Communicating with suppliers is the key to meeting sustainability goals. But how can companies unlock the best approach to holding these often difficult conversations?
“Nobody should be shy on the topic of sustainability,” says Antoine Sauvage, co-founder and chief technical officer of freight forwarding company Ovrsea. “We are at the very beginning of the transition, and we are all in the same boat. The industry has to change itself radically in the coming years, and it’s important not to be intimidated by these conversations.”
But while it’s broadly accepted that implementing sustainable measures offers a range of benefits – from overall profit gains to improved brand reputation – getting there is likely to include some uncomfortable conversations with suppliers. It’s an essential step on the road to a low-carbon future and, if successful, companies can work together with their suppliers to reduce carbon emissions on a far greater scale across the whole value chain.
The trust test
“Why should we invest in relationships with suppliers?” Sauvage asks. “The main word here is trust. You can hide what you do very easily, in terms of sustainability, for example. So if we want to improve our carbon efficiency, we need to measure it and to take the numbers of our suppliers. But at some point we have to trust them – if they say ‘we are using electric vehicles or sustainable fuel’, we won’t be there to press them, and we have to trust the reporting.”
Whether personal or professional, building relationships requires effective communication. This, argues Oxfam head of ethics Sophie Brill, can be achieved by creating an environment that fosters more generally supportive relationships with suppliers. Oxfam has a long history of leading sensitive conversations and initiatives centred around positive change and has gathered a wealth of experience in how to start new conversations with communities that have operated in a set way for a long time, and encourage them to adapt.
“Building open and trusting relationships is key to making progress in this work,” Brill says. “Your suppliers need to know they can talk about the difficult issues they are facing, and that you will collaborate on solutions that are in the best interests of the people affected.”
For James Berry, an associate professor in organisational behaviour and director of the University College London MBA at the UCL School of Management, the key to success is working alongside suppliers on a regular basis. “Don’t view your suppliers and your customers as competitors, as the people you need to fight against; those are the people you need to fight with to produce the best product. You both want the market to grow, you both want to earn additional revenue. So how do you work together to enable both sides to be successful? Because that’s what you really want.
“Also, you should view your supplier relationships as long-term relationships… [If] suppliers don’t view you as a long-term relationship [and] just want to be transactional, those are the people you probably want to minimise in your supply chain. Because if that’s the case then it’s not a relationship.”
Be clear when you have ‘the talk’
When it comes to having challenging conversations with valued suppliers, this cannot be treated the same way as conducting tough negotiations and, according to Berry, it’s often mutually beneficial to avoid the ‘hardline’ approach.
Further, he believes it can help to view the discussion process as a way to better understand your supply chain. This is especially true of sustainability goals, he argues. “If you know where your pieces come from and where your products go, you’re going to be able to negotiate ways that mean all sides can win,” Berry says.
So what techniques are proving successful at encouraging suppliers to implement sustainable strategies?
First, it’s important to take a direct approach on tough issues wherever possible, to establish trust and transparency, and to set expectations, Sauvage suggests. “The most important thing is that the suppliers can understand what their return on investment is, if they start to make efforts on sustainability, for example.”
To achieve this, Sauvage says he often conducts multi-party communications to help ensure everyone is on board with the bigger picture and what they stand to gain. “We have to help them communicate to our customers – [to realise] that those customers being luxury and cosmetic brands, they are willing to commit to a cleaner supply chain.
“And on the other side, we have to explain to the suppliers before the investment what they can expect from us if they really invest in a cleaner supply chain. So it’s a two-direction communication flow. And we have to be as clear as possible in both directions to help everyone have a firm understanding.”
Balance up contingency and risk
Berry says he regularly discusses contingency contracts with clients. “This means if we can deliver our product in a sustainable way to these metrics, you will pay this. If we can’t meet those metrics, then you will pay this. That’s offering the customer the choice, but also offering them the benefit of a more sustainable product.
“Contingency contracts are very useful in business generally, but also in negotiations. They allow you to layer different options into a single deal. If a company makes a deal to supply you in a sustainable way, and then can’t deliver, that company is not going to succeed for very long.”
So how do you ensure lasting success and reduce the risk of letting customers down? Go beyond compliance in order to save your time and resources in the long term, advises Brill.
“The collective impact of compliance-based approaches has meant suppliers are often trying to respond to multiple different requests from different customers, making it difficult for them to formulate their own plan based on the salient risks they have identified,” she says. “As a buyer we try to understand what work is already in place and support and challenge this approach, rather than setting specific actions based on our own processes.”
Set realistic goals
“We want you to be 100% sustainable in two months,” is just one example of unrealistic and unhelpful goals, which Berry says may have a lasting negative impact on relationships. “I have a six-month backlog of work, we produce things with a six-month lead time. How am I going to be able to do a two-month switchover when my production process is six months? That’s unrealistic.
And that’s where more discussions need to happen.
“I think people resisting is not really an option. But I also think unrealistic expectations are not an option either. You’re going to harm a lot of a lot of groups if you dictate ‘we want this, go do it’. You have to give lead time, because change takes time, and it takes money,” he adds.
So rather than make demands based on your needs, work with suppliers to find joint solutions and develop the right mindset, says Sauvage. “At some point, if you want to improve your sustainability, you have to figure out your engagement, and this is a necessary condition to have a sustainable company.”
Brill agrees, adding companies should “have these conversations with a mindset where we are seeking to both hold true to our core values and expectations, but to also learn from suppliers about the practicalities of implementation. But we can also increasingly share with our suppliers examples of best practice in other organisations as a way of showing how change can be implemented.”
Built in solidarity
Organisations that are good at sustainability are those that see their supply chain as an extension of themselves, and the company-supplier relationship will be a transparent partnership with a foundation of solidarity.
“Whatever that problem is, whether that’s pricing of the product, delivery of the product, [or] sustainability of the product, work with your supply chain as partners in trying to solve the problems,” Barry concludes, “And, hopefully, that will increase the value of the entire supply chain.”