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Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
Sustainability: Supply Chain Risk Management
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Sustainability: Supply Chain Risk Management

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Sustainability isn’t about the fuzzy “we care about people and the environment” statements any more. Consumers and analysts increasingly demand hard evidence to support your claims and hold you …

Sustainability isn’t about the fuzzy “we care about people and the environment” statements any more. Consumers and analysts increasingly demand hard evidence to support your claims and hold you accountable for the actions of your suppliers. Are you doing enough?

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  • 1. procurence procurence. supply chain assessmentMEASURING SUSTAINABILITYIN THE SUPPLY CHAIN18/12/2011 Measuring Sustainability in the Supply Chain
  • 2. procurenceTOC New challenges for CSR Monitoring Sustainability Sample project implementation About Meercat Suite and ProcurenceCopyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 2
  • 3. procurenceConsumers are getting more educated in terms of sustainability - companies shouldquickly get ready for the increased demand for transparency.New challenges Sustainability isn’t about the fuzzy “we care about people and the environment” statements any more. Consumers and analysts increasingly demand hard evidence to support your claims and hold you accountable for the actions of your suppliers. Are you doing enough? Do you have the right tools?Copyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 3
  • 4. procurenceOnly companies with an adequate level of internal visibility can properly inform the publicabout their activities.Source of data for sustainability reports■ basic data■ certificates■ audits■ self-assessmentsCopyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 4
  • 5. procurenceConsumers want credible (usually externally validated) and detailed information aboutsustainability in organisations.Defining „acceptable evidence” COVERING THE WHOLE CREDIBLE DETAILED SUPPLY CHAIN EVIDENCE INFORMATION ... not just internal People mistrust corporate What gets measured, processes and direct sources – you need gets managed. suppliers. external authorities. ■ internal activities ■ international certifications ■ “devil lies in the details” – ■ direct suppliers (ISO, etc.) need for an in-depth ■ credible NGO-certifications evaluation not mere ■ 2nd+ tier suppliers compliance statements (e.g. FSC, etc.) ■ global guidelines (e.g. ■ actionable information Global Compact) ■ sustainability storiesCopyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 5
  • 6. procurenceCSR departments will have to work hand-in-hand with the purchasing / SCM department toachieve the desired levels of transparency in the supply chain.Implications for CSR departments NEED WITH A CLOSER RESPONSIBILITY FOR NEED TO MANAGE CO-OPERATION WITH THE WHOLE SUPPLY CHAIN NGOs & PARTNERS PURCHASING / SCM ■ at the minimum, mandatory ■ Help transform data into ■ Need to find credible evidence of basic action (more resources). sources of external data compliance from the whole ■ Supplier development and benchmarking. supply chain know-how ■ Need to prove that ■ reliance on self- ■ Pre-selection of suppliers sponsoring activities are assessments to lower the based on their sustainability “heartfelt” and not mere PR cost of data gathering approach – need to adjust (evidence for the change). SOPsCopyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 6
  • 7. procurenceCompanies should start with ensuring compliance and then focus on pro-activeness.Stages of sustainability management MATURITY OF SUSTAINABILITY MANAGEMENT  ignorance compliance pro-activeness EXAMPLES who are your 2nd+ tier compliance with setting new suppliers? international standards: social, standards? environmental, measuring and economic managing social and compliance with locally pro-active, environmental impact local laws? setting good of each product: “end- example? to-end” transparencyCopyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 7
  • 8. procurenceAs the sustainability management matures, ties with suppliers will become closer.Depth of co-operation as organisations mature MATURITY OF SUSTAINABILITY MANAGEMENT  ignorance compliance pro-activeness hands-off self-reports on-site audits development active co-operation CLIENT-SUPPLIER RELATIONSHIP  ■ Frequent on-site audits remain ■ Supplier development across the supply to-date the best method of ensuring chain are challenging and are best delegated sustainability compliance in the supply from tier to tier. chain ■ Active co-operation and transparency across ■ Self-reports play a supporting role to keep the supply chain remain an exception, but the costs down can be achieved, e.g. Icebreaker BaacodeCopyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 8
  • 9. procurenceTOC New challenges for CSR Monitoring Sustainability Sample project implementation About Meercat Suite and ProcurenceCopyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 9
  • 10. procurenceSustainable organisation need to monitor performance of their suppliers and partners inaddition to adjusting their internal processes.Performance monitoring PERFORMANCE DIMENSIONS NGOs Ecological Economic SUSTAIN- SUPPLIERS YOUR ABILITY COMPANY / SUPPLY CHAIN Social MONITORED ENTITIES Copyright© Procurence Sp. z o.o.Source: European CommissionSource: Procurence Measuring Sustainability in the Supply Chain Slide 10
