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MEASURING SUSTAINABILITY
IN THE SUPPLY CHAIN
18/12/2011          Measuring Sustainability in the Supply Chain
procurence
TOC




                                   New challenges for CSR

                                   Monitoring Sustainability

                                   Sample project implementation

                                   About Meercat Suite and Procurence




Copyright© Procurence Sp. z o.o.




Source: Procurence                       Measuring Sustainability in the Supply Chain   Slide 2
procurence
Consumers are getting more educated in terms of sustainability - companies should
quickly 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
procurence
Only companies with an adequate level of internal visibility can properly inform the public
about their activities.
Source of data for sustainability reports




■ basic data
■ certificates
■ audits
■ self-assessments
Copyright© Procurence Sp. z o.o.




Source: Procurence                    Measuring Sustainability in the Supply Chain      Slide 4
procurence
Consumers want credible (usually externally validated) and detailed information about
sustainability 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 stories
Copyright© Procurence Sp. z o.o.




Source: Procurence                                             Measuring Sustainability in the Supply Chain                                     Slide 5
procurence
CSR departments will have to work hand-in-hand with the purchasing / SCM department to
achieve 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).
                                                                   SOPs


Copyright© Procurence Sp. z o.o.




Source: Procurence                                               Measuring Sustainability in the Supply Chain                                Slide 6
procurence
Companies 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” transparency




Copyright© Procurence Sp. z o.o.




Source: Procurence                                                            Measuring Sustainability in the Supply Chain                                       Slide 7
procurence
As 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 Baacode

Copyright© Procurence Sp. z o.o.




Source: Procurence                                                          Measuring Sustainability in the Supply Chain                            Slide 8
procurence
TOC




                                   New challenges for CSR

                                   Monitoring Sustainability

                                   Sample project implementation

                                   About Meercat Suite and Procurence




Copyright© Procurence Sp. z o.o.




Source: Procurence                       Measuring Sustainability in the Supply Chain   Slide 9
procurence
Sustainable organisation need to monitor performance of their suppliers and partners in
addition 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 Commission

Source: Procurence                          Measuring Sustainability in the Supply Chain                               Slide 10
procurence
Sustainability assessments are usually performed in the same fashion as quality and
purchasing audits, sometimes they are repeated for better effect.
Sustainability assessment process




                                   Plan

                                          Perform

                                                    Evaluate


Copyright© Procurence Sp. z o.o.
                                                                                       Develop

Source: Procurence                                  Measuring Sustainability in the Supply Chain   Slide 11
procurence
Sustainability assessments do, however, offer more of a challenge than other audit types
because 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 assessments
Copyright© Procurence Sp. z o.o.




Source: Procurence                                                     Measuring Sustainability in the Supply Chain                                  Slide 12
procurence
Potential risks in CRS non-compliance often lie in the details and that is why it is not
enough 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
  goals
Copyright© Procurence Sp. z o.o.




Source: Procurence                         Measuring Sustainability in the Supply Chain    Slide 13
procurence
Companies must be careful in selecting the right NGOs and audit companies to ensure
integrity 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
                                                                                                             ENTITIES
Copyright© Procurence Sp. z o.o.




Source: Procurence                                                       Measuring Sustainability in the Supply Chain               Slide 14
procurence
TOC




                                   New challenges for CSR

                                   Monitoring Sustainability

                                   Sample project implementation

                                   About Meercat Suite and Procurence




Copyright© Procurence Sp. z o.o.




Source: Procurence                       Measuring Sustainability in the Supply Chain   Slide 15
procurence
Sustainability and supplier audit projects should ensure that your organisation is capable
of 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 the
Copyright© Procurence Sp. z o.o.
                                                                                                                  3rd tier suppliers.      supply chain.
                                                                                                                  KEY RESULTS              KEY RESULTS



Source: Procurence                                                      Measuring Sustainability in the Supply Chain                                         Slide 16
procurence
Setting the right priorities is a key factor that ensures successful implementation despite
capacity 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
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
procurence
You should steadily increase the level of transparency in your supply chain, but be careful
not 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 suppliers
Relevant suppliers – all suppliers that pose a significant risk impact (Pareto principle)

 Source: Procurence                                                  Measuring Sustainability in the Supply Chain                                                           Slide 19
procurence
Bi-directional communication within the supply chain – including formal reports and
informal information exchange – is the cornerstone of sustainability management.
Types of COMMUNICATION


                                     Indicate          Discuss                              Share external          Reward
                                   performance       expectations                            information          co-operation
Copyright© 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
procurence
You 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
procurence
TOC




                                                               New challenges for CSR

                                                               Monitoring Sustainability

                                                               Sample project implementation

                                                               About Meercat Suite and Procurence




Copyright© Procurence Sp. z o.o.




