Sustainability and Your Suppliers: 5 Tips on How to Manage

You’ve received Sustainability questionnaires from customers, investors, analysts, or other Stakeholders (“Surveyors” for this article).  You may be getting them annually, or as a condition of selling a new product or service.  These questionnaires may be asking you about your suppliers.  If you haven’t seen this yet, you will.  WalMart’s Sustainability Index for their suppliers includes a question regarding how much you know about your supply chain.

It’s hard enough to develop, implement and report on your company’s Sustainability program.  Now you have to report on others’?   Here are five tips to do this efficiently and effectively – and to get some benefits for your company, too.

1. Decide what matters.  “Sustainability” covers a lot of ground.  The Global Reporting Initiative, the standard framework for Sustainability reporting, includes over 100 reporting categories, and many of these include requirements for narrative descriptions, and performance requirements.  Review your primary customers’ websites and Sustainability reports.  Pay attention to issues that capture the headlines, and are subject to embarrassing publicity if they are done wrong.  Identify the suppliers that pose risk to your company, either because they produce critical goods or services, the inherent profile or risks of their business, or financial stability.  Compare these to the Sustainability issues where your company may be at risk, or where better management practices could help your company.

2. Begin with what’s already there (including groups!).  There may be product or service specifications in your contract already.  Your suppliers have websites.  They may publish a Sustainability report.  If they have not developed a Sustainability report, they may publish company newsletters, bulletins on their website, or marketing materials that highlight their efforts in some areas of Sustainability (energy efficiency, community relations, reductions in water use, etc.).   The suppliers may have completed Sustainability questionnaires for other customers; they may provide these to you as a baseline for their activities.  There may be industry or trade associations that have programs that allow you to get information while sharing the cost with others.  The Electronics Industry Citizenship Coalition[1] is one example.  CHWMEG[2] is a non-profit that pools resources to fund and share inspections of waste disposal sites.

3. Be careful with boundaries.  Compiling data and information on Sustainability can raise questions of who gets credit for what.  The protocols for calculating greenhouse gas (GHG) emissions inventories are extremely detailed with regard to boundaries.  Your supplier ships products to you.  Whose GHG emissions are these:  yours, theirs, the common carrier’s, or another party’s?    Some of your products are stored offsite in a climate-controlled warehouse, awaiting seasonal orders.  The warehouse is owned by others, and there is only one other tenant.  Do the GHG emissions at the warehouse belong to the building owner or the tenants?  The rules are not so detailed for Sustainability programs for energy, water, fair labor practices, community relations, and other parameters.  If data is omitted or double-counted, it can lead to burdensome re-working later.  For all facets of your Sustainability program – developing your report, working with customer or supplier programs, interactions with other business partners (e.g., landlord) – make sure you know what’s yours, and what’s somebody else’s.  You may need to make some assumptions; that’s OK, but document what they were.

4. Begin (or improve) Sustainability communications and reporting with your suppliers.  Begin collecting Sustainability program and performance data on your key suppliers.  Develop systems to document the information collected, and where it was obtained.  Review data and information for consistency with your Sustainability program, and with the questions you are answering for your Stakeholders.  Create open communications channels, so your suppliers can tell you what they’re doing on an ongoing basis.  Establish a single point of contact in your company, so s/he can coordinate communications, and identify good practices and suppliers who may pose a risk to your company.

5. Take action and disclose.  If you receive information from suppliers that could put your company at risk (or if you see your suppliers in the wrong headlines in a news article or blog), take actions.  Require the supplier to take corrective measures, and to report to you about it.  Include your supplier monitoring activities in your own Sustainability report.

These practices are all applications of Enterprise Risk Management (ERM) to Sustainability.  ERM is a systematic approach to managing everything in an organization, allowing companies to focus on the issues with the greatest risk or opportunity first.  Following these tips will help you get the greatest results, and avoid the greatest risks of Sustainability issues – and in an efficient, effective way.

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