How the quest for sustainability is changing the supply chain
You don’t have to be particularly interested in politics or social sciences to know that a jolt is going through Germany and Europe right now. The Fridays for Future movement has grown from a small group of students to a global movement. The call of this movement for the creation of political framework conditions for a more sustainable design of our economy, has indeed put enormous pressure on the economy and created more sensitivity for this topic. The first episode of our webcast (https://adconia.de/publikation/) already addressed the challenges this poses for procurement and supply chain designers.
Social responsibility is certainly nothing fundamentally new that has yet to establish itself. On the contrary, the majority of companies have already integrated corporate social responsibility into their action guidelines for years. Since 2018, capital market-oriented companies have already been required by law to provide information on all non-financial aspects of their activities as part of CSR reporting. However, social responsibility and thus also the transparency of reporting have so far always ended at the boundaries of the company’s own operations.
Due to the social demands as well as the hardly foreseeable consequences of climate change, the United Nations, the G20 and also the G7 countries have put sustainability on their agenda. Instead of only reporting their CO2 footprint, companies are now increasingly required by the upcoming Supply Chain Act to align and review their entire supply chain with sustainability criteria. Legal regulations will initially only apply to the big players on the markets, but they will pass on their requirements to their suppliers and service providers, forcing SMEs to act as well.
Procurement as an interface to the supplier market
Procurement is the interface to the supplier market and in this function is responsible for the design of supply chains. It is therefore only natural that it will be the task of procurement, together with the management team, to meet the sustainability requirements and to design the processes accordingly. In the short to medium term, we see six fields of action that procurement and supply chains from SMEs to corporations will have to deal with:
- Sustainability strategy: Definition of a sustainability strategy derived from vision and mission and backed up with clear guidelines for action and measures
- Risk management: Further development of risk management with regard to risk potentials such as human rights, corruption or environmental protection
- Supply chain transparency: Creation of increased transparency across the entire supply chain, including continuous monitoring and reporting.
- Recycling: Implementation of a recycling concept in line with the sustainability strategy and ensuring compliance with recycling regulations within the supply chain
- Cultural change: change management to change the awareness of the entire workforce. Managers as communicators and role models
- Supplier development: further development of supplier relationship management to a partnership approach to sustainability goals
Most of these fields of action do not involve a fundamental reinvention, but rather the further development and expansion of instruments that are already known and often already implemented. The implementation of these fields of action does not contradict the stakeholder demands for cost reduction and EBIT increase. On the contrary, the usual goals can even be supported by the right sustainability strategy.
The prerequisite for this is a structured approach to the definition of strategies and goals as well as the identification of the action areas to be prioritized. With our experience from strategy projects in procurement and supply chain, we support companies in setting up a sustainability strategy.
Consultant. ADCONIA GmbH