How can you work with suppliers to influence your upstream value chain?
In Step 4 of this guide we discussed identifying solutions. If an issue occurs within your upstream value chain, procurement if often where the control or influence to address this lies. A sustainable procurement strategy is a good place to start to ensure you are taking a consistent and holistic approach. This can be built into an existing procurement strategy and sets out what you want to ask of your suppliers, and which of your suppliers you want to engage.
As part of this strategy you may choose one or more of the ways listed below to engage your suppliers.
- Asking questions of the supplier – through questionnaires or tenders and contracts.
- Agree a supplier code of conduct.
- Setting and carrying out reporting or inspection practices through contracts.
- Requesting third party verification.
These approaches require varying levels of resourcing from within your business and your suppliers business, therefore a staged approach if often adopted. The suppliers that are high cost or high risk are usually addressed first and with a greater level of detail than those that are low spend and low risk.
There are numerous guides available to help you assess where you should start or how you can go further. See the useful links box to the right of the page for further details.
- Australian Government Sustainable Procurement Guide
The Australian Government Sustainable Procurement Guide contains useful templates for engaging small suppliers (pages 51-55).View report
1. Asking questions of your supplier
A supplier questionnaire can help you understand how your suppliers view and enact sustainability. It is commonly used during the tender process, to assess potential suppliers and to measure and track the performance of the existing supply chain throughout the contract.
The questions you ask should align with your own values and performance.Four key areas to cover include:
- Suppliers social performance - labour rights, health and safety etc
- Suppliers' environmental performance - environmental policies and improvement initiatives
- Your business' sustainability commitment and purpose of the assessment
- A suppliers' sustainable management of their own value chain
- Use all the information you collect
- Be specific about the information you need so the supplier is more likely to engage
- Let your supplier know what happens if information isn't provided
Use supplier evaluation criteria to compare the sustainability of suppliers' products or services or to identify areas where you may be able to collaborate to create shared value. Many businesses use this tool initially to assess new suppliers and then review suppliers annually or as new contracts arise. See the links to the right of this text for examples.
- Australian Government Sustainable Procurement Guide
For a practical example of a supplier questionnaire see the Australian Government Sustainable Procurement Guide (Page 48).View report
- Supplier Sustainability Principles
BNZ completed a sustainability audit of all major suppliers and developed sustainable procurement requirements, many mandatory, along with a scoring matrix to ensure the suppliers strategies and the way they operate are aligned with BNZ's sustainability values and principles. (Note: NAB is BNZ's parent company.)View report
2. Agree a supplier Code of Conduct
A code of conduct is an agreement that you and your suppliers can sign up to. It relies on their goodwill and self-declaration of performance. A code of conduct, especially one developed collaboratively, can ensure both you and your suppliers are striving to achieve common goals, reducing the risk to you both.
A code of conduct is not monitored and it is up to your organisation to decide if and when to audit your suppliers on their adherence.
<Insert Pages 18 – 21 of NZBCSD 2003 guide>
<Insert examples from members such as BNZ and Westpac>
<Draw on or refer to MED (2008 guide) as many good examples in this>
3. Setting reporting or inspection practices through contracts
Setting out reporting or inspection practices through formal contracts can demonstrate to suppliers you are committed to verifying they are doing what they say they are. Actual verification of performance can, however, be very time consuming and may rely on your suppliers providing you with the right information, staff and access to their sites.
It is essential you understand and communicate why reporting and inspections are undertaken: to help the supplier improve their performance or penalise the supplier for breaches of any terms. In some cases it may be possible to collaborate with the suppliers' other customers to increase efficiencies.
<link to collaboration section>
<Use The Warehouse example here>
4. Requesting third party verification
Requesting a supplier achieve a third party verified standard such as ISO 14001, EnviroMark or Forestry Stewardship Council (FSC) can be an effective way to ensure a minimum standard is met, while reducing the transaction cost for your organisation.
However it can be a significant cost for your supplier – and one that may be passed on through the products and services they provide. There are many third party standards available and your organisation should be clear about why you are requesting a supplier achieves a particular one and if so, what will you do if they don't achieve it? Would you be willing to assist them to achieve it and if you are asking it of your suppliers should your own organisation have it first? More information is available here <insert link to ecolabel section>