Launching a supplier code of conduct represented 'base camp' in Air New Zealand’s 'Everest' target of becoming a sustainable business.
That's according to Andy Richards, general manager of procurement at the airline presenting to delegates on the topic of 'Procurement's Role in Sustainable Business' at the CIPS New Zealand Conference in Wellington last week.
The airline’s sustainable procurement template is divided into three parts: people, place and economy. It is a template, Richards said, that creates an awareness of the communities from which they draw supplies and labour, allows close examination of cost drivers in the economy, as well as an understanding of the airline’s impact on the environment.
“The elephant in the room is carbon,” Richards added. But he was quick to point out that Air New Zealand accepted the eco-airline of the year award in January, for which it was commended for “supercharging its social and environmental responsibilities”.
Apart from fuel, the procurement team purchases every item for the airline, including the envelopes. There are 5,000 suppliers, many of them operating in offshore ports, and attention to detail is Richards' mantra. He said the business relies on really good, detailed planning, a meticulous, step-by-step approach on how they enter the market and consciously seek to avoid contract leakage.
Compliance is paramount for the airline’s procurement team and given the nature and global spread of its suppliers, it’s a complex standard to maintain.
After receiving 200 separate compliance-related requests, the airline decided to launch a Supply Code of Conduct. To use a mountaineering metaphor, Richards said: “If Everest is the airline’s goal, the supply code of conduct is our base camp”.
The code is intellectual property the airline is prepared to share. As well as addressing obvious airline-specific issues, such as emergency prevention, it contains “the usual stuff” applicable to the procurement profession and it is available because “we want to stretch ambition, rather than keeping it to ourselves”.
This holistic approach is apparently extended to Air New Zealand’s suppliers. “It’s in the airline’s interests to ensure our suppliers' commercial sustainability. We need to protect our suppliers margins, and we take opportunities to work with our suppliers beyond the terms of their contract," he said.
As Richards acknowledges, this approach to partnership is key to Air New Zealand’s sustainability. “The airline is helping to drive New Zealand’s success. We have a fantastic opportunity, for example to promote the New Zealand wine industry,” he said.
“New Zealand needs a successful Air New Zealand, just as Air New Zealand needs a successful New Zealand.”
On the day of the presentation, Air New Zealand announced a 154% increase in its half-year profits to NZ$338m.
Richards added: “Our aim is to help business savings, something for which we’re always held accountable."