What Does Supplier Collaboration Mean for Sustainability?

Be the leader in innovation and growth and reach your goals with enhanced Supplier collaboration. Supplier collaboration helps you build trust and transparency within your supply chain.

Today’s sustainability goals are significant; there’s no denying it. With governments worldwide coming together to combine forces and keep the rate of global warming below 1.5℃, all efforts turn to collaboration to slow the looming threat climate change poses on the future of our planet, among other crucial sustainability goals.

The United Nations’ 17 Sustainable Development Goals aim to tackle issues such as poverty, hunger, affordable and clean energy, and creating sustainable cities and communities across the globe. Similarly, the Paris Agreement sees 196 international parties commit to a binding agreement to limit global warming through economic and social transformation.

Stats indicate that consumers are becoming increasingly interested in more sustainability. A survey highlights that 90% of Gen Z believe companies must act to prioritize improving environmental issues, and 77% of total consumers are motivated to purchase from companies committed to making the world a better place.

Reaching the goals set out through numerous treaties and organizations is no longer optional. Companies must continue forging a path to more sustainable practices.

In recent years, Schneider Electric, Stantec Inc, and Atlantica Sustainable Infrastructure PLC have been named some of the most sustainable companies globally, with more and more businesses starting to follow suit. In many instances, organizations are beginning to implement their own sustainability practices or are choosing to invest years into sustainability.

Yet, despite these efforts, there remain considerable hurdles to overcome and big goals to be met. So, with that, we look at the impact supplier collaboration could have on sustainability.

Monitoring vs. Collaboration 

For a business to meet its sustainability goals, it must first look outside of its own walls. The majority of organizations recognize and understand that a lot of the risk of sustainability is contained throughout the manufacturing and labor of sub-tier suppliers. This means finding ways to connect with your sub-tiers.

Naturally, through working with your suppliers, you will be able to endorse positive growth and maintainable changes. But let’s not forget that monitoring and management are equally as important.

By continually observing, collecting data, and providing feedback to your suppliers on their performance, you will be able to gauge which of your suppliers needs extra support and guidance when it comes to implementing and sustaining your standards and expectations.

But balance is key, and downplaying the importance of collaboration is not a good move. Working side-by-side with your suppliers, exchanging ideas, and progressing toward your goals together can prove extremely valuable.

Understanding the differences between supply chain monitoring, management, and collaboration is vital. Below, we’ve listed some of the key steps to help you differentiate between the two and the advantages they both hold.

Supplier Monitoring and Management 

Sending audit requests and providing feedback allows you to not only gain visibility you’re your suppliers but gives you the chance to relay suggestions and offer a helping hand if needed. When combined with passive assessments (such as ESG rating platforms), It becomes an effective system to see how suppliers are keeping up with goals and benchmarks.

Often, any missing information provides a broad understanding of which areas need more attention and whether some just don’t exist.

Supplier Collaboration 

Supplier collaboration provides a valuable two-way street of assessment and feedback, allowing you to keep an eye on performance levels, which of your suppliers exceeds expectations, and which lags.

Tailored assessments provide more incentive for suppliers as it increases the focus on building deeper relationships and stronger foundations for continued partnership going into the future.

But, most importantly, supplier collaboration opens doors for your suppliers to access resources to allow them to improve. It’s safe to assume that not all of your suppliers will have the tools at their immediate disposal to start implementing the necessary changes to meet your sustainability standards. So, by working with them to make sure they have the right resources, you’ll not only make the process more appealing and easy for your supplier, but you’re more likely to speed up your own progress as a result.

The Benefits of Collaboration 

With all of the supply chain disruptions and procurement challenges regarding sourcing in 2021, it’s impossible to reach sustainability goals alone. This is why collaboration with suppliers is imperative.

Collaboration helps build trust and transparency, and that can lead to innovation. We can’t measure what we can’t see, so building this trust and transparency to create visibility is crucial.

When organizations can communicate with all of their suppliers, small changes from numerous groups add up to significant change, meaning goals can be more ambitious. Compared to instances of supply chain adversity, it only highlights how paramount collaboration is to supply chain success.

So, given that we know it’s so critical, how can companies implement better collaboration into their practices?

Implementing Collaboration 

If you are ever doubtful about the importance of implementing collaboration into your supply chain, then it’s worth looking at McKinsey and MSU’s study into supplier collaboration.

Back in 2019, McKinsey and MSU launched research into the collaboration between suppliers and buyers involving a dozen leading consumer-goods companies in North America along with approximately 15 of each business’s strategic suppliers. They collected over 300 written responses from over 130 organizations, conducting interviews with roughly 60 buyer and supplier executives.

One McKinsey survey shows that companies regularly collaborating with their suppliers benefit from higher growth, reduced operating costs, and increased profitability. Their study shines some light on what aspects of collaboration buyers and suppliers believe are working well and which areas are most challenging to tackle.

As with anything, supplier collaboration comes with its difficulties. It can prove challenging when trying to quantify its value or change stakeholders’ mindsets. The transition from transactional to collaborative relationships can be a bumpy one..

Supplier collaboration results in better sustainability progress. Work with your suppliers to develop innovative products to help achieve your goals and boost profits, redesign your processes together to ensure less waste, and collaborate to purchase the right raw materials.

Collaboration allows you and your suppliers to strengthen your supply chain, but it’ll take effort and discipline from both sides. Managing time efficiently, changing mindsets, and enhancing cross-functional involvement from supplier and buyer is no easy feat, but it can be done. And it’s important that it ensures the supply chain plays its role in helping to slow the rate of global warming and building a more sustainable world for the future.

 

SupplyShift was acquired by Sphera in January 2024. This content originally appeared on the SupplyShift website and was slightly modified for sphera.com.

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