Supplier Compliance and Sustainability
Increasingly, companies are held accountable for their vendors’ compliance and regulatory requirements. Supplier Compliance Plans support vendors’ sustainability standards and alignment with environmental, social, and governance (ESG) practices. Developing strategy and execution – which can cross industries- results in responsible supply chains mitigating climate issues, workplace and human rights infringements, and governance shortcomings.
Below are three steps for building supplier compliance, with sustainability as the fulcrum of the strategy:
Selecting the Right Supplier- Define sustainability criteria vendors need to meet, like environmental impact, labor practices, ethical sourcing, and compliance with regional regulations.
Evaluating Candidates- Measure suppliers against relevant criteria. As you make a selection, review certifications, stakeholder and community engagement policies, and sustainability performance over one-, three-, and five- year periods.
Course Correcting- As you audit the supplier’s performance and measure improvements, consider where the vendor needs to focus efforts or shift strategy and work with them on measuring and monitoring those areas.
This is an ongoing process, and there are tools you should consider as you work with existing suppliers and onboard new ones.
Ongoing education to ensure suppliers understand the latest regulations in the space and also enforce alignment with the values of your firm and the values of the end consumer. This can be achieved through townhall style meetings, quarter calls, or informal, consistent meetings between you and your suppliers. Be clear on what risks the vendor should be aware of, as well as recommendations for mitigating that risk, and the consequences if they don’t take risk reduction steps. All vendors should know that you are their partner, and you share the common goal of exceeding marketplace expectations and providing the best service. Create space to share best practices or what might be working well in your vendor relationships (obviously, ensure there is no vendor network engagement that causes anti-trust issues).
Establish clear goals and key performance indicator (KPI) measurements. These can include a range of quarterly goals with the expectation of performance reviews each year based on whether the objective was met. Leverage third-party audits to give a thorough analysis of your supplier’s materials sourcing and labor activities. Given the strong need to ensure your company’s reputation regarding treatment of people and natural resources – along with strict regulations- it’s critical to ensure your suppliers achieve the sustainability goals you’ve created. Just as you want your suppliers to be transparent about their policies and actions, you should be equally transparent around your expectations, the goals that need to be met, when they need to be met, and resources that may be needed to meet them.
Show you value your vendors who exceed expectations and goals in delivery, sourcing, human resources, and natural resources. Whether it’s your employees or your suppliers, it is critical to understand how they want to be rewarded for going above and beyond.
Stakeholder support in engaging with vendors can be valuable. From obtaining a list of diverse suppliers, to surveying a vendor’s employees about their experiences, stakeholders can help arm you with information to build a stronger relationship with vendors and help them to improve their services to you.
Firms are accountable for their relationship with their suppliers and vendors. From supplier communication, to collaboration, to reciprocal transparency, to measurements, and even to the point of rewards and consequences, building the relationship is an ongoing cycle. These steps can support your work and your efforts in a smoother, more strategic process for you and your vendor.
