This blog first appeared on Procurement Leaders and is part of a series of guest blogs for that publication.
As category managers move along the path to better (and more sustainable) procurement, after they’ve started asking the right questions to determine what the business really needs, they need to move into another key area: Engaging with the suppliers who ultimately provide the goods and services.
To illuminate this vital aspect of sustainable procurement, I sat down with David Lawrence, a supply chain sustainability and collaboration expert. Lawrence is the chairman of the responsible sourcing initiative AIM-PROGRESS, a board member at SEDEX, a tutor at Cambridge University, and the owner and founder of Sokwe Consulting. Before that, David ran the global sustainable procurement program at Diageo for several years.
How do you determine which suppliers to engage?
You look at where your main risks and opportunities are across all the sourcing categories: Who are the 20 percent of the suppliers that can make 80 percent of the difference to your risk profile, costs, and reputation? If you have a joined-up strategy, it should be pretty clear who you should talk to.
What tools exist to engage suppliers about sustainability?
It has to be part of the tender and supplier development process, and it has to be the buyer having the conversations. Getting the sustainability person to do it doesn’t work—it has to be part of the commercial relationship. This isn’t something that you can outsource.
At the same time, sustainability requirements shouldn’t be an explicit part of the negotiations on cost savings. If a supplier is disclosing information about sustainability, it needs to be about enhancing value to both businesses. For example, imagine a supplier discloses that it has an excellent energy efficiency program. The buyer might be tempted to translate that into direct cost savings, but over the long term, this serves to alienate, not engage, suppliers.
What are the successes you’ve seen, and what kind of value has good supplier engagement brought to a business?
One of my biggest achievements at Diageo was helping Glanbia, an Irish dairy company, start a sustainability program. We recognized that cream was one of Diageo’s key sustainability areas, and Glanbia was our most important supplier of cream. To get Glanbia engaged in the agenda, we needed to talk to the company in a language that it would understand. We demonstrated that there was a business opportunity in showing that Irish cream is the most sustainable in the world.
Once Glanbia was on board, we introduced the company to stakeholders in Ireland that helped design a sustainability program, which was finished in a year. We even worked with a consultancy to develop the value proposition for the sustainability program. Once Glanbia got it, the sustainability program became a major strategic thrust and is really driving value now, from the company’s network of dairy farmers to its customers. Glanbia wouldn’t have started the program without Diageo requesting it.
In other companies, I’ve seen projects where suppliers work with buyers to redesign packaging products to reduce environmental impact, which requires a longer-term partnership but saves significant costs and reduces energy and waste in the process.
What do you do when a supplier won’t engage?
It often happens, particularly when suppliers feel they are being told to do something and especially if the engagement seems duplicative of other efforts. They may not understand the context or the business benefit—in other words, you’re telling them what to do, but not why it matters. So spend more time explaining where you want to get to, and then let them come up with the how.