I was with one of my more provocative clients this week who asked me the inevitable question:
“If supplier A has a really good sustainability offer but supplier B was 20 per cent lower cost, which one would you select?”
The answer is easy, supplier B of course.
Now, before the sustainability purists sign my death warrant I think I need to put a few caveats down.
- First, sustainability requirements must be built into the tender specification and contract. Failure to do this means sustainability is just an afterthought and supplier B would never change their practice. This means you are stuck with expensive supplier A if you are serious about your sustainability objectives.
- Second, it must be a condition of the contract that supplier B develops their capability over the life of the contract, particularly for longer term contracts, in this instance we were looking at five years. It will be necessary to use some of the cost savings to support this, I have seen some innovative gain share arrangements recently where some savings are reinvested in competence development.
- Third, the supplier’s sustainability performance and competence development must be measured post-award and embedded in your supplier relationship management process. Performance must be tracked and corrective action taken if necessary, including termination.
If this can be achieved you will have developed another competitive supplier into the market. Of course supplier A will bleat along the lines of “I have invested all this money in sustainability and all you ******* buyers do is chose the cheapest”. This is tough luck. Your supply chain needs to be sustainable and competitive. If there is a very small pool of suppliers who can deliver high standards of sustainability they will use this as an excuse to inflate their prices. If you are a smart buyer you will develop a bigger competitive pool of suppliers who can deliver sustainability, increasing competition and driving down prices.
I have never believed sustainability should be a premium product. What is it about using less energy, fewer resources and wasting less that adds cost to a product or service? There are some exceptions to this rule of course but you should be able to achieve net cost reductions. Smart buyers should aim for sustainable and competitive.
☛ Shaun McCarthy is director of Action Sustainability