it is crucial to ascertain that your first-tier suppliers have a robust ESG strategy. While sourcing suppliers for new projects, add sustainability requirements to the weighted evaluation criteria.

    Some strategies for sustainable supplier selection are:

    • Environmental considerations
    • Verify if the supplier uses a certified environmental management system (EMS).

      Evaluate their energy sources, transportation practices, packaging methods, waste disposal methods, and other practices that may impact their carbon footprint. Assess their understanding of the circular economy model and commitment to resource usage optimisation.

    • Social considerations
    • Evaluate the supplier’s stand on fair wages, worker welfare, safety practices, and ethical sourcing. Ask about their Diversity, Equity, and Inclusion (DEI) initiatives, corporate social responsibility (CSR) practices, and employee training and sensitisation programmes.

    • Governance and compliance
    • Request information about the company’s anti-corruption policies, regulatory compliance, and transparency practices. Investigate any past legal infringements and assess their adaptability to changing regulations. Inquire how the company, in turn, sources its suppliers.

    By partnering with first-tier suppliers that are mindful of their business’ emissions, fair trade practices, compliance regulations, and their own first-tier suppliers, you can significantly increase supply chain transparency and mitigate the risks associated with unethical supplier practices.

  • Promote sustainability through supplier relationship management (SRM)
  • SRM, a crucial component of sustainable supply chain management, helps companies evaluate their suppliers’ capabilities and build mutually beneficial partnerships in procurement.

    Businesses must go beyond the traditional Quality, Cost, and Delivery (QCD) approach to SRM and add sustainability to their supplier management strategies.

    Driving sustainability through SRM is a continuous process that involves -

    • Clearly communicating your sustainability expectations to current and potential suppliers
    • Collaborating with them to ideate, develop, and implement sustainability initiatives
    • Developing sustainability KPIs to measure supplier ESG performance
    • Incentivising green practices, such as the use of eco-friendly packaging materials
    • Encouraging the use of digital technologies, such as smart contracts, to preserve natural resources
    • Promoting local sourcing for labour and raw materials
    • Encouraging lean manufacturing
    • Conducting supplier audits and performance reviews to ensure that sustainability remains a core value
    • Tracking your suppliers’ first-tier suppliers to ensure ESG compliance further down the supply chain

Establish best practices for enterprise sustainability management

  • Lead by example
  • Strive to be a sustainability leader in your industry. Establish internal short- and long-term sustainability goals, drive accountability, and invest in continuous employee sensitisation towards ESG and DEI requirements.

  • Choose compliant first-tier suppliers
  • Insist on first-tier suppliers setting their own sustainability goals and following up on their performance.

  • Involve lower-tier suppliers in sustainability initiatives
  • Lower-tier suppliers have the least visibility in the supply network. They often belong to countries with lax or non-existent ESG regulations and, hence, may lack the awareness and expertise to enforce sustainability practices.

    It is crucial to involve them in your sustainability initiatives while factoring in their unique limitations.

  • Set realistic expectations
  • Avoid imposing unrealistic deadlines or placing orders that exceed your suppliers’ capacity, as this may lead them to demand overtime from employees, violate worker welfare norms, and resort to unethical sourcing and procurement practices.

How can Infosys BPM help?

Infosys BPM offers AI-enabled procurement business process outsourcing to help you make data-driven procurement decisions. Our services and technology are designed to assist you in transforming your procurement processes and driving sustainability through the value chain.

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