Organisations struggling with supply chain sustainability

posted by Katie Jacobs
9 November 2018

Eight in 10 organisations are struggling to include sustainability in their supply chain management, according to research by procurement consultancy State of Flux.

State of Flux’s annual global SRM research report surveyed more than 300 organisations and found only 5% of these can be classed as ‘leaders’ in supply chain sustainability.

The report also revealed that 47% of organisations do very little or no joint work with suppliers to manage sustainability.

According to the research, the main driver for procurement managing sustainability is reputational risk, cited by 66%. This is followed by regulatory risk and compliance (58%), it being good business sense (51%) and it being the right thing to do (50%). Less than one in five (18%) are driven by customer pressure.

While all companies classed as leaders said they specifically manage and identify supply chain sustainability risk, 60% of ‘follower’ companies (which make up three-quarters of the sample) do not identify or manage these risks.

State of Flux chairman and founder Alan Day said the majority of social and environmental impact comes through the supply chain. “Only by managing relationships with [suppliers] can we improve practice through the value chain,” he added.

Hugh Jones, managing director of the Carbon Trust’s business services team, called on procurement to do more around supply chain sustainability.

“One of the greatest levers for change we have for taking action on climate change within the economy is using the power of procurement to cascade positive changes down supply chains,” he said.

“If big buyers with substantial purchasing muscle can flex this in a way that drives a shift towards sustainability, they will help to accelerate the shift towards a low carbon future and benefit everyone.”

State of Flux’s report, now in its 10th year, also found that organisations are increasingly seeing suppliers as a source of innovation, with 43% citing it as a top driver. This puts innovation in the top three drivers of SRM ­– after cost reduction and risk avoidance ­– for the first time since State of Flux started doing this research.

People and technology remain a gap when it comes to SRM. Only 43% of firms are implementing any SRM training and only 7% of firms feel they have the technology that fully supports the supplier management lifecycle.

Speaking at the report launch, State of Flux head of SRM Mel Chutes said: “Skills are not being sufficiently prioritised. Underinvestment in technology slows progress and increases risk. Excel is great, but you can’t manage a global organisation on spreadsheets.”

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