Working with suppliers on sustainability issues can reveal hidden benefits

By Lara Greden, lgreden@verisae.com

While significant national greenhouse gas regulations have not come to fruition, sustainability still remains one of the top initiatives for progressive organizations. Often, their interest stems from the fact that most sustainability projects reduce negative environmental impacts while also reducing costs significantly. Thus, these initiatives are a win-win for organizations.

Let's consider a couple of facts. In a survey of chief executive officers who are members of the United Nations Global Compact, 93% declared that sustainability would be critical to the future success of their businesses. Separately, Wal-Mart calculated that it is directly responsible for just 10% of its overall greenhouse gas emissions, meaning that 90% are attributable to the business operations of the company's supply chain. If sustainability is so vitally important to the future of business, yet only a small portion of the impact is directly attributable to internal operations, there is clearly a need to engage the supply chain. Yet, many companies believe that achieving sustainability supply chain initiatives requires making difficult demands of their suppliers. But, contrary to this belief, engaging your supply chain and examining ways to improve efficiency will unlock hidden benefits for both you and your suppliers.

Companies throughout a variety of disparate industries from hospitality to finance to retail are investigating the visibility they could attain if they collaborate with their supply chain. They are specifically interested in the supplier’s energy initiatives, environmental stance, and future plans. Two patterns are emerging. First, initiatives should be developed so that they reduce negative environmental impact while also cutting operational costs and optimizing operations. Second, since suppliers account for a significant portion of emissions, engaging suppliers and looking for ways to improve efficiency should be a primary initiative. In the future, there may come a time when a supplier’s energy and environmental impact dictates whether a company engages with that supplier, or not.

Fundamentally, it's very important to understand that value can be derived by collaborating with one’s supply chain. However, this may be easier said than done.

Historically organizations do not ask their suppliers for information related to their energy and environmental affairs. Many companies are still concerned that doing so is an imposition? They are worried that they will cross the line. It is important to assure the supplier that the exchange of information here can really help to add value and cut costs for all concerned.

Companies may recall when Wal-Mart shocked everyone and bucked the status quo by sending a memo to all of its suppliers asking them whether they engaged in practices to help them manage their energy and environmental impacts. This is a strong example of taking the first step toward supply chain management. After this outreach, the next hurdle is getting more specific and asking suppliers exactly how they address these environmental and energy related issues.

One of the biggest hurdles involves the acquisition of data from the suppliers. This is where the value needs to be explained in order to warrant the release of data. This involves delicate negotiations, especially as during early stages. 

After suppliers have been initially engaged, they can be introduced to the benefits and value of examining energy and environmental management. At this point they begin to interact with the specific software programs that can help them disseminate information. This is the start of true collaboration and a definitive path to reduce costs across the board.

For the process to be effective and productive, both parties must collaborate. Software providers such as Verisae enable companies to manage all of their supply chain activities via a web-based platform. The software allows executives to measure and analyze supply chain operations data and enables better methods of data aggregation so they can take a deeper dive into data sources through metering or sub-metering. Once granular detail has been fully analyzed, benchmarks can be established and used to compare performance going forward.

Large distributed companies may be concerned that engaging with their supply chain will be too complex an endeavour and it will be difficult to derive value from their efforts. For those in this boat, using a software solution is especially important because it manages all efforts in a shared format and handles all of the data complexities. This kind of software platform allows them to start at a level of involvement they are comfortable with and they can expand their efforts in the future if they wish to. Thus, companies can start by working with certain suppliers and expand to include more of the supply chain as time goes by. The software also enables them to focus on specific sustainability initiatives and expand over time to ensure that they ultimately manage all their energy, facilities, and environmental impacts.

Security is always important. Much of the data that would be collected from suppliers is very sensitive and companies are right to question privacy and security. The system developed by Verisae is permission driven. As the suppliers opt-in they are allowed access to various levels of data as appropriate to their level of commitment. However, by opting in they gain access to data about their own operations that, when action is taken, can help them cut costs and improve the overall efficiency of their businesses. Companies that are proactive and successful with any of their energy efficiency or sustainability initiatives can gain brand recognition and support in the wider marketplace.

Let's look at the benefits and true value of engaging with the supply chain:

  • Data can be aggregated and analyzed so that benchmarks can be established and true visibility realized. All parties can now see the scale of the problem that they have to deal with.
  • Benchmarked information allows goals to be set. The software can proactively help companies reveal opportunities for improvement and track the impact of projects that are put in place to pursue these efficiency improvements.
  • The company seeking the information has access to a detailed data about their broader liabilities. This can help them to achieve goals internally and project their standings to their external stakeholders. The entire process will undoubtedly help reduce costs for the organization and make it more competitive in the marketplace.
  •  Suppliers have access to a level of data analysis that it never had before. Consequently, they can use the data to set internal benchmarks, set improved efficiency goals, track changes, cut costs and continue to improve over time.

In conclusion, there is much to gain by engaging the supply chain. While suppliers may initially be sceptical or even resistant, when the true value and benefits are explained it will become apparent to all concerned that engagement far outweighs the costs of involvement.

Lara Greden is director of environmental product strategy for Verisae, a software company that offers sustainability resource planning solutions (lgreden@verisae.com). For more information, visit verisae.com/pr.

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