Sustainability isn’t just a ‘nice to have’ anymore – businesses don’t have much of a choice in the world of 2024.
With ESG regulations now locked in place, organisations must comply or risk significant penalties. In order to achieve sustainability objectives more effectively and efficiently, collaborating with suppliers represents a real opportunity to get there faster.
When businesses work with suppliers to reach sustainability goals, they need access to the most accurate supplier data possible. However, obtaining this data isn’t necessarily straightforward. Ultimately, suppliers own it and need to provide it.
This means it is in a business’s interest to form and maintain a great working relationship with suppliers.
Anthony Payne, Chief Marketing Officer of HICX, the supplier experience platform, discusses the benefits of being supplier-centric and how giving brands a better experience adds value to organisations.
What is the link between businesses collaborating with suppliers, and suppliers being able to give them helpful sustainability information?
Anthony Payne: “There is a direct link. A good supplier experience makes it easier to communicate with suppliers because it allows for collaboration, whereas the opposite can harm communication efforts. For example, when businesses need ESG information, many will survey a broad group of suppliers even though the questions don’t apply to everyone. This is easier for the business. But it means every supplier who receives the survey must investigate whether it applies to them. The experience is more likely to frustrate suppliers than to help them offer the best information.
“Rather, we can help suppliers to help us by communicating better. The way forward is to segment suppliers into groups and send them only relevant requests. This creates a more positive experience in which suppliers are better able to provide helpful information.”
What about their motivation to help sustainability efforts – does this also rely on supplier experience?
Anthony Payne: “Yes, because if the culture of the business-supplier relationship is one in which each party looks out for themselves, then suppliers won’t be terribly motivated to offer the most helpful ESG information. It’s just human nature. Whereas if a business creates an environment in which suppliers can collaborate with them, then they’re more likely to become a customer-of-choice. This is a status worth having. A recent HICX survey showed that while 49% of suppliers would go the extra mile for their biggest customer, as many as 73% would make the effort if this was a customer-of-choice.
“Ultimately, if businesses give their suppliers a good experience, then more suppliers should be willing to provide helpful ESG information – even if it means spending a bit more effort.”
What are some of your most effective strategies and best practices to building a future-proof ESG framework?
Anthony Payne: “Businesses can futureproof their ESG frameworks by viewing suppliers as value-adding partners. This principle suggests three ways to engage suppliers…
“First, have a corporate mindset in which every employee views every supplier as a valued partner. If COVID-19 taught us anything it’s how much we rely on suppliers. When the pandemic hit, non-strategic suppliers such as providers of IT equipment and protective personal equipment suddenly became as central to operations as those who supplied the main ingredients. If we take the view that ‘all suppliers matter’, then it becomes easier to treat them all as partners in the same eco-system and we can work together towards common goals.
“Then, through this lens, we can market to suppliers. In customer marketing, a business would require a certain action from customers – such as getting them to buy a product, read a newsletter or attend an event – and so would motivate this behaviour. Similarly, in procurement, we can appeal to suppliers in a way that encourages them to participate in ESG activities, for instance, by providing helpful carbon emission information.
“One way to encourage the desired behaviour with suppliers is to segment them into the appropriate categories and send them only necessary messages. This is what a marketer would do with customers. By viewing suppliers as partners and introducing supplier marketing and segmentation, you can improve suppliers’ experience and get the most from them.”
What are the biggest barriers that organisations face to delivering more sustainable practices within their organisations?
Anthony Payne: “Once supplier data has been captured, however, the challenge continues because it must be maintained as a golden source of truth. Not having accurate supplier data is a major barrier to delivering sustainable practices because it means that businesses cannot see who all their suppliers are and what they’re doing.
“Thankfully, with robust onboarding and data management in place, businesses can keep their supplier data up-to-date and accurate so that it can inform good sustainability decisions.”
What is the best way for procurement teams to assess and prioritise the suppliers they work with? How do you juggle environmental impact vs value to company?
Anthony Payne: “The best way to assess and prioritise suppliers is to have visibility. Businesses need to know who all their suppliers are and what they’re doing, at any given time. Only once leaders are informed, can they make the best environmental decisions.
“It’s imperative to manage environmental impact with suppliers, regardless of how much value they bring a company. Apart from the moral obligation to protect the environment, businesses also have their reputations to consider. An environmental infringement that gets exposed – no matter how deep in the supply chain it might occur – is very likely to cause reputational damage, which can have a knock-on effect on sales and share price.
“In addition to brand reputation, businesses can also face expensive fines, if their suppliers are found to fall short of environmental regulations.”
What are the challenges and opportunities when it comes to supplier diversity?
Anthony Payne: “The challenge is to source the right suppliers in the first instance and then be able to report on their activity. We know that finding diverse suppliers in the UK can be difficult. While the US market is more mature, supplier diversity is growing here. Considering this, many suppliers that could qualify as “diverse” are not yet certified. Additionally, when diverse suppliers are indeed certified, there is no guarantee that their skillsets will match your needs.
“Thankfully there are ways in which businesses can proactively grow their networks of diverse suppliers. For starters, leaders can equip people within the organisation who work with suppliers, to find diverse suppliers by educating them and putting policies in place. Further, there are practical steps one can follow – such as defining the criteria for what qualifies a supplier as diverse in various territories and then finding the right businesses by searching online directories, desktop research and asking for recommendations.
“Once suppliers that are considered to be diverse are indeed found, they bring much value. Apart from being able to make a positive sustainability impact, the expectations of regulators, shareholders and consumers can be met. The by-product of this is a positive reputation which has economic benefits.
“The opposite logic also applies, and failing to capture supplier diversity value becomes a missed opportunity. For instance, when third-party expectations to support supplier diversity are missed, this can damage brand reputation which hurts sales figures and share price. Also, the unique offerings that diverse suppliers can offer will be missed, and with it the chance to make an impact. Therefore, it’s sensible to make the most of the diverse suppliers that you worked so hard to find.”
Do you have any tips for readers who want to make the most of the diverse suppliers they have sourced?
Anthony Payne: “Yes, you can start by knowing that it’s possible to make the most of the diverse suppliers you find. You can do this by following a stepped approach.
“Start by onboarding new suppliers who are considered ‘diverse’ with processes that reliably capture their information. This way, your diversity programmes can be well-informed. It’s hugely valuable to be able to tell, at the touch of a button, where a particular supplier might be based. Also, what qualifies them as ‘diverse’? And while they might hold diversity status today, how can we be sure it still applies tomorrow?
“With all the right information collected at the start of each relationship, then it’s a good idea to instill processes that drive everyone who works with suppliers to spend more with those who are considered as diverse. As more diverse suppliers join the organisation, then you need to keep their data accurate. Do this by digitally transforming the procurement landscape to make master data a priority. With robust processes, it’s possible to maximise your relationships with all suppliers.”
How optimistic are you about the future of ESG within procurement?
Anthony Payne: “I am very optimistic about the future of ESG within procurement, because, we’re seeing the supplier experience movement grow in the UK and the US. For instance, we’re seeing new job roles come out in this area as the principle is popularised. And we know that having good Supplier Experience Management programmes in place sets up business to procure in the most ESG-friendly way possible.
“And so, with Supplier Experience Management becoming increasingly popular, we believe that the future for sustainability is bright.”
