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In this guest post, Procurement Leaders invites Ecovadis' Pierre-Francois Thaler to look at what sustainability priorities should be top of mind for executives in 2016.
2015 was a big year for sustainability. Following a very successful climate change meeting in Paris, the rise of due diligence regulations in France, the UK and US, and a united front of world leaders and multinational companies in the fight against climate change, we've had a year of amazing progress.
COP21, the UN Climate Change Conference in Paris that culminated in an international agreement between 195 countries, is arguably the most noteworthy sustainability milestone of 2015. The seven commitments laid out at the conference will not only have a considerable impact on governments, but on private sector companies as well.
The supply chain represents 50-70% of a company's sustainable footprint, so incorporating sustainable procurement practices into a company's supply chain strategy will be critical for making real progress toward global sustainability and COP21 commitments. This goes beyond multinational companies and includes small and medium-sized enterprises as well – when companies implement sustainable supply chain practices and encourage the same in their suppliers, this causes a domino effect throughout the entire supply chain, ultimately creating a more sustainable and greener globe.
In light of last year's milestones, sustainable practices will become a key objective for companies in the year ahead, with procurement in a unique position to lead the charge. There are a few key factors every procurement executive should keep in mind as we forge ahead into 2016.
Sustainability: a new pillar for protecting brand reputation
Investing in sustainable procurement is necessary to remain competitive in today's rapidly-changing marketplace. Consumers are becoming more sensitive to sustainability issues and are demanding deeper transparency into the products they buy. Product information that was once nice to have is now required for success in today's dynamic and volatile industries. And with consumers and the media more interested and vocal around ethical supply chain practices, not making the move toward sustainability could risk companies their biggest asset – brand reputation.
A sustainability mindset drives business value
In addition to increased brand reputation, there are many other compelling business benefits of adopting a sustainable approach to procurement, including increased profitability and cost reduction. Over the past five years, the annual returns of publicly traded “green giant” companies have averaged 11.7% higher than their leading competitors. Ikea, Nike, Whole Foods, and six other green giants are generating over $100bn in annual revenue from their green business lines alone.
Investing in sustainability is good for the planet, and for business. The organizations that best integrate sustainability into their systems and processes will experience a direct correlation to sales, profitability and cost reduction in 2016.
Influencing change management to shift ingrained thinking and behaviors
Once a company commits to sustainability, they'll need to affect change throughout the organization and with their suppliers. Sustainable procurement means more than reporting and ensuring compliance with certain laws. Establishing a system for measuring goals, communicating them internally and externally and incentivizing suppliers to improve performance is crucial for success.
Regularly measuring both your own and your suppliers' progress toward CSR goals and engaging suppliers on sustainability issues that affect your business – and providing guidance on how to attenuate the consequences of these issues – will help facilitate sustainable business practices within the procurement function and throughout the entire global supply chain.
Now that we have a framework for fighting climate change, we must take the next step to address other sustainability concerns, such as fair labor practices, human rights and anti-bribery campaigns. Regulations that address these issues are a great starting point, but they aren't enough. To make real progress in sustainability, we must get the companies on the frontlines on board with implementing sustainable practices that trickle-down throughout their organization and the rest of the supply chain.
Pierre-Francois Thaler is Co-founder and Co-CEO of EcoVadis.
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.