CPOs designing a responsible sourcing strategy must incorporate it into the procurement decision-making process or it will be “relegated to the background”, according to Gartner.
In a report Gartner said procurement teams needed to decide between four levels of responsible sourcing and then communicate this to suppliers.
Gartner’s four levels of responsible sourcing are:
1. Basic compliance. Based on regulatory compliance and international norms, this policy is usually communicated to suppliers through a code of conduct.
2. Compliance plus. This is where expectations exceed legal minimums, so rather than focusing on a minimum wage, a living wage is promoted.
3. Supplier sustainability. The outcome of this approach for many supply chains is a focus solely on greenhouse gas emissions (GHG) data collection. Approaches include setting overall reduction targets, science-based targets, or a focus on renewable energy.
4. Environmental ecosystems. This involves supply chains taking a broader view of environmental, social and economic impacts, addressing externalities such as deforestation, biodiversity loss, land-use change, water use, and climate change.
Gartner said when the aim was compliance or compliance plus, this could be handled with a supplier risk assessment. But where the goal went beyond this, suppliers should be prioritised based on GHG emissions or material environmental impacts.
“As procurement leaders begin designing their responsible sourcing strategy, they must ask themselves how they will incorporate responsible sourcing goals into the decision-making process of the function,” said Gartner.
“Without this, the responsible sourcing strategy will likely be relegated to the background and considered optional with other short-term objectives, such as cost savings, taking precedence over it.
“For a responsible sourcing strategy to be effective, it must be elevated to the same level as how companies think about business development: an expected medium-term strategy.”
Organisations should reflect their requirements in the bidding process, supplier selection and onboarding process for new suppliers.
For established suppliers responsible sourcing requirements should be embedded into areas including contracting, performance management, and supplier collaboration work.
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