Generating Significant ROI: Strategies to Bring Your Sustainability Program From Beginner to Advanced

The road to supply chain sustainability is long, yes, but far from unattainable. Just look at the benefits business leaders and their organisations are already seeing from making their impact!

---

The heart of supply chain sustainability is environmental and social impact. However, new research from Procurious and Ivalua confirms what many of us believed all along: generating significant return on investment goes hand-in-hand with making a positive impact on our world.

Consider the business benefits sustainability leaders are experiencing today. According to the research, companies with advanced sustainable procurement programs realise greater ROI across the board compared to their peers. This includes:

·       Improved product/service quality

·       Increased sales

·       Improved compliance with legislation/regulations

·       Improved brand perception

·       Lower costs

·       Improved employee satisfaction

·       Reduced supply chain risk

·       Product/service innovation

The survey considered programs advanced if they actively monitored and collaborated with suppliers to improve performance and increase impact, vs. only monitoring sustainability performance, or doing even less.

Despite these results, an alarming 62% of organisations have not yet invested in supply chain sustainability or are just starting out.

If advanced programs are seeing significantly better ROI, why aren’t more procurement and supply chain leaders investing to improve their company’s sustainability maturity? Part of the problem is the complexity around where to invest and how to start.  Procurious’ recent research uncovered strategies that can smooth out and accelerate the process.

The road to advanced supply chain sustainability starts with visibility and engagement

Have you ever driven down a foggy road at night? It can be difficult to see the lines, know when to next turn, or spot obstacles that may appear out of nowhere. Without good visibility, the road becomes extremely difficult to navigate.

The same is true for supply chain sustainability programs.

“Increasing visibility and supplier collaboration are critical first steps in building a sustainable supply chain.”

Alex Saric, Chief Marketing Office at Ivalua

However, just 15% of organisations surveyed are monitoring sustainability performance for over 75% of their tier-1 suppliers. More than half (55%) are only monitoring 25% or less of their base. This number drops to less than 3% for sub-tier suppliers.

When asked what permanent or structural changes their organisations are actually making to improve the performance and impact of their supply chain sustainability programs, 44% of respondents with advanced programs said they were investing in a supplier collaboration platform or expanding SRM capabilities. Meanwhile, in organisations that have not yet started, this number drops to only 11%.

“It’s pretty simple. If you can’t see your risks, or lack the ability to collaborate with your supply partners to improve operations, you won’t be able to significantly improve sustainability outcomes,” said Saric.

Sustainable procurement strategies: there is a place for KPIs, but not first place

“Everything in moderation,” a quote by the great Oscar Wilde. Overdoing and over-emphasising any one thing, even if it is a good thing, can cause damage.

“We are seeing KPIs thrown around a lot, almost like a buzzword,” states Tania Seary, Founding Chair of Procurious. “KPIs are meant to guide strategies towards success, not act as a standalone strategy themselves.”

Sustainable procurement programs low on the maturity curve think they need to put a lot of emphasis on employee KPIs. In fact, these practitioners are incorporating sustainable procurement KPIs into employee performance review as the number one method to improve impact.  The story is quite different with advanced programs, where this tactic just managed to slip into the top four.

When looking at actual strategies and performance over the past twelve months (versus what respondents believe would make a difference), the survey found that the top strategy for elevating results is collaborating directly with suppliers to change and improve sustainability practices. Following this, three additional strategies stood out in terms of driving a measurable impact:

• Increasing the weight put behind sustainability criteria in supplier selection decisions (45%)
• Adjusting procurement KPIs to place greater weight on sustainability (42%)
• Leveraging technology to monitor sustainability risks, news and events that may impact the supply chain (32%) 

Of course, the sustainability leaders with advanced programs have a slightly different take. 

According to this group, the top three strategies for driving meaningful and measurable impact are collaborating directly with suppliers (no change), leveraging technology to monitor sustainability risk, news and events (ranked #2 by advanced companies versus #4 for everyone else), and mandating current suppliers complete sustainability assessments (ranked #3 vs #5).

Enabling technology is also essential to successful programs. The top three cases for procurement tech-usage enabling supply chain sustainability, according to the survey, are:

·       Improving information sharing and communication with suppliers and stakeholders (52%)

·       Improving access to third party sustainability certification and scores when selecting or assessing suppliers (50%)

·       Automating the tracking of supplier performance against sustainability goals (50%)

“Driving change and making an impact requires a full investment – people, process and technology,” said Ivalua’s Saric. “Organisations need to be clear about their vision, and then equip their teams with the resources to effectively execute and measure success.”

For more detailed strategies and implications of supply chain sustainability, read Procurious’ full report on the recent survey.