  • 11. procurenceSustainability assessments are usually performed in the same fashion as quality andpurchasing audits, sometimes they are repeated for better effect.Sustainability assessment process Plan Perform EvaluateCopyright© Procurence Sp. z o.o. DevelopSource: Procurence Measuring Sustainability in the Supply Chain Slide 11
  • 12. procurenceSustainability assessments do, however, offer more of a challenge than other audit typesbecause of the nature of what is being assessed.Specificity of sustainability assessments ■ More public exposure ■ Geographical dispersion ■ Quality / purchasing issues are ■ need to use local teams or local NGOs usually not-contentious and remain to keep costs down hidden from the public eye ■ increased communication burden ■ Good documentation & governance ■ need a standard approach world-wide are crucial to ensure comparability of results ■ More focus on 2nd + tier of suppliers ■ Fast changing environment (last audit was ■ need to have the up-to date “so last year.”) documents showing the compliance ■ need for a higher assessment of the local suppliers – evidence frequency mandatory Need for an IT system that support the process – monitoring, performing and evaluating assessmentsCopyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 12
  • 13. procurencePotential risks in CRS non-compliance often lie in the details and that is why it is notenough to merely look at the aggregate scores.Multi-dimensional evaluation■ Single “sustainability score” insufficient, since it can cover up major risks and non- compliances■ Managers must have a quick overview of the supplier’s status from multiple perspectives■ Functional scores help narrow down on problem areas■ Further dimensions help identify the level of risk or gain associated with the supplier (compliance – processes – proactiveness)■ Criteria can also be used to steer the network by providing short- and long-term goalsCopyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 13
  • 14. procurenceCompanies must be careful in selecting the right NGOs and audit companies to ensureintegrity and reliability of the results.Quis custodiet ipsos custodes? (Who guards the guardians?) ■ Reliability of the NGO partners influences the perceived reliability of assessment NGOs results ■ Need for clear selection criteria – NGO selection on basis of a “social tender” ■ Need to regularly audit the NGOs to ensure appropriate standards of governance, SUPPLIERS methodology and labour force YOUR COMPANY / SUPPLY ■ Need to document all supplier-related CHAIN communication in an easily accessible form in case of future investigations MONITORED ENTITIESCopyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 14
  • 15. procurenceTOC New challenges for CSR Monitoring Sustainability Sample project implementation About Meercat Suite and ProcurenceCopyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 15
  • 16. procurenceSustainability and supplier audit projects should ensure that your organisation is capableof dealing with the task and can extract maximum benefits.Suggested sustainability / evaluation project approach with key results KEY RESULTS KEY RESULTS KEY RESULTS List of focus topics Resources and Audits of key DEVELOPMENT and key suppliers, processes in place. suppliers, self-reports timeline and project Clear for the rest. COMMUNI- risk mitigation plan responsibilities. CATION strategies, continuous flow supplier TRANSPARENCY of information in development Identify and assess supply chain SET-UP a suppliers, evaluate Sustainability impact ORGANISATION SET PRIORITIES and targets for sustainability and audits Improvement measures Communication set and monitored. platform, sharing of Common sustainability. information with 2nd & standards across theCopyright© Procurence Sp. z o.o. 3rd tier suppliers. supply chain. KEY RESULTS KEY RESULTSSource: Procurence Measuring Sustainability in the Supply Chain Slide 16
  • 17. procurenceSetting the right priorities is a key factor that ensures successful implementation despitecapacity constraints.Determinants of project PRIORITIES Corporate FEASIBILITY & CSR strategy Cost of Commo- preven- dities tion Priority Topics & Suppliers Supplier Cost of location monito- (geopoli- ring tics) Likelihood / Impact INITIAL SELECTION Copyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 17
  • 18. procurence You need to build a strong organisation to make sustainability part of the process landscape and not just a one-off exercise. Important elements of a Sustainability ORGANISATION  Top management buy-in  Process guidelines  Cooperation CFO, CPO,  Integration with other head of QM #1 processes (RfX, inventory #3 Change management, sourcing)  Sustainability Processes culture management  Escalation rules - how to  Integration with ERM ensure risks noticed in time?Copyright© Procurence Sp. z o.o.  Members, co-ordinator  Common standards for all  Specification of subsidiaries. responsibilities #2  Reporting: target groups, #4 Team & contents, frequency  Identify internal Controlling stakeholders stakeholders (know-  Enforcing compliance how, highest impact) (rewards & punishments) Source: Procurence Measuring Sustainability in the Supply Chain Slide 18
