Managing environmental, social and governance (ESG) challenges occupies a growing position within companies. This topic is especially important in procurement and the supply chain. These are strategic action levers that lead to the transformation of organisations towards sustainable development.
CSR at the heart of supply chains
Over the years, the normative and legislative environment relating to environmental, social and governance challenges has been strengthened for both private and public organisations. Many companies must now assess the environmental and social impact of their activities on natural resources, address it and report on the results.
In this configuration, they need to take an interest in all the stakeholders in their supply chain, i.e. their suppliers and subcontractors. In this respect, let’s recall that procurement and the supply chain (production, sale of products, services and raw materials, stock management and distribution planning, logistics management, order tracking, transport, and delivery, etc.) are responsible for a large share of companies’ turnover and greenhouse gas emissions. This emphasises the need to incorporate CSR and sustainability concerns in the selection, management, and support of these stakeholders.
The call for tender and signing the contract, two key moments for CSR and the sustainable supply chain
Companies are placing more and more demands on their partners in terms of CSR within the supply chain. This generally happens from the call for tender with the introduction of CSR criteria by the procurement department, then when the contract is signed by adding a special clause.
EcoVadis, the global leader in assessing and improving CSR performance, and Affectio Mutandi, a consulting firm specialising in social, normative, and reputational strategies in terms of ESG challenges, led a study on CSR and the supply chain. Their research shows that 73% of companies include a CSR clause in their supply contracts. These CSR clauses are based on a normative framework (code of conduct, ethical charter, UN and OECD guiding principles, ISO 26000, etc.) and specify the scope of application of CSR within the supply chain (partial or complete coverage of rank 1 and above rank 1 suppliers, etc.).
As a legal security tool, contracts are an effective lever to improve the social and environmental conditions of production (such as the workers’ safety), throughout the supply chain. This idea is also defended by the UN’s guiding principles on business and human rights: "Human rights due diligence should be initiated as early as possible in the development of a new activity or relationship, given that human rights risks can be increased or mitigated already at the stage of structuring contracts or other agreements."
Finally, suppliers are more rarely contacted during the commercial relationship, whether these are telephone conversations, site visits or CSR reporting. It seems that CSR best practices are not systematically found in concrete, everyday applications, once the contract is signed.
A virtuous CSR dynamic in the green supply chain
This new order is welcomed overall by the different stakeholders in the supply chain, either out of conviction or commercial opportunity. Each supplier sees an opportunity to progress with regards to Corporate Social Responsibility, both in terms of its products and/or services offering and its processes. Finally, suppliers are rarely dissuaded from signing a contract because of the inclusion of such clauses. On the contrary, it initiates a positive dynamic.
Once again based on the same study carried out by EcoVadis and Affectio Mutandi, suppliers believe that these commitments have enabled them to:
- Become aware of the environmental, social, and ethical challenges (41%);
- Take concrete action (38%).
A collaborative approach synonymous with success for CSR and the sustainability of the supply chain
Based on this dynamic, a company must ensure each of its supplier’s CSR commitments. Firstly, it must create a dialogue within the framework of contractual negotiations. The supply chain stakeholders are calling for more communication in the customer-supplier relationship. For example, they expect companies to share the weighting of CSR criteria in calls for tender or feedback on the information flows they send them.
Secondly, it’s important that procurement departments support their supplier network in managing their CSR approach. The aim is to position suppliers as real partners in change. In this respect, several solutions can be undertaken:
- Defining and monitoring a CSR action plan;
- Themed workshops and training courses;
- Putting them in contact with their peers to pool efforts;
- Incentivisation and/or compensation measures;
- Financial support.
Introducing CSR in the supply chain is a development opportunity for the whole ecosystem, while enabling everyone to work towards a more sustainable society. However, a strategy of this kind can only succeed on one condition: collaborating with the whole supply chain in a “win-win” dynamic. Customer-supplier relations are now entering a collaborative era, whether to head towards the ecological transition, optimise procurement management or stimulate innovation.
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