Last reviewed 22 June 2020
Laura King considers the role of sustainable procurement as a tool to navigate Covid-19 now and into the future.
Over the past few months, we have all had to confront the fragility of the supply chain — just think back to the weeks of empty aisles and the continuing difficulty to find hand sanitiser. It almost goes without saying that Covid-19 has hit supply chains hard. Many organisations have seen sources of supplies go offline, a surge in demand, or at times, both. In such circumstances, it might be understandable to react with aggressive procurement policies. However, instead, many are arguing that wherever possible companies should adopt a very different strategy.
Writing in Construction News, Mark Beard, Chair of the construction company, Beard, said that: “It is my strong belief — borne out by experience — that companies that have paid their supply chain promptly and created a high level of trust are the ones who have found it least problematic to keep going during the current crisis.”
In its Covid-19 advice on supply chains, IOSH made it clear that businesses “must think about the longer-term impacts of the decisions they are making now in wider terms than their financial risk”; and Sedex (the supplier ethical data exchange) has issued guidance on how to treat suppliers responsibly, including recommending measures such as not cancelling orders and extending delivery timeframes.
Can sustainable procurement help resilience?
Working with suppliers as partners has long been the cornerstone of sustainable procurement policies. This fundamental principle — along with extensive mapping of the supply chain — is used by many to grow brand value by developing better practices around environmental and ethical concerns. However, other characteristics of a sustainable procurement policy, such as better risk management and resilience, are now coming to the fore.
Indeed, many of the steps that companies are currently being urged to take — mapping the supply chain, prioritising suppliers based on risk, understanding suppliers’ profiles and taking action in partnership to drive improvement — form the basis of sustainable procurement practices.
Why adopt sustainable procurement now?
If Covid-19 has taught us anything, it is that when required, trends in behaviour and technology can be accelerated. This acceleration in change is likely to continue post-Covid. Already, the UK Government has committed to a green recovery, and so it would be reasonable to assume that companies and industries aligned to a more sustainable future will see the biggest successes.
Large companies are certainly continuing to tout their environmental progress. According to the latest update from CDP, there has been a 24% jump in the number of large-scale purchasers asking their suppliers to provide environmental data through its disclosure programme. New entrants to the scheme include high-profile names such as Nike and Sainsbury’s.
On the figures, Dexter Galvin, Global Director of corporations and supply chains at CDP, said: "The current Covid-19 pandemic and its economic fallout has shown that building resiliency into our global supply chains has never been more vital".
Consumer attitudes are also changing. In a White Paper published by Bis Henderson Consulting, it predicts that: “Demand may be suppressed by changing consumer attitudes to ‘buying stuff’…” emphasising that the attitudes of the conscientious consumer are likely to be “amplified” by the crisis.
Where to start with sustainable procurement
Although the exact shape of the new “normal” is still unknown, the indications are that sustainability is here to stay and that many companies will be focusing on risk management and business continuity as a top priority. In both of these situations, robust and ethical procurement practices will be critical.
Organisations are very different, and there is no one-size-fits-all solution to issues within the supply chain. However, there are some steps that everyone can take to improve resilience — both in the short and long term.
Mapping the supply chain
Having a clear picture of the supply chain is critical to gaining visibility and understanding of what challenges suppliers face.
Here, it is crucial that mapping exercises go beyond immediate first tier suppliers in order to drill down into the detail needed to establish resilient strategies. To take an example of why this is important, consider the scenario where an organisation “diversifies” its portfolio of first tier suppliers to companies that all use the same second or third tier suppliers. In this example, the supply chain is just as vulnerable.
Developing strong relationships
It goes without saying that those in the supply chain are not immune from the impact of Covid-19 and the need for a people-centred approach throughout the crisis. Often, these industries face unique and significant challenges. Consider, for example, how to ensure driver welfare when hauling goods, or how to re-start a production line given the negative publicity around the meat-processing industry.
Ultimately, if the burden of the current crisis is pushed onto the supply chain, it will inevitably collapse, impeding recovery even further. To counter this, consider asking questions of your supplier such as:
are they experiencing any difficulties as a result of Covid-19 (eg disruption to their supply chains, closure of sites, stock shortages)?
does your custom represent a large proportion of their income?
is there any help that could be offered?
Moving away from the traditional customer-supplier relationship towards a more collaborative partnership may seem counter-intuitive to the cut-throat role of a “typical” buyer. However, in a world of limited resources, having a positive relationship in the immediate-term should help secure supplies.
Over the long-term, collaborative and trusting relationships with suppliers will also drive and incentivise better behaviours and more sustainable business practices.
Mapping the supply chain and realising sustainability across the entire portfolio can be an incredibly complex task. To break it down, it can be useful to start with key, or high risk, suppliers or commodities and then work from there.
Conduct a risk assessment
When undertaking a mapping exercise to understand the reach and profile of suppliers, identify those high-risk industries that need to be prioritised for action by asking questions such as:
where are they geographically based and does this pose any risks — for example, countries with a history of labour exploitation?
do they operate in a high-risk industry for poor employment or environmental practices?
Create an action plan
Determine what the baseline is, and then work to improve performance. You may be able to help suppliers with best-practice design or provide training programmes. Any expectations should form part of the performance indicators or deliverables.
It is worth remembering that you are unlikely to be the first client to request more information about sustainable practices, so as part of any plan, also investigate how to reduce the burden of compliance.
Finally, make sure any changes are embedded into procurement policy. This should not just be a paper exercise, it also means adapting current practices and attitudes. Cultural shifts can take time, so ensure that there is support from senior managers, showcase success stories, and review progress against performance targets.
The global pandemic has shone a spotlight on supply chain vulnerabilities and put the value of sustainability into focus. Going forward, many organisations will be looking at their supply chain design to determine what is required for true resilience.
Conduct a mapping exercise to understand the reach, risk and profile of the supply chain.
Collaborate and work with suppliers to help them adapt and survive; over the longer-term, work with suppliers to improve sustainable practices in their organisation.
Embed sustainable policy and practices into procurement strategies. Favour a collaborative, rather than a combative approach.