Author: Mark Perara, CEO and Founder, Visible
I recently had the pleasure of giving a presentation on “Procurement and Supply Chain Live” at the Tobacco Dock. Given that this was my first personal event since the pandemic stopped everything, it was very exciting to be in front of an audience of my peers again and it was nice to hear the input of other speakers.
Like many of those speakers, I decided to present the significant sustainability challenges faced by those of us who work in procurement and supply in my presentation “The Carbon Procurement Crisis”.
Although our focus was similar, I noticed a significant difference in the advice I gave and what many others advised. Much has been said about basic orientation, data, and building complex, long-term structures before we can really begin to achieve our sustainability goals.
Here I would like to share my opinions and thoughts that I have given to the audience in Procurement and Supply Chain Live, and suggest an alternative way to improve the sustainability of suppliers that takes into account a simple fact.
This fact? We are running out of time. There is not enough time at baseline, time to study the data, time to model the myriad consequences of every decision we could make, and most importantly, not enough time to act. Fortunately, there is another way.
The scale of the problem
Today’s world is facing uncertainty on an unprecedented scale. With trade wars, the invasion of Ukraine, supply chain shortages, socio-political upheavals, food shortages, rising energy prices, rising cost of living and the effects of the pandemic, we are experiencing disturbances like never before.
These crises put pressure on companies as they struggle to mitigate the turmoil for their business and cope with the increased level of unpredictability that affects all areas of their business. This pressure and unpredictability will only intensify as the climate crisis worsens, a problem that will inevitably affect every continent, every nation, every citizen and every business.
Our behavior as individuals and as organizations has already caused tremendous changes in our climate, and researchers at the Meteorological Bureau predict a steady probability that over the next five years the planet will exceed the 1.5˚C thresholdalthough at first only temporarily. Without a change in our behavior, we have little hope of limiting this crisis, let alone preventing it.
We are already at 23% in the 2020s, and every 5 weeks we are approaching 1% by the 2030 deadline. It is clear that we are not moving fast enough to reach pure zero by the end of the decade.
The importance of our value chains
As if the approaching emission deadline wasn’t scary enough, business leaders are facing a new challenge: increasingly vigilant attention to our impact beyond our own operations. Businesses, especially large ones, are increasingly responsible for their end-to-end emissions in the value chain, and rightly so. No business is an island, and the awareness of what is happening to make our business beyond our four walls is growing.
The inspection is not unfounded. Today, 80% of the greenhouse gas emissions of most large enterprises are in the supply chain upstream. Although these emissions are beyond their direct control, the leaders of these companies are tasked with using their power and influence to make changes to their supply base and engage supplier stakeholders in the path of sustainable development.
Although decisive action is needed, no organization can simply withdraw 30-40% of its suppliers if they do not meet the requirements without plunging themselves into further chaos as a result of the loss of products, services and revenue. Fortunately, awareness of the alternative is growing: work much more closely with supplier stakeholders, especially with large emissions, to ensure sustainability through the end-to-end value chain of large enterprises.
Don’t expect a perfect data set
While it is key to improving the coordination and interaction of supply base stakeholders, working with suppliers is not easy, and there are many variables that need to be addressed to improve supplier sustainability.
The organizations we talk to often cite “paralysis analysis” or “we have no data” as the reasons why they have failed to take significant action with suppliers. Volume 3 is complex, data is difficult to retrieve, aggregate, and normalize, and it can be difficult to establish a reliable baseline level of provider resilience that exists today.
In a world where data-driven decision-making is valued (and myself as a data and technology botanist!), I feel the urge to wait for the numbers to come. But we just don’t have time to sit back without making improvements until we can quantify our baseline.
Instead, we must ask ourselves: if we do not have time to wait for perfect data, how to make the best decisions without them?
Control the controls: focus on what you know
The process of improving the sustainability of suppliers, especially with regard to Scope 3 emissions, is usually reduced to four stages:
- Build an estimate of the value chain emissions (note: estimation – we don’t have time for perfection)
- Prioritize your efforts according to the scale and how much you can do to impact these emissions
- Striving to work with these suppliers on goals and objectives
- Selective cooperation in finding environmentally friendly products and solutions
As I mentioned, many organizations will stop at Stage 1, convinced that it is not enough for them to continue. But step 2 can be very helpful. I call this step of priority “controlled control”. Simply put, we need to focus on what we know.
I know, for example, that most of my emissions are in my supply chain. I probably have a good idea of which category of volume 3 is the largest (purchased goods and services) and which categories of procurement my largest emissions fall into. I know who these suppliers are, I know what products or services they provide me, and I know how much I spend with them.
Focusing on what I know gives me something to start with. And it is necessary for us to do to start.
Use the lead indicator
Another problem that organizations face with sustainability of suppliers is the second problem related to data. Reliable emission figures or sustainability indicators of suppliers from general structures are rarely updated and give only a retrospective view of performance. This is because our ultimate goals (such as reducing kiloton emissions as one example) are lagging behind.
The key problem with latency is that if we go the wrong route, it will be too late to go back and correct the course when we get the data – which could take years. We need a leading indicator that measures our progress towards our goals and provides a reliable indicator of the success of the backlog.
Establish active cooperation relationships
The main metric we use at Vizibl to succeed suppliers is called “active collaborative relationships,” or ACR.
We know that success in supplier sustainability is determined by our ability to reconcile our intentions and goals with suppliers, and to work closely and in partnership with them to bring about change.
Active relationships are a defining characteristic of successful cooperation with suppliers. They denote relationships with productive activities such as ongoing projects, open opportunities, lively initiatives, and valid evidence concepts that aim to achieve the ultimate overall strategic goal set by the buyer and supplier. This activity can be easily verified, its data is frequently updated, and successful collaboration around a strategic sustainability goal predicts success against that goal.
The organization, which manages several emissions reduction projects from a cohort of strategic sustainability providers focused on matching goals and expected results, with clear criteria for success, will be an organization with many proactive relationships. Accordingly, it is also an organization that is more likely to meet its lag.
Just get started
Regardless of your environmental sustainability delay metrics, whether it’s net zero by 2030, lowering percentages in all three emissions or reducing primary plastics from your products, we can’t afford to fail. While it may seem that we are “blind” to take action without data, three things are clear:
- We are facing unprecedented disruption as a result of climate change, and we do not have enough time to prevent or limit its effects
- Getting data is time consuming and complicated and we can’t afford to do nothing while waiting for the numbers to show
- We can make robust decisions without data based on what we already know, and as a result we can start taking control measures today.
Building active collaborative relationships with stakeholders in our supply chain is the best way to control governance and make concrete progress over our approaching collective term.