Why and how to engage your suppliers in sustainability
Kevin Ramm, Head of Sustainability at Muddy Boots, discusses key areas for engaging suppliers in sustainability.
Leading food companies around the world already recognise the business case for driving sustainability. For example, research from the Stern Centre for Sustainable Business established that products marketed as sustainable grew six times faster than those that were not. Food is a sector that particularly benefits from growth in brand loyalty and revenues, when the product and company can demonstrate credible sustainability credentials. Consumers are increasingly demanding that companies embrace principles of sustainability, due in part to higher awareness of environmental and social issues, and the influence of millennials and Generation Z. McKinsey describe one of the key shifts in consumption behaviour is the search for truth in products they buy and their relationships with brands.
Risks presented from sustainability
Food companies also recognise - and experience first hand - the risks presented from sustainability challenges. According to the US Department of Agriculture, recent severe drought in the US impacted 80% of agricultural land, resulting in $14 billion in loss payments, with reduced food supply and increased prices along the supply chain. The financial sector is now demanding comprehensive and credible information about the sustainability performance and risks in supply chains, as a key element of decision making for investment, loans and insurance.
A key characteristic for the food sector is that the sustainability of products – and the risks to supply chains - are highly determined through activities and decisions early in the value chain – such as food processing, farm operations and agri-business inputs. For example, according to a recent report from CDP – a respected and well established organisation enabling corporate sustainability disclosure in supply chains - typically 90% of the GHG emissions for food products occur upstream of arriving at the manufacturers or retailer sites. Similarly other impacts such as deforestation and water footprint are concentrated in the first part of the value chain. This explains why today more than 95% of major buyers use sustainability performance in sourcing and supplier management decisions.
How to engage your suppliers in sustainability
So, engagement with suppliers is accepted as critical for food businesses to be able to reliably measure sustainability, and more importantly to work together to drive sustainability improvements for food products. Which begs the question, how do food companies engage suppliers on sustainability?
It’s a question that we at Muddy Boots are particularly close to, as we work with a range of customers who have progressive and impactful supplier sustainability programs. Looking across our customers and the food industry at large, we see broad consensus around the following 4 themes for engagement:
- Firstly - Align: be clear with suppliers why and how you wish them to work with you on sustainability and what is important to you. Enable education where necessary and be consistent with terminology and clear on process and consequences.
- Secondly - Ease: ensure you have good systems in place to make it easier for suppliers to work with you – such as information sharing platforms. Suppliers will need clarity on what tasks they need to perform and how to perform it successfully – ranging from acceptance of code of conduct, evidence of certificates and approvals, through to provision of richer sustainability information.
- The third theme is Assess: be transparent on how you measure supplier sustainability performance of your suppliers, and if you produce a supplier sustainability scorecard share the scorecard with them and consider sharing benchmarking information to help suppliers gauge comparative performance. Clearly, it’s important to be fair about cohorts included in a supplier benchmark and to fully protective sensitive data.
- The final theme is Collaborate: work together on agreeing hotspots for sustainability improvement with the the customer and supplier or grower exploring what’s feasible and attractive to do as a manageable program. Let’s face it, the complex nature of the food industry means that sustainability cannot be solved by individual companies acting in isolation. The entire industry is on a sustainability journey and we need to promote continuous improvement across supply chains with clear incentivisation for continuous improvement.
There are some great initiatives and developments in supplier sustainability collaboration, such as the CDP Supply Chain program, the Sustainable Procurement Pledge and SAI Platform’s Sustainable Dairy Partnership. As someone who started as a sustainability practitioner 15 years ago, it’s exciting to see how food businesses and the agricultural sector are working more closely to address key issues of our time.
References - Publications & Resources - NYU Stern ; Generation Z characteristics and its implications for companies | McKinsey ; USDA