Lessons on Supplier Engagement

ECO-Buy held a Breakfast Forum on Engaging Your Suppliers on Sustainability on Thursday 29 March. Three speakers from Kingston City Council, Grocon and Spotless as well as two panel members from Vega Press and Health Purchasing Victoria presented their views, experiences and programs, followed by questions and answers.

Organisations are recognising that their major environmental impacts are through their wider supply chains. According to the Carbon Disclosure Project, about 80% of organisations’ greenhouse gas emissions come from their supply chains from activities such as manufacturing, transportation and packaging. The introduction of the Clean Energy Future legislation in July further stresses the importance of engaging with suppliers in reducing the carbon intensity of supply chains to avoid being hit by higher costs. Engagement and on-going communication with suppliers both up and downs supply chains is essential to influence sustainability practices. The engagement process usually starts from a large buyer corporation and moves to the upstream suppliers and to a lesser extent to downstream customers.  

There are two types of approach used by buyer organisations to drive sustainability into their supply chains. The first is compliance-based, imposed by buyers to suppliers in order to meet sets of environmental criteria, requirements or standards. Kingston City Council, for example, is using software called Ipro LiVe to manage contractors, OH&S documentations and the assessment process. As part of the assessment process, four key environmental questions are asked from contractors to find out if they have any environmental policy, plans, or procedures. Based on the information that contractors provide they either receive an approval, which means they are qualified for 12 months, or fail which means the council may not use them as a contractor.

Grocon uses an on-line supplier registration portal to monitor its suppliers. The information for all suppliers and sub-contractors is recorded based on previous experience, performance and set criteria. Suppliers are then short-listed through a pre-qualification process. The questions look at certain compliance and the minimum requirements (i.e. OH&S, environmental management plans, previous experience in delivering Green Star projects).

The second type of approach goes beyond compliance and focuses on cooperative activities between buyers and suppliers. The joint efforts of buyers and suppliers to devise and develop environmental solutions characterises these practices. This requires firms to dedicate specific resources in addressing the environmental issues across the supply chain. Grocon engages suppliers through meetings, workshops and invites them to make presentations on their products, technologies and the way they can support Grocon programs. For Grocon, on-going contact is a key to engaging suppliers, and it creates the opportunity to introduce more environmentally sustainable products. In partnership with Boral Concrete, Grocon introduced Pixelcrete, a type of concrete which uses 60% less cement and 100% recycled and reclaimed aggregate, reducing carbon emissions by 50%.

From Spotless’ perspective, sustainability is a long-term investment integrated into its day-to-day activities and further into Spotless’ supply chain. The Presidents Cup golf tournament was provided as an example that required collaboration among different parties such as chefs, cleaners and suppliers of foods in finding ways to reduce the waste and the environmental impacts of the event.

Vega Press has found solutions to its environmental impacts by working with its suppliers. For example, they have arranged with a service provider in Bayswater to take their waste fluid to use in a cooling process. This is cheaper than if it goes to the landfill. Kingston City Council provides suppliers with suggestion on how to improve their environmental performance. Suppliers that demonstrate progress receive approval for further work.

Engaging suppliers is a challenging task and requires hard work. One big issue that Kingston City Council faced at the early stage was the list of questions to be asked from a range of different contractors, especially establishing a list of questions which would be relevant to all suppliers without being repetitive and burdensome. In response to this challenge, Kingston reduced the number of questions to four practical ones and makes a case-by-case judgement based on what the real risk of the contractor is to the environment and therefore what level of details should be expected.

A key concern for many is the effect of the new carbon tax. The impacts of the legislation were discussed in the Forum, and a few actions the businesses are taking in response. Grocon has engaged subject matter experts to identify what the actual impacts of carbon pricing will be on its products and services, including what costs are going to be passed on and what reporting mechanism is going to be adopted.

As printing is an energy intensive process, Vega Press has engaged consultants to review its electricity usage. They are prepared for price increases on electricity, paper and other materials. Health Purchasing Victoria (HPV), however, does not expect a large impact, but they have undertaken an assessment of their supply chain to determine where the actual costs will be. HPV plans to accept or push back on proposed cost increases on a case by case basis.

The diverse set of perspectives that contributed to the ECO-Buy Breakfast Forum provided an interesting and dynamic morning. Each of the organisations presented a different approach with their suppliers, ranging from compliance-based questionnaires and standards to working closely with suppliers beyond compliance towards better environmental solutions. Though the task can be difficult, we can expect to see more organisations taking this approach in the future, innovating a more sustainable supply chain.

Article provided by Mohammad Yarahmadi, PhD Candidate at Swinburne University of Technology.