The Supply Chain Sustainability School was founded in the UK in 2012 and is now established in Australia with over 500 members. Ahead of his address at the Global Forum on Sustainable Procurement at the Australian Technology Park in Sydney on 2 May, Shaun McCarthy explains work to achieve more sustainable procurement.
Sustainable procurement – using procurement to support wider social, economic and environmental objectives, in ways that offer real long-term benefits.
It is called many things: responsible procurement, green procurement, social procurement, ethical sourcing, responsible supply chain management … the list goes on. There are many myths and legends associated with these terms, including the assumption that it costs more.
The role of the procurement professional is to address competitive markets for goods, works, services, utilities, etcetera, in a way that delivers value for money.
If the client has sustainability risks or opportunities to address them then the procurement professional needs to use that competitive market to deliver those objectives along with all the usual ones (cost, time, quality, for example).
Most organisations deliver 60-80 per cent of what they do through their supply chains so it should be logical to assume that they require a very strategic approach to managing their supply chains and that sustainability objectives should be part of that strategy.
The primary focus should be sustainable supply (what a supplier can do to contribute to your sustainability objectives), the secondary focus is the sustainability of the supplier (how well the supplier manages their own sustainability objectives).
A client posed an interesting question recently: “If you have bids from Supplier A and Supplier B, and Supplier A has better sustainability credentials but Supplier B is 10 per cent cheaper, which would you choose?”
The answer in most cases is of course Supplier B, but I would recommend that a condition of the contract would be for Supplier B to improve their sustainability performance in a way that is clearly defined in the contract. So, the next time I go out to bid, I have two suppliers that can satisfy my demands. Simple, isn’t it? Not really. Procurement is rarely as simple as that but the point is we need a competitive market to deliver value in a way that does not perpetuate the myth that sustainability costs more.
If we expand this thinking to a large company it becomes a little more complicated. Expand it further to a whole sector, particularly one with deep and wide supply chains, then we start to understand the magnitude of the challenge.
Sustainability is a big, ever changing picture including carbon, waste, environmental management, air quality, ethics, social value, indigenous employment, health and safety, etcetera. It is not possible to address these issues by just asking a supplier to complete an online portal (an efficient, hi-tech way of collecting useless information), writing stuff in a contract, auditing the supplier to within an inch of their life and punishing them if they don’t achieve it.
Sustainable supply chains don’t grow on trees; they need to be developed.
The other important strategic issue is measurement. There are too many supplier rating schemes that add cost and little value to the supply chain and not enough real time management of performance.
It is necessary to understand what contribution the supply chain is making to your sustainability objectives in real time so any performance anomalies can be dealt with at the appropriate time. We manage quality and performance in real time, why do we report sustainability retrospectively each year?
The Sustainability Tool is a cloud-based solution to this problem that enables performance to be evidenced in a way that allows interventions in the event of poor performance and straightforward collection of evidence and summary data to show things are going well.
So, we need to manage sustainability in our supply chains the same way as we manage everything else. The new standard ISO 20400 will set out how to do this. I hope the introduction of a global standard will help us all to make a difference.
Shaun McCarthy is chair of the UK Supply Chain Sustainability School and director of Action Sustainability.