Companies who demonstrate transparency are also seeing better supplier relationships said Padmini Ranganathan © Getty Images/EyeEm
Companies who demonstrate transparency are also seeing better supplier relationships said Padmini Ranganathan © Getty Images/EyeEm

Trust between buyers and suppliers crucial to meet social goals

Collaborative partnerships with suppliers are the key to success when working towards social goals. 

Padmini Ranganathan, global vice president of risk and sustainability solutions at software firm SAP Ariba, told SM a “development mindset” rather than an “enforcement mindset” was necessary to tackle issues as varied as forced labour or packaging design.

“Companies that have worked on transparency with their suppliers, even in tough areas like forced labour, are seeing better success,” she said. “There aren’t that many, but those who have put a focus on traceability are generally seeing better supplier relationships, better management, and trust created between buyers and suppliers who they have worked with for many years. 

“Having the ability to have that conversation around tough topics like forced labour or even changing packaging design, can only happen when there is a development mindset as opposed to an enforcement mindset. There's a strategy enforcement from the top-down, but then at the operational level, it has to be collaborative.”

She added developing sustainable supply chains will often come at extra cost at first. Businesses need to balance the value of cost and profitability at board level to determine “what short-term hits the business is willing to take”. 

When it comes to the operational implementation, Ranganathan believes sustainability must be considered from the initial design process. Procurement teams must set out the sustainable production standards they want to adhere to and be able to communicate that to suppliers.

“It's not always about switching suppliers. It's about more cohesive supplier co-development activity. When you look at a plastics ban or reducing single-use plastics, we are seeing companies putting a code of conduct in place for the supplier to sign off. But is that sufficient, or do we need to really do more than that? 

“The strategic side comes from the board setting a goal, but the operational side has to consider, 'How we can implement this?' Is it simply adding a code of conduct, adding a contract SLA, or amending contracts with suppliers? Those are all good steps to take. But is there something more we can do to join forces? It’s thinking about how purchasing power can be leveraged to work with and establish solid supplier relationships.”

According to Ranganathan, the ‘post-consumption cycle’ (recycling and reusing products) is an area where there is still a need for development. 

While awareness on sustainability issues is rising, consumers aren’t as willing to give up on flexibility and ease of delivery, but Ranganathan hopes emerging technology such as blockchain will be able to support post-consumption traceability. 

“We're seeing a lot more innovation happening right now with post-consumption traceability, and we hope that technologies like blockchain will have an impact but it's still an emerging technology. There's lots to prove out there both in terms of ability to capture the right data, right information, the ability to scale and the cost factor. There's a lot to be proven there yet,” she said.

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