Question: How can you execute on your ambitious environmental and social sustainability goals?
Answer: By embedding sustainability into your operational processes and prioritising it along the entire supply chain. With 13 trillion USD annual spend by the top 500 companies, Procurement offers a massive opportunity for driving global sustainability.
By rewarding the right suppliers, sustainable action is incentivised throughout the supply chain. However, there are multiple dimensions to the ratings puzzle. In this blog we have used an example from EcoVadis (the world’s leading and most trusted provider of business sustainability ratings with over 75,000 rated companies). Their ratings cover four critical themes:
Environment (GHG's , operational waste and product reuse)
Labor and Human Rights (Health, safety and working conditions)
Ethics (Corruption and anti-competitive practices)
Sustainable Procurement (Supplier environmental and social practices)
When your business embeds supplier ratings into an actionable scorecard, it will clearly see supplier key strengths and improvement areas. This will better inform operational procurement processes and make sustainability a priority in your purchasing decisions.
Sustainable Supplier Management
So how would this work in practice ?
When onboarding new suppliers and managing existing ones, you can automatically prompt your supplier base to get assessed and optimize completion speed.
By embedding the ratings in the procurement process, you can make smarter purchasing decisions, down to the order level to direct more spend to the highest-rated suppliers, reward sustainable actions and stop orders going to an unsustainable supplier.
This will provide full transparency on your ESG performance by evaluating the spend sustainability and sharing this with your customers.
By leveraging process automation, you can set up weekly Supplier Coverage reports sent directly to your team's inbox .
In our example below, we show how supplier ratings can be integrated into your procurement processes and reporting. In this example we have used Celonis as the reporting engine and Ecovadis as the ratings provider. This app is available on the Celonis EMS store. (please note that all data is fictional)
1 Understand your Supplier Coverage
First you need to get your suppliers rated. This will take some time and you will probably prioritise the most important suppliers first. In our example, we can analyse the current rating coverage by overall spend, suppliers and PO's, identify execution gaps causing low coverage and trigger ratings for unrated suppliers with high spend
2 Track your Supplier Ratings
Secondly, you can track the average rating of your suppliers by overall spend, suppliers and PO's for the overall ESG performance and detect optimisation potential to improve average ratings
3 Drill down on your Supplier Summary
You can drill down to the individual rates by supplier for environmental performance, ethics, labour & human rights and sustainable procurement. In our example we have 4 different supplier ratings categories and an average overall score.
4 Automate the Update of Supplier ratings
In this simple example, you could drive improvements using the Celonis action engine to take action on your unrated suppliers with the highest spend by sending an automated email
Conclusion
Supplier ratings are now available from a number of providers. If you are currently developing supplier ratings to drive sustainable spend in your organisation then look for opportunities to integrate this with your existing procurement improvement initiatives. In this way you multiply the benefits !!
Best Regards
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