Lack of Supplier Sustainability Can Harm Your Company

Posted by Bob Pojasek on Sep 5, 2012 2:50:00 PM

Editor's Note - Dr. Robert Pojasek is the leader of sustainability at Shaw Environmental & Infrastructure in Stoughton and an adjunct professor at the Harvard Extension School where he teaches “Strategies for Sustainability Management.”

Do you really know about the ethics and practices of your suppliers? What will you do if one of those suppliers is cited for bad corporate behavior?

Sustainability RoundtableIt wasn’t long ago that your purchasing department was focused only on cost, reliability and quality.  Sustainability is now being added to your mix as a result of inquiries from your larger customers.  You may find yourself getting more involved with the way sourcing and purchasing is done looking forward.

Perhaps your organization is a supplier of services or products to customers who really care about sustainability.  It is not uncommon to be queried about your sustainability program as part of the purchasing or sourcing process that you go through with these customers.  You begin to realize that the customer is also holding you responsible for your purchasing.  So no matter where you may reside in the value chains (i.e., a supply chain that includes the customer) that use your products and services, you need to be sure that you can implement an effective sustainability program and extend it into your supply chain.

Despite what you may read, it’s not just about environmental stewardship.  Your suppliers may engage in human rights violations or outright corruption.  When they are caught, there is a media frenzy to find out what other companies are potentially complicit in this activity.  To build awareness of these risks, many companies include supplier “codes of conduct” in the purchasing cycle to make sure that the organizations that you do business with are following all environmental, health & safety, social and economic legal requirements

Environmental, social and economic problems in the supply chain cause operational, regulatory, and reputational risks to all of the companies in the value chain.  In today’s economic climate, you are exposed to more risk due to the increased responsibility for what your suppliers do or do not do.  Integrating sustainability criteria into procurement procedures (including the supplier code of conduct) will help your organization make better choices, not only with sustainability in mind, but also for your own bottom line.  Your “top line” can also improve as your results of sustainability efforts become known.

It is important that your supply chain management efforts go beyond just adding sustainability criteria to procurement specifications.  You need to determine what is happening with the criteria and collecting evidence of the changes actually taking place.

The key to engaging suppliers and creating effective partnerships involves two-way communication. Suppliers need to provide  evidence of their conformance to specifications.  They will want to know how this information will be used and how that use would affect their business with your organization.  You need to know about how your efforts will translate to more work with your customers.

Supplier engagement that leads to working partnerships should create continual improvement throughout the supply chain.  This, in turn, will lead to competitive advantage in the marketplace for reasons that go beyond sustainability.  In the next AIM Sustainability Roundtable, we will be taking a close look at supply chain management and sustainability.

Join an AIM Sustainability Roundtable

Topics: Supply chain, Business Center, Sustainability

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