Sustainability as a competitive advantage
Sustainability is not a buzz word any more, the consumers are demanding it and it is part of their purchase and consumption decision criteria. Because of this, it has become not only a minimum standard for the Consumer Goods industry to meet, but is about to become a key competitive advantage. Many companies have already realised this and built their company strategy, marketing and positioning based on sustainability.
In order to operationalise and market sustainability as a competitive advantage, it is imperative that sustainability be embedded and mainstreamed across the entire echo-system of the company. Any IT solution in support of doing this, should provide for the following capabilities:
- The ability to monitor suppliers with regard to sustainability with two dimensions
- their own sustainability framework
- the company’s sustainability criteria
- The ability to update, review, document and maintain the sustainability information and data
- in a timely manner
- with limited administration effort
- The ability to report on sustainability
- in real-time
- in a way that is meaningful to consumers and thus can be translated into marketing and/or advertising
It is thus critical to define sustainability with regard to both:
- technical and operational criteria e.g. % supplier with sustainability score > X
- criteria which can be used for consumer communication and marketing e.g. 80% Sourced from suppliers within a radius of 50kms.
A few quick words about why there is a need for a company to interest itself in the supplier’s sustainability framework as a best practice:
- it is reasonable to assume that a supplier which does not have his/her own sustainability framework, is not necessarily in a good position to ensure that the sustainability criteria of the company is met and adequately monitored. Further,
- suppliers typically have more than 1 customer, they would have to maintain more than 1 different customer sustainability framework, which is expensive and resource intensive. Ideally, their own sustainability framework is the aggregation of the various sustainability requirements placed upon them…
- suppliers due to the multiplicity and diversity of their customer requirements might be in the better position to provide the information to:
- help customers have a sustainability framework which is along a general standard
- identify the most relevant sustainability criteria within the industry/market
- render the sustainability framework more comprehensive.
- benchmark their scores against sister companies, competitors etc…
- improve their scoring systems to better reflect the competitive advantage they wish to achieve.
Here below an example of what is meant:
A company in the food industry, as part of its business strategy wants to focus on sustainability with regard to 4 main criteria, for customer communication purposes:
- Bio diversity
- Local Sourcing
- Ecological impact
These criteria could translate in the sustainability framework as:
- % waste created per 1 ton produced
- Average % Seed variety purity
- Average seed variety per 1 ton produced
- % inputs sourced within a 100 km radius
- kwh per 1 ton produced
The decision to report at company or LoB or plant level vs. at finished product level is crucial as it drives the choice of the solution(s) required to generate reliable and accurate data with regard to sustainability.
- While reporting at a generic level, puts the onerous of monitoring sustainability on the suppliers and a requires a dedicated supplier management and onboarding solution,
- Reporting on an output unit basis, requires additional internal operational monitoring at a more granular level and cutting across many solutions.
In the first case, an IT solution which provides for sustainability scores for suppliers, is a good option. Sustainability scoring can be done directly by computing supplier answers to questionnaires, collecting certificates etc.. and scoring/aggregating these in the solution, to come to a score at company level with regard to the supply chain’s sustainability. It suffices then, to adjust these scores with the company’s own score, to come to a composite score. The same data and/or scores can also be sourced from intermediate certifying institutions and integrated into the company’s sustainability management solution to come to the same determination, to further increase transparency, reduce biases and workload.
In the second case, IT solutions are needed which not only address the overall scoring of the suppliers with regard to sustainability, but require sustainability data/information on a transactional and shipment or unit basis. The sustainability data sitting on top of the transactional data is then carried over into the company’s production and ERP systems. This data/information exchange could happen at transactional level, either through ERP integration between suppliers and company or using a network to carry this data, which would then migrate into the company’s own production and ERP systems. This means that the Supplier Management system is integrated with the ERP/Production system and the Source-to-Pay solutions. One would expect the overall sustainability score of any given supplier be matched by the aggregated score the supplier achieves from individual transactions.