Supplier Relationship Management - Beyond ESG & Supplier Diversity

SECRETS OF SUPPLY CHAIN SUCCESS: BEYOND ESG & SUPPLIER DIVERSITY

SRM, SUPPLIER RELATIONSHIP MANAGEMENT, Sustainability, Supplier Relationship, ESG, supplier diversity
Blogs, Rules, 3. Reshape Supplier Relationships

OVERVIEW

ESG, sustainability and supplier diversity are pressing items on every senior leader’s agenda. As organisations look to decarbonise value chains from end to end, procurement needs to forge strong relationships with key suppliers in the supply chain. 

But your organisation won’t be the only one… your competitors will also be vying to be the customer of choice with those same suppliers. Collaboration and partnerships with suppliers is essential to ensure that these initiatives are more than just a ‘tick-box’ exercise and actually lead to mutually positive outcomes.

As part of the New Rules of Procurement Engagement, we asked leading SRM ‘changemakers’ to share their insights on what’s the real impact (and strain) of ESG and supplier diversity on long term business growth.

Read on… or Download the How to Reshape Supplier Relationships eBook now!


ES-GROWTH

Environmental, Social, and Governance (ESG) isn’t just the latest buzzword or ‘nice to have’; it’s a requirement to stay ahead of the curve. 

With mounting pressures from customers, employees, investors, and regulators, embracing ESG is a necessity for staying relevant and thriving in today’s fast-paced environment. 

In a new study, KPMG US surveyed 550 board members, executives and managers at public and private companies in North America and Europe, and across a wide range
of sectors. 

The survey found that as regulatory pressures build for organisations to disclose sustainability information, scaling up ESG capabilities is emerging as a key priority for many companies, with 90% of respondents reporting plans to increase their investments in ESG over the next three years. 

Top investment areas are as shown in the chart below.

KPMG statistics show ESG is emerging as a key priority

Scaling up ESG capabilities is emerging as a key priority for many companies in KPMG report

But there is still a lot of confusion and vagueness about how to embed ESG into business practices and measure their impact on both financial performance and societal well-being. Without this clarity, ESG is in danger of being seen as a set of one-off initiatives, another marketing campaign or just a branding exercise.

But how can you make ESG an integral part of business ‘as normal’ and see ESG not as ES-Governance but as ES-Growth? Our New Rules Changemakers share their insights on this question.

THE REAL WORLD OF ESG

​​ESG is not just one thing. To different industries, companies, suppliers it will have different connotations and require different tactics. 

“The meaning of ESG varies based by industry. There is the environmental impact, there is the governance impact; here in the US, ESG involves diversity. So we need to understand what we are talking about and what the company needs, because people must enter the conversation equipped with proper knowledge about what is at stake. Whether your company produces chemicals or is in the staffing industry will affect your impact on the planet and on society.” Pierre Laprée, SpendHQ

Legislation also plays a huge role. It’s not enough to put a ‘tick in a box’; neither is regulatory compliance achieved by just putting the responsibility onto suppliers.

Many suppliers will not have the capacity, or capability, to immediately comply with evolving regulations making adherence and enforcement a critical obstacle to address.

“95%+ of organisations out there globally are SMEs. And the further you go upstream in the supply chain, the smaller those companies become. And a lot of those companies are struggling to pay the bills; to keep the lights on. They don’t have the processes or standards in place. But that [ESG] legislation is being pushed out.” Sheldon Mydat, Suppeco

According to MAKE UK, more than three quarters (77%) of firms are receiving ESG requests from their customers, but less than half say they have the resources required to meet them, highlighting a need for greater support

“Things are changing now. Legislation has teeth. These things are very important… but you still can’t impose them. It doesn’t work; it’s been tried.” Sheldon Mydat, Suppeco

TAKE SUPPLIERS WITH YOU

As mentioned in the introduction, there is enormous value, experience and insight within your suppliers that can be unlocked by building good, value based relationships. ESG is a great case in point. 

While suppliers might not know all the specifics of the legislation, they do know the intricacies of the product/service they’re providing. 

“Go outside of your own building. Procurement is an interface between the internal needs of the company and the market, so go and talk to your suppliers. There’s a good chance that they only do one thing for a living and they probably do it very well and with a lot of depth, so ask them. Get the knowledge where it is, and they will actually help you understand what you should be doing and why you should be doing it.” Pierre Laprée, SpendHQ

To leverage this expertise in support of ESG strategies, it’s imperative to have a partnership mindset with all suppliers, (not just tier 1) built on open communication, transparency and visibility. Read more on this topic in our The Death of Strategic Suppliers blog.

