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Getting Supply Chain & Procurement Involved with Sustainability

A new Institute for Supply Management looks at how far organizations have come on the sustainability scale, and how far they still have to go.

Over the summer, the Institute for Supply Management (ISM) and Boise Paper joined forces to conduct a study on how sustainability is perceived and implemented by U.S.-based supply management professionals across three pillars—social responsibility, environmental impact, and economic awareness.

Through this exercise, the organizations learned that:

  • Ethics, conduct, health, and safety are the most important sustainability attributes to supply management organizations and companies.
  • Between 48-67% of supply managers say they would pay more for the most common spend categories, including capital equipment, office supplies, and manufacturing components, if they were offered sustainably.  
  • Non-manufacturing companies are less likely to prioritize working with U.S. suppliers than their manufacturing counterparts.
  • Generally, 46-63% of companies are willing to pay more for U.S.-made products like capital equipment and manufacturing components.
  • Companies with 10,000-plus employees are more likely to have sustainability goals in place and have them integrated into daily operations vs. smaller companies.

“Sustainability only continues to grow in importance, for consumers, the companies that serve them, and the supply management function that orchestrates the company’s sustainable policies, processes, and performance,” ISM’s Thomas W. Derry said in a press release. “A great track record in sustainability is linked to higher revenues, profit, and company valuations. It’s here to stay.”

Helping Companies Create Value

ISM’s new research also reveals that a focus on sustainability can help companies create value while also positively impacting the environment, being responsive to customers, and improving communities. In “A Supply Management View of Sustainability”, ISM points out that the supply management business function is “critical to any organization’s success in implementing policies, processes, and practices that improve sustainability and social responsibility.”

And while many companies have attended to sustainability and social responsibility within their own operations, ISM says fewer have engaged their supply chain. This leaves both risks and opportunities unaddressed. “In fact, for any given company, many and sometimes most of its environmental and social impacts exist upstream, embedded in the products and services purchases and the business practices of its suppliers,” ISM points out in its report.

“This makes it all the more important for a company’s supply management organization to lead efforts that contribute to the company’s broader sustainability and social responsibility objectives,” ISM states. “In turn, suppliers should be held accountable for working with their own suppliers towards sustainability improvement, and those second-tier suppliers with their suppliers, and so on. In this manner, the entire supply chain is engaged.”

Procurement’s Role in Sustainability

Some of the more difficult sustainability-related decisions that supply management professionals face include:

  • Should a company avoid sourcing from a region where the risk of child labor is high, or should it incur the cost of inspection and certification?
  • If packaging material impacts are significant, should packaging weight be reduced at the risk of decreasing product safety during transportation?
  • Should a company disclose its list of suppliers, or will this put those suppliers at risk for targeting by activist stakeholders?

The answers to these questions are rarely straightforward, ISM admits. Due to the global nature of supply chains, for example, local regulations, markets, and culture must all be factored into the equation.

“Unlike other areas of business where best practices are universal,” ISM explains, “the best solution for a sustainability and social responsibility issue may be highly contextual and even change over time.”

5 Steps in the Right Direction

To get started down the right sustainability path, the Sustainable Purchasing Leadership Council tells organizations to:

  1. Understand the relevant environmental, social, and economic impacts of their organization’s purchasing.
  2. Take responsibility for the relevant environmental, social, and economic impacts of their purchasing by committing to an action plan.
  3. Deliver on commitments to improve the relevant environmental, social, and economic impacts of their purchasing.
  4. Actively promote internal and external innovation that advances a positive future.
  5. Solicit and disclose information that supports a marketplace of innovation.

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