Sustainability and Supplier Strategy
The CPO's Corner
How does sustainability affect your supplier strategy beyond cost savings?
Success in achieving cost savings has been the “bread and butter” for Procurement organizations for years. There may be a savings target mandated by the company CFO, or a commitment made by the CPO to upper management to reduce costs by a certain amount each year. The effect tends to be a focus on making the numbers in the short term – this month, next quarter.
Sustainability is about looking to the future, to ensure that the suppliers you depend upon will be financially viable years from today. It includes following good practices to protect the land and our resources. Food producers in Canada have programs with supplier partners to ensure that items grown across the globe like cocoa and coffee are produced through agriculture programs that help farmers increase yields and rejuvenate their plantations. Closer to home, Canada is a global leader in sustainability with some of the most rigorous laws in the world for protecting forests and ensuring sustainable forest management.
But investing in the long term is just that – an investment. Foregoing, perhaps, a short term quick win for the right supplier for the future.
How do you balance the two?
A suggestion is that you ensure that you level the playing field by being crystal clear on the sustainability expectations when conducting an RFP. If two competitors have vastly different long term focus, the one who is not investing in the future is likely to be the one with the lower price today. There should be a sustainability “sniff test” before there’s any competition on other elements like cost or speed. It should be right there with financial stability as a first round differentiator. Procurement professionals should understand their suppliers’ sustainability programs, certifications, goals and achievements against those goals as well as you understand the prices they are charging. If they don’t have the program, they don’t advance.
But what if there’s a push from a senior executive at your firm to use a supplier that doesn’t make the sustainability grade? Then the best you can do is communicate – raise a red flag and make sure that any compliance officer in your firm is aware. As objectively as possible you measure and report – and if you keep doing those two things the pendulum will swing in the right direction.
Finally, those of you creating category strategies must ensure that you include a section on sustainability in your strategies. What are the leaders in each commodity doing to ensure that sustainable practices are being followed? Understand what those up front are doing, and incorporate that into your plans and practices commodity by commodity.
Joanna Martinez is a global procurement / supply chain leader and the founder of Supply Chain Advisors LLC. She is a frequent lecturer and blogger on procurement topics and also provides coaching, strategy development, training, and cost reduction opportunity assessment. Her clients range from Fortune 100 companies to technology startups.
As either regional or global CPO, Joanna has led transformation initiatives for companies in many different sectors: among them Johnson & Johnson (consumer products), Diageo (beverage), AllianceBernstein LP (financial services) and Cushman & Wakefield (real estate services, property management). She has also held client-facing roles, effectively giving her the opportunity to “sit on both sides of the table”.