Leading Sustainable Organizations
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Your CEO just made a major announcement: From now on, your company will purchase only goods and services from sustainable suppliers. The announcement was not a surprise. The CEO recently signed the company’s first sustainable procurement policy, modeled in part on the guidance from the new ISO 20400 standard. Support for the policy is high throughout the company. But, as the chief sustainability officer, you know there’s a problem: None of your suppliers are sustainable.
Some of your suppliers are deeply committed to protecting the environment. Others provide an excellent working environment for their employees. Still others offer low prices. However, none of them meet all of the minimum economic, environmental, and social performance requirements your organization has carefully developed. Of course, your business needs to purchase from someone; your CEO isn’t about to shut it down.
Overall, your CEO has the right idea: Sustainability requires thinking and action that go beyond your own company. But building a base of sustainable suppliers will take time: Sustainability requires a long-term strategy with strong, sustained senior-level commitment. This was made clear in the recent report “Corporate Sustainability at a Crossroads.” Good intentions are commendable, but they’re not enough.
There are, however, ways you can prepare to engage more sustainable suppliers and assess your current ones.
Accept the need for trade-offs. Real-world sustainable procurement initiatives must begin by acknowledging your company’s current situation. Sustainability is often framed in “win-win” terms. For example, your company believes it can lower costs while reducing its environmental impact and improving its working environment. That’s certainly the goal and it is possible. But, in practice, there are often conflicts between economic, environmental, and social objectives. You may need to compromise in one area to obtain benefits in another. This is particularly true in the short term.
Like all established companies, you will have supplier relationships you cannot simply discard. In some cases, alternatives may not even exist. There may be no sustainable options. Clearly, your company wants to get to the point where trade-offs between economic, environmental, and social objectives are less pronounced and, ultimately, eliminated. Unfortunately, this is not easy.
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Develop a trade-off hierarchy. If you accept that trade-offs can occur, you must decide how to systematically identify and assess them. This will force you to articulate what you value most. You might, for example, decide to employ an ecologically dominant logic, where “environmental and social criteria supersede economic interests.” That could be a tough sell within the company, but it will help drive sustainability over the long term. Trade-offs are about difficult choices.
Articulate a transition pathway. Clearly, the focus of your sustainable procurement initiative will be to source from suppliers that are sustainable. This, however, is likely to require a long-term focus. You will need guideposts to let you know how you are doing along the way. Interim trajectory targets will let you know if you are getting better or worse, but they are a means, not an end. Sustainable procurement is not about supplier effort; it must be performance oriented.
Build supplier capacity. Sustainable procurement is also not about telling suppliers where they fall short. Where practical, your company should help its key suppliers strengthen their sustainability performance. You may even consider collaborating with your competitors. Collaboration is particularly attractive for issues that are not competitive differentiators or that your company cannot address alone. For example, many companies have banded together to improve working conditions in their supply chains. The Electronic Industry Citizenship Coalition is just one example.
Lastly, don’t get too comfortable. You may be sourcing from recognized industry leaders. But, remember: That doesn’t mean they are sustainable. They may be the best of a bad lot. Don’t be satisfied with acceptable performance in some, but not all, areas. Excellent performance on some criteria does not substitute for poor performance in others. Sustainable procurement is difficult to achieve, but it is possible over the long term. Stick with the goals you’ve set and keep looking for better ways to meet them.
Sustainability ultimately requires that your company, and its supply chain, “operate within the thresholds imposed by nature and society.” That is the basis on which your procurement criteria must be built. Win-win alternatives must be developed within those constraints. Set priorities, focus on what is truly urgent, and remember that you don’t need to address everything at once. Make improvements in procurement wherever you can. Don’t forget, though, that getting better doesn’t mean you’ve reached sustainability.
By implementing a sustainable procurement policy, your company has taken an important step. You’ve recognized that you can’t build a sustainable company if none of your suppliers are sustainable. But make sure everyone understands that it’s going to be a long road. There’s no perfect way to start. The important thing is that you get going, make improvements when you can, and keep at it.