As stakeholders increasingly recognize the importance of sustainability across the value chain, evaluating suppliers on sustainability metrics has become an essential part of supply chain management for publicly listed companies. By doing so, they can ensure that their supply chain partners are aligned with their sustainability goals, mitigate risks associated with unsustainable practices, and improve their reputation among consumers and stakeholders.
However, evaluating suppliers on sustainability metrics can be a complex process that requires a thorough understanding of sustainability issues and effective communication with suppliers. Many companies struggle with how they can approach this, and whether it will create conflicts with their suppliers. In this blog, we suggest a simple 5 step process to start working on your supply chain’s sustainable practices.
Step 1: Define Sustainability Priorities
The first step in evaluating suppliers’ sustainability practices is to choose the ESG topics you want to focus on and select the metrics that will be used to measure their performance. These metrics should be aligned with the company’s sustainability goals and should cover environmental, social, and economic aspects of sustainability.
Step 2: Communicate Expectations
Once the sustainability topics and metrics have been defined, the next step is to communicate these expectations to suppliers. This can be done through a supplier code of conduct or a supplier sustainability questionnaire. When communicating with suppliers, it is important to use simple language to ensure that expectations are understood. Avoid using technical jargon.
Step 3: Collect Data
After communicating expectations, collect data on sustainability performance. This can be done through self-assessments, third-party audits, or site visits. When collecting data, it is important to be consistent to ensure that performance can be compared across suppliers. I
Step 4: Analyze and Evaluate
Once data has been collected, analyze and evaluate it against the desired level of sustainability maturity. This can be done using a supplier scorecard or a sustainability dashboard. It is also important to provide suppliers with feedback on their performance to encourage continuous improvement.
Step 5: Integrate Sustainability into Supplier Contracts
The final step is to integrate these new data requirements and performance expectations into supplier contracts. This can help ensure that suppliers are held accountable and can provide a basis for contracts’ termination or renegotiation if sustainability goals are not met.
Evaluating suppliers on sustainability metrics is an important part of supply chain management in today’s business environment. It is not necessary to start with a super complex evaluation model if your company doesn’t have the resources to do so. You can start with something relatively simple and make it more thorough as you learn together with your supply chain.
CEO, Miranda ESG
Contacts at Miranda Partners