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Developing Sustainable Supply Chains effectively
#Supply Chain & Procurement
#ESG
The growing call for Supply Chain Sustainability
In the B2B world, Supply Chains can account for more than half of a Buyer Organization’s revenues. Sustainability is a universal value and a key step in value chains, making a Buyer Organization as sustainable its last supplier.
ESG Supply Chain reporting and supplier due diligences are a growing trend internationally (e.g. the German Act on Corporate Due Diligence - also known as LkSG). The financial system is increasingly adopting “Supply Chain Finance” tools that incorporate indicators on the ESG performance of a Buyer’s supply chain.
Supply Chains are largely characterised by the presence of Small and Medium-sized Enterprises (SMEs) - in some cases, spread globally - with limited reporting capabilities and different levels of sub-suppliers (system integrators, raw materials, etc.). This makes Supply Chain Sustainability monitoring even more challenging.
Nowadays, Buyer Organizations need to be in control of their suppliers’ sustainability. For Buyer Organizations this means measuring it and constantly stimulating improvement throughout their entire Supply Chain.
Delivering a Sustainable Supply Chain journey
Best in class players are quickly moving from ESG score calculations to risk monitoring in a changing environment. Indeed, the ESG Supply Chain requires a gradual evolution of the adoption of ESG practices by the supplier base, continually raising the standard, in accordance with the best international practices (ISO, GRI, SDG, CDP, GHG Protocol).
Sustainable Supply Chain model
Defining a sustainable Supply Chain model is key. Mapping sustainability requirements, defining metrics for creating of a sustainability score, assessing benefits, setting up the approach to provide guidance to vendors. Reply can help you use an approach shared by industry or define a new one.
Suppliers’ ESG Measurement
After defining a solid model, it is critical to gather information and measure it. This is a time-consuming activity and should be viewed as a journey rather than a single step. For this reason, the industry-standard approach may be the best one, since it makes it leverages a standard approach shared with other companies in the same industry.
Score feedback sharing
The sustainable approach aims to continually improve the sustainability of the Supply Chain. For this reason, it’s important to develop a workflow to share score feedback with your entire supply chain, proposing a solid path to improvement to suppliers.
Monitoring of improvement actions
The obvious next step after sharing feedback is the verification of any improvements in the whole supply chain. For this reason, it is necessary to build a plan to monitor and track these improvements.
Suppliers rewarding
The sustainable approach is a win-win methodology. You will get better results if you reward suppliers who buy into your sustainable approach. Rewarding the best suppliers in this sustainable journey will guarantee you the best results.
Reply’s approach to a Sustainable Supply Chain
Reply is constantly engaged in discussions on the many Sustainable Supply Chain regulations and frameworks being discussed across industries. Among others, Reply has contributed to the industry workgroup for the “ESG Supply Chain Guidelines” in the broad B2B industrial sector. This includes the knowledge of the next generation of top-of-the-line digital technologies that support Sustainable Supply Chain implementation and integrate with existing ERP, Supplier Relationship Management and Procurement systems. Reply has also developed specific procurement and sustainability solutions that can be easily integrated in an existing IT landscape, according to the so-called Composable Supply Chain technology pattern.