Imagine this message in your inbox this morning:
Hello Mr./Mrs. Supplier,
in order to continue our path towards a more sustainable organization, we need you to answer the following questions:
- What is the percentage of organic compound in the raw materials you provide to us?
- What is your rating on the latest CDP report?
- Does your company use ingredients from palm oil?
- Are your suppliers tracking their fertilizer usage?
- Can you guarantee that all your 3T materials are sourced from certified smelters?
- How is your organization addressing air emissions from ammonia production for fertilizer manufacturing?
- Does your organization track energy consumption at the manufacturing facilities that produce the polymers (e.g. polypropylene, polyethylene) used in your products?
Please respond the latest by end of this week so we can have a detailed conversation around your answers in our bi-annual supplier assessment meeting next week.
Best Regards, your favorite Buyer
These scenarios were part of the keynotes and our ARIBA Solutions and Sustainability round table discussions this week at ARIBA LIVE 2014 in Las Vegas.
Beyond providing software solutions supporting ‘sustainable’ product positioning, compliance checking and energy management, many of our customers are positioning Sustainability as part of their procurement strategy, leveraging Sustainability increasingly as competitive differentiation in decision-making. The goal is to use sourcing & procurement as the inflection point for comprehensive and long term sustainability strategies along the entire value chains.
Sustainability data collection from suppliers to allow more responsible sourcing decisions has direct impact on design decisions based on Sustainability, more sustainable production and manufacturing, transportation and logistics, all the way to point-of-sales and finally EOL (end-of-life) decision making.
SAP and ARIBA reached a big milestone in their efforts to integrate environmental, economic and social aspects into supply chain management. More than 2600 customer have already registered since the roll-out of our new SAP PSN capabilities beginning of this year.
We partnered with TSC (The Sustainability Consortium) to identify hotspots and improvements opportunities across more than 100 different product categories.
The global 2000 companies spend $12 trillion with their suppliers today. Leveraging the size and scale of business networks towards more environmental and social sourcing and procurement decision can ‘move the needle’ and influence all industries.
Supply chain networks evolved from compliance at lowest costs (examples: code of conduct, regulatory compliance (RoHS, etc.)) to more active management of suppliers in form of supplier evaluations and checking of product attributes (example: FSC certification). Active collaboration with suppliers and generating indices for a broad variety of sustainability aspects is the latest incarnation of that trend.
Starting with the biggest retailers in the world making commitments to base a large percentage of their procurement decisions on a sustainability index, this will quickly become adopted by other industries. Here are my reasons why:
- Many industry giants have already introduced sustainability scorecards and questionnaires to their supply chains, but not within business network settings and integrated into backend enterprise processes
- A broad based industry approach based on network infrastructure can improve sustainability all the way upstream to farmers and smallholders; because to answer the questions asked by your customers you have to collaborate with your own suppliers and reach upstream
- It will change the way sourcing merchants are evaluated (namely with additional specific sustainability objectives) and how design decisions are made
- Suppliers now have the opportunity to benchmark themselves against the market and use product category specific best practices and expert opinions (so-called TSC CSPs (Category Sustainability Profiles)) to improve and optimize
A systematic collaborative network approach on product level on this scale has never been tried before.
According to a latest study social impacts and environmental concerns are continue to rise as the top priorities for manufacturers and consumer. The result is a
need to more accurately quantify and communicate the sustainability of raw materials, substances, ingredients and products.
The challenge before us, then, is to work collaboratively together, developing an approach that drives better understanding, standardization, and informed decision making.
To find out more how SAP works with TSC product sustainability toolkits, follow this link.