Companies have historically focused on costs, quality, product characteristics and on-time delivery as key performance indicators of their supply-chain management and engagement efforts. These days, companies are making voluntary commitments to responsible sourcing to ensure the products and services they purchase are created by supply partners who embrace and act upon sustainable business practices.
These leading companies and their supply-chain partners recognize the value in continually improving the social, environmental and economic benefits of all products, and their associated components, brought to market.
The business case for responsible sourcing can vary by company based on numerous issues such as industry challenges; areas of operation and local laws; stakeholder expectations and concerns; and an organization’s overarching mission, values and strategy. As I mentioned in a previous article about supply-chain management, it is important to fully understand why your company engages in, and what it expects to gain from, certain activities. Responsible sourcing is no exception. For example:
- Do you want to eliminate or mitigate risks in your supply chain?
- Do you want to improve specific supply-chain efficiencies?
- Are there supply-chain sustainability goals toward which you are working?
- Is there an opportunity for you to collaborate with a segment of your supply chain on sustainability-related issues?
- Are there opportunities to further enhance the sustainability and reputation of your company through your supply partners?
Below are four business-case reasons for incorporating sustainability-related considerations into your procurement process.
- Risk Management: Companies that develop a thorough understanding of the social, environmental, and economic risks of their supply chain are better prepared to control costs and protect their market share and brand from potential delays, interruptions or reputational issues associated with these risks.
- Asset Utilization and Continual Improvement: Many companies establish sustainability strategies and goals related to key operational inputs that drive greater efficiencies and continual improvement both within their own organization and those of their supply partners. The sustainable management of inputs such as water, energy, employee retention and packaging materials not only decreases operational costs but also drives innovation as companies and their suppliers seek to identify new or improved methods for more efficiently managing assets.
- Product Differentiation and Innovation: Over the past three to four years, there has been an increase in the number of companies and supply partners establishing formal partnerships to develop more sustainable products. This type of supply-chain engagement often results in the development or improvement of products that better align with customer demands; allows for entry into a new or emerging market; results in a critical product differentiation from competitors; or more adequately addresses key stakeholder concerns.
- Enhanced Image and Reputation: As many other companies, Tyson Foods has found that sustainability touches every aspect of our company and its operations. Accordingly, we define sustainability in a way that brings responsibility and accountability into every business activity and process, including those related to responsible sourcing. This commitment and outward demonstration to upholding sustainable business practices can positively impact the image and reputation. Moreover, it can build a culture of responsibility and pride with employees and relationships of trust and credibility with external stakeholders.
Taking responsibility for the social, environmental and economic impact of your company’s operations is not enough. You must look beyond the four walls of your organization.
Procurement practices built upon a foundation of social, environmental and economic sourcing principles better enable a company to mitigate or manage supply-chain risks, strengthen supplier partnerships, and reinforce stakeholder trust. Additionally, whether the primary focus is compliance with legal requirements; protecting human rights; providing safe working conditions; respecting the well-being of animals; or ensuring protection of the environment and conservation of natural resources, leading companies understand the actions and decisions of their supply partners (or lack thereof) can impact their company’s brand and reputation.
As stated by Ruth Kinzey in a June 26, 2013, article titled Suppliers, Responsible Sourcing, and Your Company’s Reputation: “If you haven’t thought about responsible sourcing practices at your organization, you should. If you have developed protocols or procedures and put them into practice but haven’t shared this information with your customers, you’ve missed an important communication opportunity. If you have adopted such standards and publicized them but haven’t instituted an audit or check-up process with your suppliers, now is the time.”