PwC reports, “The need to ensure supply chain continuity (in response to supply chain disruption) and rapidly evolving regulations in the area of ESG (duty of care, CSRD, etc.) mean that companies need to improve visibility beyond their tier 1 suppliers and streamline data sharing between stakeholders.”

“The fact is organisations need to create more visibility, not just for them as customers, but for their suppliers; their suppliers need the visibility. Give the suppliers the visibility; the ownership; the access. Give them involvement; take them on the journey. It’s the only way to make this work. Otherwise your ESG, CSR, programmes of improvement aren’t going to get much further than your tier one suppliers.” Sheldon Mydat, Suppeco

“Visibility only goes as far as your tier one because you can’t see around bends, you can’t see beyond the boundaries of a contract, so you need to bring your suppliers on the journey. [And] they need to bring their suppliers on the journey; and so on and so forth.” Sheldon Mydat, Suppeco

The need to improve supply chain visibility is reinforced by a global survey by MIT Technology Review which identified the largest supply chain problems going forward—and poor visibility is the biggest threat.

Visibility is the biggest threat to supply chains statistics

Visibility is cited as the biggest supply chain threat in a MIT study

EMBRACE SUPPLIER DIVERSITY

Although there has been some recent backlash to ESG, an undeniable positive upside is the awareness and promotion of supplier diversity. 

These two simple words have the potential to do so much good in the often ruthless world of commerce. 

By actively championing suppliers from previously underrepresented groups, companies can promote equity, create economic opportunities for marginalised groups, foster innovation, and enhance overall business performance.

“Look at diversity, equality and inclusion [in terms of]… ‘As an employee; as a colleague; am I better in a workforce that is diverse, where we have a lot of different cultures, lots of different perspectives on the world?’ And if that applies to us, will it apply with our suppliers? Do we believe that having a diverse supplier base is useful or not? Start with this [question] internally.” Pierre Laprée, SpendHQ

“There is absolutely a recognition that innovation comes through better diversity. It’s a fact. You can’t innovate unless you have diversity of thought. That’s the key thing. So we are seeing much more deployment of KPIs and barometers that measure levels of diversity with the supplier ecosystems.” Sheldon Mydat, Suppeco

“It’s important to create an equitable place for smaller organisations to be involved, to take responsibility. This stuff needs to be done but if you want to engage; encourage the right behaviour; then you need to practise inclusion. You need to bring them along on the journey; make them feel included.” Sheldon Mydat, Suppeco

DELIVERING BUSINESS GROWTH

So, can ESG initiatives, sustainable and responsible sourcing practices, and supplier diversity really deliver business growth, or has it been oversold?

Growth has to be measured to be valued. 

Just like the pencil marks on a kitchen wall recording a child’s height, ESG and its counterparts need to be measured to see first the progress, then the growth, and ultimately the value. 

And to do this you need data—both qualitative and quantitative data.

“It’s really hard to get started with ESG, so we’ve worked with our clients to start making things visible. Sometimes it’s really hard because a lot of the benefits you can find in ESG might be qualitative as opposed to quantitative, so it becomes really hard to track them. What we’ve been helping some of our clients do is simply flag their projects as ‘hey, we’ve touched a notion of ESG, be it in terms of sustainable procurement or diversity and inclusion.’ They’re not trying to measure KPIs. They’re just trying to see, to begin with, where they have addressed that question.” Pierre Laprée, SpendHQ

MAKE UK state four in ten (45%) of manufacturing companies are not aware of their suppliers’ performance against their targets.

With these metrics and reporting mechanisms in place, the next step is to go deeper. To set shared targets with suppliers and find the right ways to meet these goals.

“Once you have done that and piqued the interest of your C-suite, then that’s when you can start industrialising the big items, make them measurable and set targets. However, the moment you set targets, you can no longer succeed without your supplier. You’ll need to start socialising these goals and targets with your supplier and engaging the relationship, not only on a transactional basis, but on an ESG approach where you work with them to find the right levers you can pull to succeed.” Pierre Laprée, SpendHQ

Lastly, to embed these growth metrics into the business and allow for wider adoption and scale, technology takes much of the complexity out of ESG

“More than ever, technology can help. It can help you track, measure, and identify factors that you would not otherwise be able to see. For example, we help our clients identify their diverse supplier spend and also position themselves in a benchmark. Benchmarking doesn’t only allow you to take pride in the fact that you’re good; it also helps you identify where you are a laggard, because that’s most likely where you will find the ‘low hanging fruit’ that will help you actually move the needle and do the right thing.” Pierre Laprée, SpendHQ

