According to a Gartner survey, 79.5% of respondents are interested in sustainable sourcing in order to meet compliance requirements defined by local and global regulations and norms. However, 11.5% of respondents consider it for market differentiation, while 5.5% consider it to impact a long-term common goal for the well-being of the environment or society. Whatever the objectives, procurement organizations must first define the objectives and scope of their sustainable sourcing strategy before incorporating responsible sourcing criteria into their supplier lifecycle management. The following are the key steps to implementing a sustainable sourcing strategy:
1. Establish the parameters of your responsible sourcing strategy.
2. Define and communicate supplier expectations.
3. Verify supplier compliance with responsible sourcing requirements.
4. Remediation and capacity development.
1. Establish the parameters of your responsible sourcing strategy.
Procurement organizations must first define the scope of their responsible sourcing strategy by defining the outcome and level of ambition they are pursuing – is it compliance, market differentiation, or ecosystem enablement? Many organizations begin with a compliance-focused approach, but as their ambitions grow to support their brand differentiation strategy or higher goals for contributing to addressing a global issue, their goals may evolve.
2. Define and communicate supplier expectations.
Following the definition of the scope of the responsible sourcing strategy, the next step is to define and communicate your responsible sourcing requirements and expectations to prospective suppliers. It can take the form of a responsible sourcing policy (supplier code of conduct) that includes a set of labor, health, safety, and environmental requirements that suppliers are expected to follow, as well as additional expectations beyond these compliance requirements to focus on broader sustainability issues based on your ambitions.
Once the policy is in place, the next step is to communicate your organization’s responsible sourcing policies to your suppliers in order to ensure that everyone is on the same page with your expectations and standards. Through bidding materials such as RFQ packs, organizations should incorporate responsible sourcing requirements into the bidding process, supplier selection, and onboarding processes for new and prospective suppliers. Terms and conditions included in supplier contracts and purchase orders for established suppliers should include a provision referencing the responsible sourcing policy.
3. Verify supplier compliance with responsible sourcing requirements.
Simply communicating responsible sourcing requirements to your suppliers will not ensure compliance. Before contracts are awarded, procurement must also validate supplier adherence to policies by assessing risk and gauging performance. This validation and assessment process should continue throughout the supplier relationship.
Organizations can use various platforms for validation, such as requesting a self-assessment from the supplier to understand current performance and gain a deeper understanding of potential risks, mandating document submissions for proof during the onboarding process, using data from external sources to understand the supplier’s performance against the requirements, and so on. This data assists you in assessing suppliers, creating a shortlist of suppliers who can meet your responsible sourcing criteria, and ranking them based on risk. Organizations may choose to conduct on-site audits of prospective suppliers based on risk assessment, particularly if they demonstrate poor adherence to requirements or there is a significant contextual risk.
4. Remediation and capacity development
Simply communicating responsible sourcing requirements to your suppliers will not ensure compliance. Before contracts are awarded, procurement must also validate supplier adherence to policies by assessing risk and gauging performance. This validation and assessment process should continue throughout the supplier relationship.
Organizations can use various platforms for validation, such as requesting a self-assessment from the supplier to understand current performance and gain a deeper understanding of potential risks, mandating document submissions for proof during the onboarding process, using data from external sources to understand the supplier’s performance against the requirements, and so on. This data assists you in assessing suppliers, creating a shortlist of suppliers who can meet your responsible sourcing criteria, and ranking them based on risk. Organizations may choose to conduct on-site audits of prospective suppliers based on risk assessment, particularly if they demonstrate poor adherence to requirements or there is a significant contextual risk.
