Patagonia’s commitment to social responsibility doesn’t end at company headquarters. It extends to management of the company’s entire supply chain, including the selection of suppliers committed to international labor and human rights standards.
The larger the organization, the greater its influence on the creation of more sustainable products. Organizations spend exponentially more on suppliers than on philanthropic efforts, yet both can drive positive social and environmental impact. According to Schonfeld & Associates, companies can spend an average of 25% of revenue on operations, versus just 0.13% on donations to charity through philanthropic endeavors.
Historically, an organization’s social impact was simply a measure of its philanthropic giving. However, in today’s business climate, the selection of responsible and ethical vendors can have a significantly greater social and environmental impact on society. For example, donating to a local environmental group focused on conservation and cleanup is important, but arguably more so is selecting suppliers that aren’t actively contributing to environmental degradation in the first place.
In 2020, thriving and sustainable businesses are no longer focused solely on maximizing shareholder profits at the expense of all other stakeholders. Shareholder expectations are shifting, and consumers, regulatory agencies, employees, and communities are experiencing firsthand the positive value that companies can bring to their communities, beyond just jobs. Stakeholder groups have greater visibility to the positive and negative effects of a business’s operating model, and they expect companies to operate ethically and responsibly, in ways that don’t drive value for a select few at the expense of many.
As part of the ever-increasing evolution of corporate social responsibility and triple-bottom-line business strategy, companies are exploring both traditional and non-traditional aspects of the organization to uncover areas of risk and social and environmental impact.
Responsible or sustainable sourcing, is defined as “the integration of social, ethical, and environmental performance factors into the process of selecting suppliers.” Implementing a responsible sourcing program is largely focused around two key objectives: modifying business processes (mostly in supplier management), and the change management associated with those process modifications. Here’s how to implement responsible sourcing into your operations.
- Understand the ROI and levers for change. Determine the value proposition for your organization, and how to achieve a healthy return on investment. Every organization is different, and the value drivers will resonate differently based on size, geography, and industry. Identify the various levers for change, which can involve CSR and sustainability criteria included in request for proposal (RFP) templates, supplier feedback and communication, and supplier-selection protocols.
- Map targeted outcomes to strategy design. Align stakeholders on the vision and expected outcomes of the program. Outline an implementation roadmap that supports a phased approach, with a sensible respect for the change management needed to ensure success across all internal and external stakeholder groups. Determine appropriate metrics that support a multi-year goal, and drive the right value into the organization. Because there’s no one-size-fits-all strategy, ensure your organization’s responsible sourcing program is strategically aligned with your vision and long-term sustainability plan. For program frameworks and parameters, explore additional information published by B-Corp, BSR, GRI, and EcoVadis.
- Determine key focus areas. Identify your biggest cost drivers in operating your business, and determine if there are 501(c) 3 organizations, B-Corps, or other mission-centric organizations that can provide the same product or service. Community-centric organizations often offer event space and catering, providing a socially responsible alternative to more traditional venues.
- Notify suppliers of your plans. Engage suppliers early, and ensure the program is designed in a way that doesn’t overburden them or create unintended consequences. Partner with key accounts f on program design and implementation timelines. Inform suppliers why your organization is pursuing responsible sourcing, and your expectations of them as you transition.
- Provide support resources for suppliers ready to take action. Prior to go-live, ensure that all the right support resources are available to suppliers, with appropriate contact information as necessary. This could include more information on why your organization is pursuing responsible sourcing, a survey FAQ, and links to other publicly available information about your organization’s values and mission. On go-live day, share the new survey with suppliers and monitor questions or help inquiries as they come in.
- Measure impact and accuracy. Arguably the most challenging aspect of launching a responsible sourcing program is ensuring that participants are providing accurate and relevant survey information. Most survey questions will likely reflect information that suppliers would want to publicize externally, which means most information could be available on websites and marketing materials for audit purposes. Audit responses that seem inaccurate or unlikely, and follow up with supplier contacts to ensure there’s a good understanding of survey questions and the program’s expectations in general. Measure, measure, measure.
- Recognize supplier progress. While identifying high-risk suppliers will help inform future procurement decisions, it’s equally important to recognize the high performers and incentivize future investments in sustainability and responsible business practices. It takes time for suppliers to adopt sustainable business practices, but it also takes resources, will and commitment. This deserves recognition.
Exponentially greater positive societal impact is within reach, and doesn’t require additional funding. Responsible sourcing programs can drive intentional spending practices that require a certain level of social and environmental commitment from suppliers that present less risk and greater partnership value. Triple-bottom-line business strategies can drive substantial value for all types of businesses, as well as greater sustainability and resiliency into the supply chain. Leverage your buying power to incentivize and encourage responsible business practices throughout your supply base, and further your organization’s long-term viability and sustainability.
Jake Gentry is a consultant with Point B, a management consulting, venture investment and real estate development firm.