Trends and best practices change quickly in the worlds of both sustainability and supply chains, and 2021 was no exception. As a follow up to last year’s comprehensive list, Seb Butt, Craft.co General Manager, has provided insight into this year’s most important do’s and don’ts of sustainable supply chains.
Do: Understand how your company defines and measures Scope 3 emissions.
Greenhouse gas emissions are typically categorized into Scope 1, Scope 2 and Scope 3. While the first two refer to direct emissions produced, controlled or purchased by a particular entity, Scope 3 measures those that are derived from an organization’s entire value chain. Evaluating and monitoring supplier performance has always been touted as important, but it’s historically taken a back seat to firms’ internal sustainability and ESG initiatives - until now.
Last year’s COP 26 Conference demonstrated an increased recent focus on science-based targets - which ultimately strive to limit global temperature rise to 1.5 degrees and achieve net zero carbon emissions - thereby putting renewed pressure on procurement and supply chain leaders to invest more resources in supplier intelligence technology and monitoring their supply chain.
“It’s been spoken about for quite some time, but it was only at COP 26 that so many governments signed up to it and as a result, governments have gone back to their countries and disseminated that target down to the business sector,” said Butt.
Greenwashing occurs when an organization portrays their products, services or operations to be more environmentally sustainable than they are in reality. While it won’t be eradicated completely, stronger accountability measures mean that companies who engage in greenwashing will likely suffer reputation damage, not to mention loss of contracts and credibility.
In addition to more robust supplier monitoring and legislative efforts, consumer demands and ground-up activism are keeping closer eyes on whether firms are actually delivering on the values they profess to embody. According to Deloitte research that surveyed over 10,000 consumers in 2020, 42% had changed consumption habits because of their stance on the environment, and 21% had encouraged others to switch their purchases to a company whose values aligned closer with theirs on a particular issue.
Do: Enable your procurement colleagues to take courses and continue their education on sustainable supply chain management.
Sustainable pledges and summits are now resulting in more clearly defined legislation and policy changes. Extended producer responsibility laws, which shift the burden of resource disposal and recycling to the companies who manufacture them, have become increasingly common in Europe and some US states. Germany’s Supply Chain Due Diligence Act, which mandates supplier assessment of human rights and environmental risks, goes into effect in 2023 and similar bills have been drafted throughout the world, including the US.
But staying on top of new regulations in addition to proactively seeking out industry trends takes collective effort. Groups like the Sustainable Procurement Pledge offer guidance on a myriad of best practices, as well as a network that can assist locating educational resources, classes and more. Offering procurement and supply chain professionals the opportunity to better understand the sustainability landscape and their respective role demystifies the challenges they face and empowers them to align their goals with stakeholders.
According to Butt, an increase in courses on sustainable procurement over the last 12 to 18 months indicates that not only has demand spiked, but that educating supply chain leaders on ESG is more convenient than ever.
Don’t: Be in a rush.
While adhering to sustainable practices should remain a priority for procurement professionals, it’s also important that any decisions, such as top-down process changes or new technology, is carefully considered and evaluated from multiple teams and employees prior to implementation. Purchasing innovative software for supplier intelligence or workflow automation, for example, is useless if the strategy and buy-in from internal stakeholders was done haphazardly.
“I’ve spoken with many procurement professionals whose companies had invested a lot of cash into a new piece of technology or data, but there was no strategy behind why they’d done that. That means they’re more hesitant the second time to try something new because they didn’t get the ROI from it previously, ” said Butt. “Make sure you have an overarching strategy before rushing into something.”
Do: Communicate your goals to external stakeholders and empower your suppliers to align with them.
Your company may have clearly defined ESG and sustainability goals, but if you do not educate suppliers on how to comply with your code of conduct and guiding principles, your ESG goals will not be realized. Providing consistent tools, training and resources during the onboarding process, as well as clearly articulating the intentions behind CDP reporting and other assessments will help streamline the data collection process.
“Figure out how you measure Scope 3 within your company but don’t just keep that knowledge internally. If you’re a big company, you should share that information, so that you all start speaking the language and your suppliers understand what’s expected of them,” said Butt.
Suppliers also receive countless information requests and arduous questionnaires, which often create confusion - not to mention concern - if they are asked to submit metrics that they haven’t disclosed previously and don’t understand why the data is being asked of them. Maintaining strong relationships will also ensure that this information is being sent to the proper teams and individuals.
“It’s generally the largest suppliers that have the most influence and can help the smaller suppliers that they work with. You don’t want to say you can’t work with a supplier anymore because they are not in line with your objectives - it’s about enabling them to get them to do what you need them to be doing.”