CSR, Sustainability and SRM – A Powerful Partnership (part 1)

Lance Younger, CEO, Nils van de Winkel, Analyst, Statess (leading consultants and experts in collaborative platforms for managing supplier relationships, performance and productivity) and Alis Sindbjerg Hemmingsen, Responsible Procurement, share their expert advice on corporate social responsibility and SRM.

Corporate Social Responsibility CSR) and sustainability have become major items on the CEO’s agenda. No annual report is complete without making reference to CSR and looking forward it will be one of the most influential trends affecting procurement. This brings increased complexity and reduced visibility, requiring new efforts by procurement.

In part 1 of this article we will explore why there is a stronger need for CSR than ever before, and in part 2 we will look at how CSR and SRM can combine to address supply chain issues and support an organisation’s competitiveness. We give some clear action points on how to achieve this.

Increased Exposure to CSR Issues … and Opportunities

To a large degree, the complexity of CSR stems from the organisational evolution over the past 100 years. In the early 1900s, companies like Ford operated with a narrow geographical scope, controlling many parts of the production.

Today, however, most companies have factories in various parts of the world and some have outsourced part(s) of their business in order to focus on core business activities and competencies. Even if companies have their operations in one country, they are likely to have suppliers that operate or source on a global basis. As a consequence organisational structures are now far more complex. Procurement organisations, and hence buyers, have to deal with multiple tiers of suppliers, which have an increased exposure to CSR issues.

Combined with this, there is a huge increase in visibility throughout the supply chain, driven by consumer demands, proactive company management of data and the advent of technology. Factory collapses in Bangalore now hit the UK headlines, in turn impacting company share prices. On average it takes 18 months for these impacts on share prices to be corrected.

With the advent of new philosophies such as the circular and shared economy, CSR is increasingly also being used as a positive change agent both on the Board agenda as well as being delivered on a daily basis. Royal DSM is an example of a company incorporating CSR into its business objectives. From being founded as a coal mining company and having diversified into (petro)chemicals, DSM managed to evolve into a life and material sciences company. Since 2007, a public-private partnership between Royal DSM and World Food Programme (WFP) has contributed to improving the diets of people, using essential vitamins, nutrients and fortified rice, in countries that include Nepal, Kenya, Bangladesh and Afghanistan. DSM provides technical and scientific expertise, high nutrient products and financial assistance to increase the micronutrients in WFP's food basket.

Setting Standards

Tackling CSR involves setting a standard in areas such as getting involved in and developing the community, respecting the environment, implementing fair operating practices, respecting human rights and implementing labour practices in accordance with local legal requirements. In seeking to improve CSR performance companies will have to select products or suppliers that are believed to be the most responsible solution. This requires an “information stream,” which could include anything from cultural context to environmental impact analysis. It also requires an “activity stream,” which results in positive action by an organisation to implement change. Many companies manage this themselves, others augment this with specialist third-party data streams or sustainability platforms like EcoVadis and Sedex.

Backed Up by SRM

Extended, multi-tiered global supply chains, combined with challenging decisions make CSR a challenge. It first of all requires a methodology that can prioritise CSR based on the company’s objectives. Supplier Relationship Management (SRM) has grown out as an effective tool to shed light on the extended supply chain and can assist in measuring the CSR in the supply chain.

The 2014 global SRM research, undertaken by State of Flux, with more than 500 companies, shows that more than 55 percent of the organisations state that supporting sustainability and CSR is an important business driver for SRM. The report also shows that more than 20 percent of those companies that had well developed SRM approaches reported significant benefits in supporting their sustainability and CSR goals with SRM.

The report also shows that the Public sector (67 percent), Automotive (59 percent), Manufacturing (59 percent) and Food and Beverages (58 percent) industries rank supporting sustainability and CSR goals as the highest business drivers for initiating and driving supplier relationship management programmes.

There is a clear imperative for stronger integration of CSR, Sustainability and SRM. Part 2 tomorrow explains how this can be achieved.

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