Companies often refer to “supplier engagement” in discussions about managing sustainability in their supply chain. The idea of engagement is great, but how much “engagement” is really going on? I would argue that only a small percentage of companies are truly engaging their suppliers in a positive and constructive way around sustainability.
According to a recent webinar survey by the Institute of Management Accountants, 75% of attendees stated that they respond to more than 250 sustainability surveys per year. With this kind of demand for information, organizations like Campbell Soup Company require a full time employee or more just to respond to reporting requests! Among sustainability professionals, the problem I am describing is commonly known as “survey fatigue.” It is real, and in many cases, getting worse. A 2016 report from ReScore Group found that survey fatigue was the number one complaint of sustainability practitioners. While I strongly believe we need to manage sustainability risks in the supply chain, I would argue that we are shooting our collective selves in the foot with the current approach.
Problem #1: Sustainability managers can’t get to the good stuff. Any sustainability professional or practitioner will tell you that as a profession, we are severely under-resourced. When looked at in the context of the size of sustainability budgets at most companies, having an entire position solely to respond to surveys, or even taking the time to respond to ten slightly different questions on the same topic, harbors massive opportunity costs. Consider what those resources could accomplish if even half of that time was spent working on projects that resulted in new product development, increased efficiencies, or decreased risk?
Problem #2: Reactivity does not lead to transformation. Resource use is not the only problem with a scattershot approach to supplier information gathering. Receiving even 2-3 surveys in a year launches suppliers into reactive mode. Sustainability becomes a “check the box” exercise. Identifying what can be provided to the customer quickly trumps any discussion of what is really important to do or to track. As a result, suppliers spend their time chasing down a wide range of data points and/or creating new policies before there is an understanding of how either can actually create value for the company. This delays the kind of work that will achieve real buy-in and engagement across the company; the kind of work that is essential to transforming the business model.
Problem #3: The customer is not getting what they really want. Let’s consider what customers really want. They want to be confident that their suppliers are managing social, environmental, and governance risks so supplier mismanagement won’t disrupt their operations or increase costs. But what actually happens when a supplier receives a survey? Despite what is often a well-intentioned effort on the part of the customer, the first reaction from a supplier is fear. What happens if I don’t respond to this question? What if I don’t meet their standards? Fear may get short-term results, but it is not the best path for helping to generate a shift to a culture of sustainability thinking in a company. Nor, when all is said and done, is it best for the customer who is requesting the information.
What is the best path to customer peace of mind? I certainly don’t have all the answers, but it seems to me that having the supplier understand how sustainability can create value for them would help considerably. If suppliers understand the value of sustainability, they are much more likely to act proactively (for the same reasons as the customer) without the pressure.
There is no question that companies need accurate and clear information on environmental, social, and governance factors from their suppliers, but we must shift the way we engage to obtain it.
I saw a glimmer of a shift in thinking already occurring at this year’s Sustainable Purchasing Leadership Council (SPLC) annual summit (an event I highly recommend to anyone working on sustainability and supply chain). A core conference theme was helping suppliers build capacity for sustainability. This is especially critical for small and medium sized enterprises (SMEs) that make up over 99% of our economy and desperately struggle to find the resources for sustainability. The subject of engaging suppliers was addressed in a number of conference sessions (such as this one, this one, and this one), and were also common in discussions among attendees about their own sustainable purchasing programs. This was our third year at the SPLC summit and was the first time I observed these conversations at a substantive level.
Jumping off from these conversations at SPLC, we are excited to dig deeper into how we can work to become both more efficient and more effective around supplier sustainability. The next two posts in this series will delve into tactics such as:
- Setting the stage
- Being intentional and strategic
- Leveraging tools; avoid having suppliers duplicate efforts
- Sharing information/results
We also want to hear from you all! If you have thoughts about what I have written, have seen great strategies that work, or just want to throw out some ideas, e-mail me and I will include them (and you!) in a future post.