ESG initiatives significance in your Supplier Management Strategy
A global pandemic, water shortages, wildfires, deadly floods across the globe, and labor & human rights issues have propelled sustainability into the spotlight.
Nearly 2 out of every 3 consumers see sustainability as an important issue, and they are willing to use their influence with governments and organizations to ensure their concerns are addressed. We all are standing witness to these events over the past year and businesses are recognizing it as their call to action.
Organizations are investing sustainability and diversity concepts into their business processes, and they are committed to the success of these programs.
For a sourcing professional who may be primarily evaluated by savings and avoidance, ESG can be seen as cumbersome or a competing workstream. As a solutions provider, we seek to provide solutions that integrate this into a single workstream so this can be addressed as one process effectively and quickly.
For example, our integration with Tealbook can make the requirement to discover and include diverse suppliers efficiently as part of the source-to-pay process.
From within the sourcing process, you can leverage the full capability of the TealBook supplier discovery tool with a click of a button.
We enable access to over 4.8M supplier records including a large number of qualified and diverse suppliers.
The advanced search features and integration between the TealBook and Ivalua platforms allows users to quickly identify suppliers and bring the enriched supplier information directly back into the Ivalua platform. This creates a supplier information profile complete with diversity categories, certification data, and contact information. This data can be added directly to the sourcing event or onboarding process, transforming a multi-week process to mere hours-even minutes.
It is important to understand the complexity of ratings and multiple frameworks (GRI, SASB, ISI 2600) that make it difficult to monitor across suppliers.
Also, ESG looks different across suppliers. At EcoVadis, we take into consideration 3 aspects when assessing companies’ ESG performance: location, size, and industry.
A plastic manufacturer based in Asia with 1,000 employees may require a focus on topics like environment and labor & human rights topics while a small software company based in California may focus on topics of ethical business practices.
Ecovadis’ score (considering 21 factors) synthesizes multiple frameworks and the assessment can be used as a consistent measure across the supply base. This lets the procurement team focus on improving the supply base instead of managing a scoring model.
Establish a baseline for your data: Do you have confidence in the data you have about your suppliers?
Our research found 82% of procurement leaders discovered that their supplier data was less than adequate during the pandemic – less than adequate!
Don’t set goals or start improvements, until you have scrutinized your supplier data and have a trusted baseline. We have helped customers examine their baseline data and found a 235% increase in diversity spend, just by verifying their baseline data.
My advice is you treat ESG in the current supply base like you treat any important risk as you decide how to attack it. Start from a category basis and look at which categories can have the most impact on areas like Waste or Working Conditions and assign these categories a rating.
This information can be worked into strategies for the categories, develop standards, educate the suppliers, implement corrective actions / improvements. This is where software solutions can gather, synthesize, and report, and collaborate at scale to support these initiatives, but a strategy is still necessary and the program will be a living program and the systems need to be adaptable.
We believe that the true power in enabling diversity is by identifying potentially diverse suppliers and engaging with them to meet the specific qualification requirements, as the specific certifications can vary by customers and/or region. Allowing self-certified or potentially diverse suppliers, can identify more diverse and innovative suppliers. Our customers can then collaborate and coach these suppliers on achieving the correct certification.
View our archived webinar, Connecting the Dots Between ESG Objectives and Source-to-Pay Processes, and reach out to us today to discuss your supplier management strategies.
Jarrod McAdoo brings over 26 years of procurement experience to Ivalua as a product expert for the Analytics & Insights, Supplier Management, Spend Analysis, and Environmental Impact Center Solutions. A frequent thought leadership contributor for the Ivalua Blog, Jarrod has worked across multiple industries, including higher education, public sector, retail, manufacturing, and engineered products. Prior to his time at Ivalua, Jarrod held various roles in category and supplier management—including strategic sourcing and procurement team management where he led teams to implement shared service procurement models and Source-to-Pay systems. Jarrod holds a Masters in Business Administration (MBA) from Duquesne University and a Bachelor of Science degree from Carnegie Mellon University.