As corporate responsibility attracts more attention, more and more companies are working with peers and competitors in their respective industries to accomplish sustainability-related goals.
Responsible purchasing programs are proving to be key drivers of financial value. According to Nielsen, products created with sustainability attributes are outpacing overall sales growth. And with environmental, social and governance (ESG) indicators now considered material financial risk, investors and business partners want to see proactive sustainability strategies from organizations — especially within the supply chain.
As corporate responsibility attracts more attention, companies are not only making individual commitments to driving supply chain sustainability improvements — such as BMW’s recent pledge to stop purchasing Congo cobalt — they’re also working with peers and competitors in their respective industries to accomplish sustainability-related goals.
Collaboration goes mainstream
Over the past year, we’ve seen significant growth in sector initiatives, in which participating companies within the same industry leverage sustainability performance management tools together to share information and best practices. Collaborative groups in pharma, consumer packaged goods, beauty and chemical are expanding rapidly as the need for sustainable action becomes clear:
In January, GlaxoSmithKline, Teva and Takeda launched the Responsible Health Initiative, a consortium designed to fortify ethical business practices and drive shared value across the pharmaceutical, healthcare and biotechnology fields.
Together for Sustainability, a collaborative initiative in the chemical industry, added 2 new members in 2018, and its 23rd — Wanhua Chemical Group — in February of 2019. They find that over 80 percent of suppliers maintain or improve their score upon re-assessment.
In transportation, Railsponsible added four new buy-side companies, including CAF (Construcciones y Auxiliar de Ferrocarriles), ÖBB (Österreichische Bundesbahnen), SNCB (Société Nationale des Chemins de Fer Belge) and Wabtec. The group boosted supplier scorecard sharing within their collective pool of more than 859 assessed companies, and have an average score of 53.3, more than 10 points above the EcoVadis global average.
Seven companies in the EcoVadis buy-side network are now members of AIM-Progress — a sector initiative of over 40 food, beverage and consumer goods companies.
The global business community’s growing interest in working together on sustainability improvements is noteworthy. It means companies are realizing that acting through supply chain activities is a tangible way to drive better outcomes and lasting value. It means more companies are ready to fight for sustainability — and it means organizations understand that how they operate their business can have a tremendous impact on both the bottom line and the world.
Reaching sustainable maturity: Benefits of industry collaboration
When you consider that 50-70 percent of the impact companies have on society and the environment comes from the supply chain, the challenge in front of organizations is clear, but so is the power. By working together on supply chain initiatives and sharing tools for assessing and improving supplier CSR performance, progress in sustainable outcomes happens exponentially faster and influences behavioral changes across all participants in the value chain.
This is because of the obvious time and money savings generated by combining efforts, but also because this level of harmonization creates newfound transparency on supplier performance. Getting the industry on a common supplier assessment platform positions companies to go beyond simply meeting minimum compliance standards to address root supplier performance issues and clearly identify new ways to create shared value.
The more that companies within a sector work together, the better the results — and the more suppliers are engaged. Suppliers are more motivated to work with buying organizations on sustainability improvements when at the request of several of their key customers. And with a common platform, suppliers only need to submit one evaluation that gets shared across the board, rather than conducting several different surveys unique to each buying organization. This reduces survey fatigue, and frees up both buyers and suppliers to focus on the actual content of their sustainability initiatives and drive real business impact — including lower brand risk and operational efficiencies, and building innovative sustainability product categories that set the strategic direction of the company and more.
Collaboration may feel counterintuitive — especially considering sustainability can be a competitive differentiator for a business, and therefore something you’d think should be kept close to the chest. In reality, sector initiatives enable entire industries to work better together, and multiply social and business impact — which doesn’t just aid one company, but the entire community.
Wondering where you stand — and where to start — on sustainable procurement? Assess your maturity in minutes with this diagnostic benchmark.