Sustainable and ethical procurement has risen to the top of the agenda for MRO professionals. With stakeholders expecting the highest standards, procurement holds the company’s reputation in its hands.
Sustainability and ethical behaviour are no longer ‘nice-to-have’ add-ons hidden in a corporate social responsibility policy. Failure to live up to the standards customers and stakeholders expect can fatally harm a company’s reputation.
More than 1,300 procurement professionals took part in the RS Components and the Chartered Institute of Procurement & Supply (CIPS) survey on supplies for Maintenance, Repair and Operations. For the first time, the 2021 Indirect Procurement Report respondents named sustainable and ethical procurement as one of their top three business pressures.
The scale of the challenge is underlined by the survey’s finding that the average organisation has 151 indirect suppliers and 83 MRO suppliers. Ensuring that a supply chain that big meets environmental, social and governance (ESG) standards is a mammoth task.
PwC believes that supply chains are a fundamental part of building robust, sustainable businesses. “Once companies define and map their customer experiences, create the right ecosystem to support customer interactions and embrace a human-centric approach, they’ll need to develop a strategy to bring the new B2B value chain to life,” it says in a recent report.
Central to businesses adopting a more ESG-facing position will be using their supply chains to verify the sustainability credentials of their partners.
Transparency is the key
Therefore, as Richard Wilding, Professor of Supply Chain Strategy at Cranfield School of Management points out, companies that don’t procure sustainably will find it increasingly hard to raise capital. Banks will want proof that a company is living up to its ESG policies.
“You’ve got to have good transparency and continuous monitoring intelligence on your global supply chain to be able to do this,” he says. “Which means procurement is having to think much harder about this − because you can end up with board directors being held to account for labour or environmental abuses.”
“The need to build sustainable supply chains and really strong relationships with your suppliers is more important than ever.”Andrea Barrett, Vice President Social Responsibility and Sustainability, RS Group
But MRO procurement should not be daunted by the issue, according to Andrea Barrett, Vice President for Social Responsibility and Sustainability at RS Group. Having honest conversations with suppliers has always been part of the job, she says − it’s just that now you need to ask for evidence of their sustainability and ethical policies in action.
“The need to build sustainable supply chains and really strong relationships with your suppliers is more important than ever,” says Barrett. “When you go through a bidding or tender process, it’s important to make sure your suppliers are a good cultural fit and have similar ESG ambitions to your business.”
She advises procurement managers to include this in their pre-qualification checks, and to use established global platforms such as EcoVadis and Sedex to manage and improve ethical and sustainability standards with their suppliers.
“That’s what we look for from our suppliers,” says Barrett. “We expect them to sign an ethical trading declaration that aligns with our commitments and we are adding ESG performance objectives for our strategic suppliers. Of course, we’re asked that by our customers, too.”
“We should not lose sight of the fact that sustainable procurement is not just about climate change or the environment, but also means avoiding sources which use modern slavery or abuse workers’ rights in other ways.”Emma Botfield, UK & Ireland Managing Director, RS Components
Sustainability is everyone’s job
Barrett says that everyone in the organisation must understand that sustainability is their responsibility. Off-contract, ad-hoc purchases can derail the best-laid ethical sourcing plans. So it’s vital to have experienced, well-qualified people in your team.
Although she says that organisations with a clear commitment to sustainability tend to attract the best people, the survey found that almost a third of organisations are struggling to recruit people who understand best practice in the MRO category.
Clear ESG benchmarks and KPIs are vital when it comes to evaluating new suppliers, says Emma Botfield, RS Components’ UK & Ireland Managing Director. And it’s important to apply these standards to existing as well as new suppliers, she adds.
“We should not lose sight of the fact that sustainable procurement is not just about climate change or the environment, but also means avoiding sources which use modern slavery or abuse workers’ rights in other ways,” Botfield says.
It’s a point that Kate Davies, Head of Global Commercial Services at RS Group, endorses. She says it’s vital to qualify your whole supply chain, as the risk of compromising your commitment to sustainability with a bad buying decision has never been greater.
She cites the example of poor-quality Personal Protective Equipment (PPE) sourced at the height of the pandemic. “It’s paramount to remember that PPE is about protecting health and safety. For those who failed to ensure compliance and focused solely on price, this exposed risks such as fraudulent and even harmful products coming into use – achieving the opposite of the intended use,” she says.
“I am very proud to be part of a business that really takes those risks seriously, and thoroughly checks its supply chain before offering products to its customers.”
Sustainability is nothing new; the best MRO procurement teams and suppliers have been working on it for years. What is new is the focus from stakeholders and customers, who now expect nothing less.