Whether your business is in oil and gas, chemical distribution, building construction, or any number of industries, the lifeblood of your organization is your supply chain. But how can you know that your contractors, vendors, and suppliers aren’t exposing you to risk? More importantly, how can you ensure that your supply chain is satisfying the demands of stakeholders to focus on environment, social, and governance standards? The answer is to build your supply chain with sustainability as a goal.
Step 1: Vet Suppliers
From the basics to the complex, there are a multitude of businesses that are ready to work within your supply chain. Vetting each one to ensure compliance with safety standards, government regulations, and minimum certifications is a time-consuming task. It is also necessary to the foundation of sustainability. Fortunately, services like Avetta can do the hard work for you by maintaining a database of vetted suppliers who upload proof of their compliance to a central database.
Step 2: Build a Supply Chain Map
Understanding the sustainability impact of the entire supply chain is the second step. Your organization must reach out to suppliers and gain an understanding of their environment, social and governance challenges. Together, your companies can strategize and prioritize efforts to satisfy both parties’ demands. Doing so not only identifies suppliers that need to be rationalized, but also strong partnerships built on common goals that need to be nurtured.
Step 3: Share Expectations
It is not enough to simply assume that business partners know instinctively what your organization expects of them and vice versa. Without having a clear understanding of what the other party demands, it’s difficult to consistently meet expectations. That’s why communicating expectations via a code of conduct is a practical solution that not only shares your organization’s values, but also holds partners accountable.
Siemens does an exemplary job in this regard, making sure that sustainability is at the forefront of their supply chain. From the foreword of their Supplier Code of Conduct:
As a company that is active in around 190 countries worldwide, we bear a great responsibility – for our employees, for our shareholders and for the societies in which we operate. Sustainable practices are firmly anchored in our corporate culture, based on our company values of being responsible, excellent and innovative. This applies as well to our Supply Chain Management.
-Dr. Roland Busch, Member of the Managing Board of Siemens AG
Step 4: Establish a Performance Baseline
Knowing your suppliers’ strengths and weaknesses allow you to know where your organization can help fill gaps with your supplier or even decide where alternative suppliers need to be procured. On the other end of the spectrum, partnering with suppliers whose strengths align with your organization’s goals, like environment conservation or employee safety, can help you attract new business, talent, and investors who are focused on those standards.
Step 5: Create a Performance Plan
Constant improvement is not only realistic – it should be expected. Once baselines are established, KPIs are set and an audit program implement, this should establish a baseline to measure improvement. Once all parties agree to the measurements, they should also expect to execute a plan based on those measurements to address any shortfalls. Provided all the other steps have been followed, this should be a stress-free conversation with only the goal of increased sustainability in mind.
Sustainable supply chains never start out that way. Instead, they must be enforced through processes, communication, and standards. Once set, those expectations must be continually enforced, but with regular vigilance sustainability can become a way of life for any supply chain. It all begins with choosing the right suppliers to work with. Avetta can help you build a sustainable supply chain.