Your checklist for building a sustainable value chain

Posted in on Dec 7 2022,by Pamela Newenham Pamela Newenham
Your checklist for building a sustainable value chain

Pamela Newenham

Pamela Newenham

Marketing Manager

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Sustainable Value Chain Checklist

In our world, everything is connected, so understanding the impact of our sourcing and buying decisions is critical. Ethical and responsible procurement is now an economic and reputational imperative, and in some contexts, a legal requirement.

Sustainable purchasing principles can be applied to the purchase of all major items: energy, water, paper, technology, equipment, product components, travel and transportation...the list goes on. The environmental impact can include what went into making your products or the product you buy, such as toxic compounds, to the resources they use in operation, right through to their disposal.

Companies must build supply chains that are resilient, diverse, and future-proofed for global sustainability challenges. Purchasing carbon neutral products and services is an excellent way of managing Scope 3 or supply chain emissions .

The GHG Protocol classifies a company’s greenhouse gas (GHG) emissions into three ‘scopes’:

  • Scope 1: direct emissions from owned or controlled sources.
  • Scope 2: indirect emissions from the generation of purchased energy.
  • Scope 3: indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions. These GHG emissions are typically related to goods or services that an organisation procedures.

1. Set your Ambition

Define your business case - it should align with your company’s overarching sustainability objectives, and articulate the benefits of responsible procurement. This will help you get senior-level buy-in, which is vital.

Benefits of a Sustainable Value Chain

  • Mitigate risk and protect your reputation by maintaining a sustainable value chain.
  • Generate cost-saving through productivity. Better collaboration with suppliers will highlight new opportunities, increased efficiency, labour productivity, and reduction in material input or energy.
  • Innovation, new business opportunities and boosting the development of new products and services.

2. Define and Communicate your New Vision and Ambition

What are the high-level objectives and outcomes of your procurement ambition? Explain how your plans will support the wider business’s sustainability objectives. Communicate with your suppliers - create a new code of conduct and give an appropriate timeline to meet your new criteria.

Existing Frameworks

There are lots of existing frameworks you can draw upon to help you develop your code, here’s two:

  • ISO 20400: a guidance standard for organisations to integrate sustainability within procurement.
  • UN Global Compact Ten Principles: a principle-based framework for businesses in the areas of human rights, labour, environment and anti-corruption.

3. Know your Supply Chain and Assess your Risk

Build transparency, this may take some time and effort but just get started, review your tier-one suppliers for starters. It’s a process of continuous improvement.

You’ll soon understand high-priority areas in your supply chain - for example, you could focus on larger categories of spend or on countries or sectors commonly associated with sustainability risks, or your critical business purchases or areas with few/no alternative suppliers?

With better visibility or traceability of your supply chain, you can start to identify sustainable business risks and opportunities. You will then start to understand the social and environmental issues across your supply base.

For each category of spend, analyse the risks identified to understand their potential impact on people and the environment and their likelihood and frequency of occurrence. Scoring, ranking, and mapping risks will help you prioritise, track and share

To decrease the burden on suppliers, there are well-established disclosure systems, such as the Carbon Disclosure Project (CDP) or technology to help your team gather all the information, so your employees don’t have to chase down this information.

What to ask your suppliers?

The questions you should ask suppliers largely depend on your industry, the countries you source from, and the risks you have identified at the category level. The following list provides some example questions you might consider including in self-assessment questionnaires or tenders.

  • Do you use an Environmental Management System (EMS) to manage your environmental performance and responsibilities?
  • Does your organisation currently measure and report on key environmental metrics, including: energy usage; transport and travel-related emissions; waste production; water consumption? Have you set targets to reduce these metrics? Do you have evidence of improved performance on these targets?
  • What proportion of your electricity comes from renewable sources?
  • What is the proportion of recycled or reclaimed or bio-based content within your products?
  • Do you offer refurbished or remanufactured options for your products?
  • Do you offer a take-back scheme and take responsibility for your products at end-of-life?
  • Is the packaging of your products reusable and/or recyclable?
  • Do you offer a packaging take-back scheme?
  • Do your products contain any materials which are deemed toxic to the environment? If yes, what are these toxic materials? What are your plans, including targets, to decrease their use?

Some suppliers might demonstrate a best-in-class approach to monitoring a sustainable value chain, while others may need on-site visits or further engagement to understand their challenges.

4. Build out your Strategy

You have identified risks and opportunities across your supply chain - now you can build out a responsible procurement strategy with actions and owners and timelines - a roadmap with defined ambition and goals. Basically how your purchasing team will deliver on these goals, the risks and opportunities, critical categories and suppliers to target, with clear metrics for success.

5. Embed Sustainability into Everyday Processes

Ensure that sustainability requirements are included along the entire procurement lifecycle. Examples:

  • Are you building sustainability into your tender process?
  • What are the environmental and social issues associated with this category of spend?
  • Can I include sustainability in supplier contracts e.g. ask supplier to reduce / report on annual emissions as part of the CDP
  • How might my sustainability priorities be addressed within specific categories?
  • Is there a potential to substitute this? Could we avoid buying new?
  • What are competitors doing in this category?
  • Is there a market for small and medium enterprises (SMEs) and social enterprises? Are my processes accessible?
  • What will the disposal requirements be for this product or service?

6. Enable your Team with Climate Literacy Training

Provide climate literacy training for your entire team. To ensure buy-in and action - your team must understand the impacts of climate change on their own lives, the planet and what risks it poses to the business. CoolPlanet provides online sustainability courses to do just that.

Include sustainability in your procurement team’s objectives, setting a common goal for your procurement staff.

Translate the team’s sustainability objectives into personal targets, making it clear that sustainability is everyone’s responsibility.

7. Collaborate with Suppliers - Positive Engagement

Move away from a compliance-only lens or a pass / fail model, build long-term relationships fostering mutual respect - and build an environment of continuous improvement.

Help your suppliers to improve their sustainability credentials and to understand why it's important to do so.

When asking suppliers to adapt their practices to adhere to your sustainability standards, be mindful of how your own purchasing practices could negatively impact them.

  • Are there specific categories with consistent late payment?
  • Are expected lead times putting too much pressure on suppliers?
  • Do your buyers regularly change orders or specifications at the last minute?
  • Do your buyers systematically push for low prices?

These purchasing practices pressure suppliers and often drive unethical labour practices further down the supply chain. Research shows, for example, the connection between low prices and forced labour in tea and cacao supply chains.

If you do discover unethical practices, instead of immediately changing suppliers (which often leads to loss of employment for local communities) work with the supplier to understand the root cause of the issue and to develop a plan to prevent any recurrences.

8. Collaborate with Competitors, NGOs & Local Communities

Gain leverage by working together to tackle common challenges. Seek out companies who use the same suppliers or work with industry groups to reduce duplication and standardise requirements. This will lessen the burden on suppliers.

If you are a small player in your supplier’s customer base or you don’t have the capacity to engage directly, collaborating across the industry with existing networks, trusted NGOs and local governments will help you increase influence and credibility with suppliers.

9. Communicate and Continually Learn

Regularly communicate your progress regularly to the wider business. How you can measuring your impact? Be transparent, about successes and challenges. Make sure you provide information that is accessible and can be easily shared so everyone can learn from your journey.

There are a lot of sustainable procurement guides available and plenty of resources online in this space to help you understand the best approach for your specific industry. Otherwise, talk to CoolPlanet directly for industry-specific advice.