“Embracing sustainability and supplier diversity isn’t just a checkbox exercise; it’s a strategic imperative to stay ahead. Relying on outdated manual input tools such as spreadsheets isn’t going to cut it. Forward-thinking companies are leveraging advanced supplier performance platforms as well as supplier onboarding technologies, with integrated ESG and AI functionality, to gain real-time insights into supplier performance. These tools tend to have reporting capabilities and dashboard functionalities so that they literally have information at their fingertips.” Temeena Hussain, Market Dojo

“Make an assessment of where you are, find opportunities, and then make sure you follow up on these initiatives and track their results. That’s how technology can help you achieve more when it comes to ESG.” Pierre Laprée, SpendHQ

READY TO TAKE THE NEXT STEP IN IMPROVING SUPPLIER RELATIONSHIPS & PERFORMANCE?

Accelerate supplier onboarding from weeks to days using Market Dojo Supplier Onboarding

Seamlessly integrated into Market Dojo’s suite of eProcurement solutions, Supplier Onboarding is designed to support fast-paced and efficient onboarding.

Gain total visibility into suppliers’ onboarding status to effectively manage risks and ensure compliance with ESG standards with automated ESG Supplier Profile Questionnaires.

Learn how Aggreko achieves ‘best in class’ supplier onboarding with Market Dojo. Read Aggreko’s story here.

“Within months, we migrated 8,500 existing suppliers and onboarded 3,000 new ones. We also migrated 55,000 documents which provided comfort to stakeholders in knowing that they hadn’t lost the last four years of work.” Procurement Lead, Aggreko

Our Sourcing Specialists are on hand to discuss your supplier management requirements, book a demo of Market Dojo’s solutions.

In the next blog in this series, we’ll take a look at the emerging trends that will impact supplier relationships.

Can’t wait…? Download your copy of the Reshape Supplier Relationships eBook now!

Download How to Reshape Supplier Relationships eBook by Market Dojo

MORE RESOURCES:

MORE FROM THE NEW RULES:

 

June 13, 2024
Get A Demo Today

Kontakt

Consultation Call
Vorname*
Nachname*
Firmañía*
Telefonnummer*
Email*
Ihre Wünsche
Lead Gen
Lead Source
Lead Source Detail

Contacto

Consultation Call
Nombre*
Apellido*
Compañía*
Teléfono*
Email*
Me interesa
Lead Gen
Lead Source
Lead Source Detail

Contactez-Nous

Consultation Call
Prénom*
Nom*
Société*
Téléphone*
Email*
Interessé par
Lead Gen
Lead Source
Lead Source Detail

GET IN TOUCH

Consultation Call
First Name*
Last Name*
Company*
Phone*
Email*
I'm interested in
Lead Gen
Lead Source
Lead Source Detail

GET IN TOUCH

Consultation Call
First Name*
Last Name*
Company*
Phone*
Email*
I'm interested in
Lead Gen
Lead Source
Lead Source Detail

GET IN TOUCH

Consultation Call
First Name*
Last Name*
Company*
Phone*
Email*
I'm interested in
Lead Gen
Lead Source
Lead Source Detail

GET IN TOUCH

Consultation Call
First Name*
Last Name*
Company*
Phone*
Email*
I'm interested in
Lead Gen
Lead Source
Lead Source Detail

GET IN TOUCH

Consultation Call
First Name*
Last Name*
Company*
Phone*
Email*
I'm interested in
Lead Gen
Lead Source
Lead Source Detail

GET IN TOUCH

Consultation Call
First Name*
Last Name*
Company*
Phone*
Email*
I'm interested in
Lead Gen
Lead Source
Lead Source Detail

GET IN TOUCH

Consultation Call
First Name*
Last Name*
Company*
Phone*
Email*
I'm interested in
Lead Gen
Lead Source
Lead Source Detail

GET IN TOUCH

Consultation Call
First Name*
Last Name*
Company*
Phone*
Email*
I'm interested in
Lead Gen
Lead Source
Lead Source Detail

GET IN TOUCH

Consultation Call
First Name*
Last Name*
Company*
Phone*
Email*
I'm interested in
Lead Gen
Lead Source
Lead Source Detail

GET IN TOUCH

Consultation Call
First Name*
Last Name*
Company*
Phone*
Email*
I'm interested in
Lead Gen
Lead Source
Lead Source Detail

GET IN TOUCH

Consultation Call
First Name*
Last Name*
Company*
Phone*
Email*
I'm interested in
Lead Gen
Lead Source
Lead Source Detail

GET IN TOUCH

Consultation Call
First Name*
Last Name*
Company*
Phone*
Email*
I'm interested in
Lead Gen
Lead Source
Lead Source Detail

GET IN TOUCH

Test