  • 19. procurenceYou should steadily increase the level of transparency in your supply chain, but be carefulnot to overstretch your resources.Defining and implementing supply chain TRANSPARENCY WHAT YOU NEED INCREASING TRANSPARENCY WHAT YOU NEED ■ Clear roadmap as to what level of transparency you DEPTH SCOPE want to achieve and can afford.  Direct suppliers  Name & address  2nd tier suppliers  Environmental ■ Monitoring of progress / KPIs,  3rd tier suppliers assessment  complete supply  Social performance e.g. % network covered by chain  Financial rating each type of evaluation. Copyright© Procurence Sp. z o.o.  Quality & commercial assessment Typical target coverage: 80-90% of direct suppliers (by spend). Don’t forget about small,  Few key suppliers  Operative rating specialised suppliers!  All relevant (delivery on time, etc.) 2nd tier supplier coverage: all key, identified ~80% suppliers  Mapping flow of goods of relevant, basic sustainability information on at least 30%  Risk assessment“Key” = Prio 1 suppliersRelevant suppliers – all suppliers that pose a significant risk impact (Pareto principle) Source: Procurence Measuring Sustainability in the Supply Chain Slide 19
  • 20. procurenceBi-directional communication within the supply chain – including formal reports andinformal information exchange – is the cornerstone of sustainability management.Types of COMMUNICATION Indicate Discuss Share external Reward performance expectations information co-operationCopyright© Procurence Sp. z o.o. ■ Always provide ■ Tell your suppliers ■ Share and ■ Punish suppliers with exactly what you encourage the underperforming information about expect from them. sharing of suppliers, but … their performance. ■ Create “premium” sustainability and ■ … make the ■ Benchmark standards to indicate risk information punishment less suppliers against future expectations. severe for those their peers. ■ Encourage the who inform you sharing of risk about potential information (raw problems. materials prices & ■ Make rewards part availability, logistical of your policy (e.g. disruptions). extra RfX points)Source: Procurence Measuring Sustainability in the Supply Chain Slide 20
  • 21. procurenceYou need to push the boundaries of professional sustainability management upstream –in this way your suppliers increasingly take the operational burden away from you.Key DEVELOPMENT steps Short-term Mid-term Long-term ■ Create audit questions with ■ Design audits to include ■ Let the suppliers improvement measures in mind. “premium” criteria that develop their own ■ Identify practical and realistic show your network what supply base in the improvement measures. you’ll expect from them in same fashion you 3-4 years’ time. developed them. ■ Always based on a cost- benefit-analysis, no “automatic” ■ Improve the capabilities ■ Share audit and development. of your suppliers. assessment results of ■ Divide issues into “must” and ■ Determine standard common 2nd tier “nice-to-have” to establish processes, document suppliers to promote development priorities. and share them. efficiency. ■ Teach your suppliers. ■ Audit results should always have consequences.Copyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 21
  • 22. procurenceTOC New challenges for CSR Monitoring Sustainability Sample project implementation About Meercat Suite and ProcurenceCopyright© Procurence Sp. z o.o. Copyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 22
  • 23. procurenceBest-practice supplier evaluation and risk management toolBenefits of Meercat audit / self- partner and supplier assessment / risk drill-down contract develop- data ex- management reports database ment change ■ fast implementation – ready to use in 2-3 days ■ covers all assessment processes (risk, quality, sustainability) ■ covers the complete supply chain (suppliers - direct, and indirect, distributors, retail points ■ suppliers have direct access to their results ■ unlimited suppliers and users to enhance communication ■ standalone tool with optional ERP integrationCopyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 23
  • 24. procurenceMeercat supports all the main functions required for implementing of a successfulsupplier evaluation schemeSupported processes Copyright© Procurence Sp. z o.o. NEW SUPPLIER SUPPLIER SUPPLIER NETWORK DEVELOPMENT ACQUISITION INFORMATION ASSESSMENT AND COMMUNICATION supplier self- supplier development supplier database registration audits tasks contracts, supplier self- initial evaluation risk profile certificates, photos assessment regular data supplier black list reporting exchange classification (forecasts, etc.)Source: Procurence Measuring Sustainability in the Supply Chain Slide 24
  • 25. procurenceProcurence is an innovative start-up offering flexible SCRM sorftware solutions.Procurence advantages Why Procurence? Trust our know-how Know-how Current clients ■ Set-up by experienced purchasing consultants and risk management professors, who implemented evaluation and risk processes for top multi-nationals Speakers at trade conferences Excellent customer service ■ Turnkey solutions – just log-on and start using the software, we take care of the rest Flexibility ■ Meercat can be adjusted to suit your exact needs, all within weeksCopyright© Procurence Sp. z o.o.Source: Procurence Measuring Sustainability in the Supply Chain Slide 25
  • 26. procurence procurence. supply chain assessment If you have any questions, do not hesitate to contact me. Matt Zaleski, CEO +48 601 45 32 45 +49 151 240 84734Copyright© Procurence Sp. z o.o. procurence sp. z o.o. ul. Dereniowa 2/6 • 02-776 Warsaw • Poland tel. +48 22 219 5400 • fax. +48 22 203 5084 info@procurence.com • www.procurence.com Measuring Sustainability in the Supply Chain

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