Nov 7, 2021
Alex Saric

Ivalua: CSR is good for business, but how can you achieve it

Procurement
CSR
Supplychain
Ivalua
Alex Saric, smart procurement expert at Ivalua on why CSR is good for business

CSR is becoming increasingly critical to organisations. With upcoming regulations – such as the UK’s modern slavery act – many organisations are now waking up to the necessity of CSR. In fact, recent research revealed that two-thirds (67%) of organisations are now directly measuring their CSR performance.

Moreover, the research highlighted that executing an effective CSR programme has clear benefits. Seven-in-ten (71%) organisations have experienced improved supplier relationships in the past year because of their CSR initiatives, while 69% have realised increased sales. CSR has indeed become a critical part of any successful organisation. 

However, while CSR attitudes and communication have made great progress, actions are lagging. Businesses have yet to define official targets or policies in critical areas like overall sustainability (just 33% have officially defined policies and targets), carbon emission reductions (26%), and participation in fair trade (24%).

This stark contrast between words and action is not simply a case of lip service. There is a genuine desire by many business leaders to improve society. Progress is being held back by a lack of visibility and digitalisation. Respondents revealed the most significant challenges to improving CSR were an inability to effectively assess individual supplier CSR performance (40%), an inability to measure overall supply chain CSR performance (39%) and a lack of systems required to enable effectively, scalable collaboration (35%).

Without CSR improvements, organisations are missing an opportunity to gain a competitive advantage, reduce risk, and drive meaningful change – all while increasing sales. So here are three key steps to achieve an effective CSR programme.

Step one: Set up for the future with clear expectations of suppliers

Setting clear minimum qualification criteria for suppliers is hugely important. It ensures suppliers understand your expectations and allows businesses to focus supplier evaluation and negotiations with suppliers that will support CSR objectives. We’ve seen how this can help prevent confusion later down the line by ensuring suppliers know businesses' goals and requirements. Competitively bidding suppliers that meet criteria on CSR (as well as other factors such as risk and performance) is a top strategy for driving CSR improvements without negatively impacting the bottom line. 

58% of successful organisations are setting minimum sustainability criteria during supplier selection. For example, IKEA sets precise requirements for all IKEA materials, products, and services through its IWAY code of conduct. These criteria ensure suppliers meet standards for environmental, social, and working conditions – safeguarding ethics and ensuring consistency along the entire IKEA supply chain.

Businesses should also communicate future objectives - the goal posts they wish suppliers to work towards. The reality is that few if any, organisations are where they want to be or should be when it comes to CSR so while minimum criteria can help drive a quick improvement, the greatest gains will come over time through continuous improvement. Collaboration is needed across the board to guarantee change on environmental standards and supply chain ethics. By making CSR an advantage for suppliers will see meaningful change for the better across the whole supply chain. But change must start at the top.

Step two: Digitise collaboration

Once organisations identify and communicate their expectations of suppliers, they should provide suppliers with the maximum flexibility in how those are met. In fact, this was identified as the most effective strategy for driving overall improvements in sustainability, identified by 59% of successful companies. By offering flexibility, suppliers can offer more innovative, and often cost-effective, solutions and drive ongoing progress.

Digitation is a crucial component to improving CSR results over time, enabling the business and its suppliers to meet those future targets. We've seen that digitising supplier collaboration can improve planning, execution and logistics visibility, but also enables better collaboration on ethics and sustainability, resulting in higher customer satisfaction.

Digital interaction with suppliers is often a vital factor separating the leaders and laggards in procurement. Digitising supplier collaboration was one of the most effective supplier strategies for improving sustainability, with 58% of successful organisations saying it equates to more efficient, agile, and customer-focused processes. It was identified as the most effective strategy to optimise any trade-offs between cost and CSR. Firms can enable greater scale and efficiency by having the ability to securely share information, efficiently communicate and develop and track improvement plans.

Step three: Improve supplier reporting to guarantee visibility and flexibility

Digitisation, when done smartly, should also improve transparency, addressing the top challenges holding organisations back. Technology can support a 360-degree view of suppliers, combining internal, supplier-provided and 3rd party information on CSR, as well as other important factors. It can then provide better transparency across categories. This helps better assess suppliers, monitor progress against targets and optimise decisions throughout the supplier and product lifecycle. 

Technology should enable suppliers to easily share details on their own programs and the suppliers they rely on. This improves the efficiency of gathering information and allows businesses to gain more visibility into the sub-tier, where the bulk of CSR issues often lie. In turn, this can help improve decision-making and risk response, and ensure that organisations can identify new areas of innovation whilst finding new ways to work together to support business goals. Encouraging supplier reporting also frees up time and promotes supplier participation within CSR. 

Ensuring your business goes from strength to strength

CSR is an increasingly crucial lever to gaining a competitive advantage. Without it, organisations will struggle to adjust to regulatory changes and miss the benefits of CSR - to increase sales, avoid scandals and ultimately contribute to a better society. Digitising supplier collaboration drives continuous improvements while increasing supplier reporting and setting minimum qualification criteria safeguards an adaptable and reliable supply chain.   

To drive meaningful change and increase efficiency, organisations must consider implementing innovative supply chain solutions. By making procurement smarter, organisations can take hold of the procurement process, increase visibility, and develop secure supplier-buyer relationships. By improving CSR in your organisation you can lead by example to generate a knock-on effect across the supply chain.

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