Patagonia understands that their commitment to social responsibility doesn’t end when you leave the company headquarters. Their commitment to social responsibility is exponentially greater because of their role in managing their supply chain, and selecting suppliers committed to international labor and human rights standards.
The larger the organization, the greater influence they have to transform not only suppliers’ creation and delivery of more sustainable products, but entire industries. Why? Because organizations are spending exponentially more on suppliers than philanthropic efforts, yet both can drive positive social and environmental impact. According to Schonfeld & Associates, companies can spend an average of 25% of revenue on operations, ranging between 8-40%, depending on the sector. This figure is almost 200 times larger than the average 0.13% of revenue businesses typically donate to charity through philanthropic endeavors, according to CECP.
Historically, an organization’s social impact was simply a measure of their philanthropic giving. However, in today’s business climate, the selection of responsible and ethical vendors can have a remarkably greater social and environmental impact on society. For example, donating to a local environmental group focused on local conservation clean-up efforts is important, but arguably more important is selecting suppliers that are not actively contributing to the negative environmental degradation in the first place.
Today, thriving and sustainable businesses are no longer solely focused on maximizing shareholder profits, at the expense of all other stakeholders.
Shareholder expectations are shifting, and consumers, regulatory agencies, employees, and communities have experienced firsthand the positive value companies can bring to their communities, beyond just jobs. Stakeholder groups have greater visibility to the positive and negative effects of a business’s operating model, and expect companies to operate ethically, and responsibly, in ways that don’t drive value for a select few at the expense of many.
As part of the ever-increasing evolution of CSR and the triple bottom line business strategy, businesses are exploring both traditional and non-traditional aspects of the organization to uncover areas of risk and social/environmental impact.
Implementing a Responsible Sourcing Program
Responsible sourcing, or sustainable sourcing, is defined as “the integration of social, ethical, and environmental performance factors into the process of selecting suppliers.” Implementing a responsible sourcing program is largely focused around two key objectives: modifying business processes (mostly in supplier management) and the change management associated with those process modifications. Here’s how to implement responsible sourcing into your operations.
1) Understand the ROI and levers for change
Determine the value proposition for your organization, and how to achieve a healthy return on investment (ROI). Every organization is different, and the value drivers will resonate differently based on size, geography, and industry of the organization. Identify the various levers for change, which can involve CSR and sustainability criteria included in RFP templates, supplier feedback and communication, and supplier selection protocols.
2) Map targeted outcomes to strategy design
Align organization stakeholders on the vision and expected outcomes of the program. Outline an implementation roadmap that supports a phased approach with a sensible respect for the change management needed to ensure success across all internal and external stakeholder groups. Determine appropriate metrics that support a multi-year goal, and drive the right value into the organization. Since there’s no one size fits all strategy, ensure your organization’s responsible sourcing program is strategically aligned with your vision and long term sustainability plan. For program frameworks and parameters, explore additional information published by B-Corp, BSR, GRI, and EcoVadis.
3) Determine key focus areas
Identify your biggest cost drivers in operating your business, and determine if there are 501(c) 3 organizations, B-Corps, or other mission-centric organizations that can provide the same product or service. Community centric organizations often offer event space and catering, providing a socially responsible alternative to the more traditional venues.
4) Notify suppliers of your plans
Engage suppliers early, and ensure the program is designed in a way that doesn’t overburden suppliers, or create unintended consequences. Partner with key accounts for thought partnership on program design and implementation timelines. Inform suppliers why your organization is pursuing responsible sourcing and your expectations of your suppliers as you transition.
5) Provide support resources for suppliers ready to take action
Prior to go-live, ensure all the right support resources are available to suppliers with appropriate contact information as necessary. This could include more information on why your organization is pursuing responsible sourcing, a survey FAQ, and links to other publicly available information about your organization’s values and mission. On go-live day, share the new survey with suppliers and monitor questions or help inquiries as they come in.
6) Measure impact and accuracy
Arguably the most challenging aspect of launching a responsible sourcing program is ensuring participants are providing accurate and relevant survey information. Most survey questions will likely reflect information that suppliers would want to publicize externally, which means most information could be available on websites and marketing materials for audit purposes. Audit responses that seem inaccurate or unlikely, and follow up with supplier contacts to ensure there’s a good understanding of survey questions and the program’s expectations in general. Measure, measure, measure.
7) Recognize supplier progress
While identifying high risk suppliers will help inform future procurement decisions, it’s equally important to recognize the high performers and incentivize future investments in sustainability and responsible business practices. It takes time for suppliers to adopt sustainable business practices, but it also takes resources, will and commitment. This deserves recognition.
The Bottom Line
Exponentially greater positive societal impact is within reach, and doesn’t require additional funding. Responsible sourcing programs can drive intentional spending practices that require a certain level of social and environmental commitment from suppliers that present less risk, and greater partnership value. Triple Bottom Line business strategies can drive substantial value for all types of businesses, as well as drive greater sustainability and resiliency into the supply chain. Leverage your buying power to incentivize and encourage responsible business practices throughout your supply base and further your organizations long term viability and sustainability.