We can configure Canopy to ask the right questions on ESG, delivering meaningful supplier data that helps meet your broader business goals
In a world of ESG investing, sustainability goals and broader environmental concern can no longer just be dismissed as 'green stuff'. And Procurement has a key part to play in this, given the contribution of supply chains to a company's ESG footprint. This makes it an important enabler of change both within the organisation and across the supply chain. But in many organisations, environmental data on suppliers can be poor; it can be difficult to capture from suppliers and record in systems that are shared across a company. Given an ongoing focus on urgent climate action, now's the time to advance your strategy to implement more sustainable supply chains. In this blog, we're looking at some of the main issues on ESG, and how we can configure Canopy to capture the data you need.
Putting the 'E' into ESG
It's a common acronym in business and investment circles, but it's important to remember exactly what is involved in ESG. The focus for the 'E' of the acronym - environmental criteria - is on sustainability and environmental management. This encompasses everything from a commitment to recycling and waste management through to using green energy sources and reducing carbon impact. (While carbon dioxide isn’t the only greenhouse gas (GHG) emission that needs to be reduced, emissions are usually converted to CO2 or equivalent to produce a "carbon footprint").
Research by McKinsey & Company shows that two-thirds of the average company’s ESG (environment, social, and governance) footprint lies with suppliers. So it's up to procurement leaders to make the difference when it comes to sustainability in many organisations. But it can be difficult to build up an accurate picture, especially when it comes to indirect carbon emissions, often called 'Scope 3'. According to a McKinsey survey of 20 CPOs at large European companies, 70 percent of the sample said their organisations didn’t understand where Scope 3 emissions were generated in their value chain. And of course, much will be completely outside an average company's ability to control; for instance, the shipping industry is thought to contribute around 3% of global carbon emissions >>https://www.bbc.co.uk/news/science-environment-66064838
Everyone's got to start somewhere
Encouragingly, this meeting is expected to adopt longer-term targets for net zero, as well as immediate carbon reductions. And there are plenty of practical measures that procurement teams can take to improve sustainability. Quick wins, even if not part of a formal strategy, can achieve a lot and help to inspire others to do more. For example, reducing the number and frequency of deliveries will reduce emissions, purely through better management of the existing supply chain. Sourcing more locally where possible is an approach which has already borne fruit in many organisations.
More strategically, one place to start may be to segment your supply chain based on your strategic needs, areas of greatest impact, and where there is greatest risk. The next step will be to develop an appropriate set of sustainability requirements for each segment. When doing so, it's vital to consider whether you would be prepared to make it a condition of trade that all suppliers adhere to these requirements. For your remaining suppliers, you can go on to define a minimum standard that everyone is expected to adhere to.
Sustainability goals help good business
Everyone needs to be taking sustainability seriously. Of course, there's the element of pleasing shareholders and investors; increasingly, investors are adopting an ethical investment strategy with sustainability at its core. And eco-conscious customers who are purchasing from brands with good sustainability credentials and eco-friendly policies. Research from the Energy Saving Trust showed 87% of UK adults are either extremely or somewhat concerned about climate change. >>https://energysavingtrust.org.uk/how-to-measure-your-organisations-carbon-footprint/
You are on a journey together with your suppliers, so it's crucial to keep an open dialogue and support each other. By making sure to ask the right questions of suppliers upfront, you can go on to secure their commitment through policy adherence. Suppliers should feel incentivised, for example by educating them about the potential for future business if they can demonstrate their sustainability credentials. A commitment to ongoing monitoring and enforcement helps to bring about lasting change and recognise suppliers’ efforts.
Configuring Canopy to track ESG data
Measurement is a powerful tool to inform and improve sustainability, and many organisations are making this a key criterion in supplier selection processes. But the challenge is often that the data needed to make informed decisions is scattered around the organisation or isn’t available at all. With the Canopy supplier management platform, it's certainly easier to evaluate and ensure suppliers are in line with your ESG priorities.
Crucially, we can configure the platform to ask the right questions of your suppliers upfront. You can track any published calculations on carbon impact or other environmental measures, and ensure EPD (Environmental Product Declaration) documentation is up to date. By setting a review date, you can keep all the information current and fresh. And you can define governance rules by category and geography basis to ensure you are meeting your ESG commitments. With a dashboard of data to show senior leadership teams, you'll be able to demonstrate commitment and action towards creating sustainable supply chains.
To find out more about how the Canopy supplier management platform can track ESG data and help you meet your commitments, contact one of the team today.
Visit: www.team-canopy.com
Email: hello@team-canopy.com
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Post by Nick Verkroost
Nick is an experienced business leader and the CEO for Canopy (OCG Software), the rules-based Supplier Management platform. Nick's focus is on commercial and operational excellence and ensuring our clients maximise the opportunities that Canopy offers.