Against a backdrop of increasing consumer concern and highly publicised climate strikes, gaining visibility of sustainability in the supply chain remains a challenge for most multinationals – even though many are dedicating increasing time and resource to improvements.
These findings are captured in a recent report from sustainability rating and scorecarding firm Ecovadis. The company’s 2019 Sustainable Procurement Barometer notes that, despite the growing availability of assessment tools in the market, a large proportion of organisations still cannot track how sustainable their suppliers are. This is typically because businesses fall into a ‘compliance trap’, where procurement concentrates on collecting documents and ticking boxes at the expense of longer-term improvements.
Ecovadis’s research is in line with what we see at organisations in the Procurement Leaders network. While a small majority of companies we work with have metrics in certain sustainability areas – such as reducing carbon dioxide emissions or improving human rights – few understand and can reduce the impact of suppliers in a meaningful way. This is shown in our KPIs for sustainable procurement report.
As well as the overreliance on compliance that Ecovadis highlights, Procurement Leaders has seen several additional factors that contribute to poor monitoring of supplier sustainability. Most commonly, companies target improvements in a certain area but do not implement the tasks necessary to effect change. Several teams that Procurement Leaders has spoken to have targets for removing child and slave labour from their supply chains, for example, but lack the mechanisms to do so or means of seeing if improvements are being made.
The reverse of this problem is also common. Many procurement teams have sustainability-related tasks that they carry out – and these are often heavily compliance- and audit-focused, as Ecovadis finds – but lack targets in the areas that they need to address most urgently. Both scenarios lead to flawed monitoring data and inhibit the effectiveness of a sustainability programme.
As a priority, procurement teams should draft sustainability targets that cover both intended impact area and the tasks to improve those areas. In practical terms, this might be a key performance indicator for a buyer to reduce water usage in their category by engaging in collaborative projects with suppliers. Monitoring performance in this way helps ensure the procurement team collects meaningful data on the most relevant sustainability areas for the organisation and helps the function quantify its efforts.
This, of course, requires a procurement function to commit its staff to prioritise sustainability improvements, sometimes above existing deliverables – a commitment many functions remain reluctant to make. Ecovadis’s report finds that 39% of suppliers view their customers’ sustainability efforts as being important “only on paper”; an impression that inevitably affects information that is shared and undermines any long-term changes.
For procurement to take steps forward in sustainability, functions must ensure this commitment is in place and incentivise staff to focus on sustainability through relevant and meaningful targets. In doing so, the function can better gain visibility of supplier sustainability and make lasting improvements that impact the business.