                            Copyright© Procurence Sp. z o.o.




Source: Procurence                                                   Measuring Sustainability in the Supply Chain   Slide 22
procurence
Best-practice supplier evaluation and risk management tool
Benefits 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 integration
Copyright© Procurence Sp. z o.o.




Source: Procurence                                                         Measuring Sustainability in the Supply Chain                         Slide 23
procurence
Meercat supports all the main functions required for implementing of a successful
supplier evaluation scheme
Supported 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
procurence
Procurence 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 weeks

Copyright© Procurence Sp. z o.o.




Source: Procurence                                                      Measuring Sustainability in the Supply Chain                             Slide 25
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 84734


Copyright© 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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Sustainability: Supply Chain Risk Management

  • 1. procurence procurence. supply chain assessment MEASURING SUSTAINABILITY IN THE SUPPLY CHAIN 18/12/2011 Measuring Sustainability in the Supply Chain
  • 2. procurence TOC New challenges for CSR Monitoring Sustainability Sample project implementation About Meercat Suite and Procurence Copyright© Procurence Sp. z o.o. Source: Procurence Measuring Sustainability in the Supply Chain Slide 2
  • 3. procurence Consumers are getting more educated in terms of sustainability - companies should quickly 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. procurence Only companies with an adequate level of internal visibility can properly inform the public about their activities. Source of data for sustainability reports ■ basic data ■ certificates ■ audits ■ self-assessments Copyright© Procurence Sp. z o.o. Source: Procurence Measuring Sustainability in the Supply Chain Slide 4
  • 5. procurence Consumers want credible (usually externally validated) and detailed information about sustainability 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 stories Copyright© Procurence Sp. z o.o. Source: Procurence Measuring Sustainability in the Supply Chain Slide 5
  • 6. procurence CSR departments will have to work hand-in-hand with the purchasing / SCM department to achieve 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). SOPs Copyright© Procurence Sp. z o.o. Source: Procurence Measuring Sustainability in the Supply Chain Slide 6
  • 7. procurence Companies 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” transparency Copyright© Procurence Sp. z o.o. Source: Procurence Measuring Sustainability in the Supply Chain Slide 7
  • 8. procurence As 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 Baacode Copyright© Procurence Sp. z o.o. Source: Procurence Measuring Sustainability in the Supply Chain Slide 8
  • 9. procurence TOC New challenges for CSR Monitoring Sustainability Sample project implementation About Meercat Suite and Procurence Copyright© Procurence Sp. z o.o. Source: Procurence Measuring Sustainability in the Supply Chain Slide 9
  • 10. procurence Sustainable organisation need to monitor performance of their suppliers and partners in addition 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 Commission Source: Procurence Measuring Sustainability in the Supply Chain Slide 10
  • 11. procurence Sustainability assessments are usually performed in the same fashion as quality and purchasing audits, sometimes they are repeated for better effect. Sustainability assessment process Plan Perform Evaluate Copyright© Procurence Sp. z o.o. Develop Source: Procurence Measuring Sustainability in the Supply Chain Slide 11
  • 12. procurence Sustainability assessments do, however, offer more of a challenge than other audit types because 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 assessments Copyright© Procurence Sp. z o.o. Source: Procurence Measuring Sustainability in the Supply Chain Slide 12
  • 13. procurence Potential risks in CRS non-compliance often lie in the details and that is why it is not enough 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 goals Copyright© Procurence Sp. z o.o. Source: Procurence Measuring Sustainability in the Supply Chain Slide 13
  • 14. procurence Companies must be careful in selecting the right NGOs and audit companies to ensure integrity 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 ENTITIES Copyright© Procurence Sp. z o.o. Source: Procurence Measuring Sustainability in the Supply Chain Slide 14
  • 15. procurence TOC New challenges for CSR Monitoring Sustainability Sample project implementation About Meercat Suite and Procurence Copyright© Procurence Sp. z o.o. Source: Procurence Measuring Sustainability in the Supply Chain Slide 15
  • 16. procurence Sustainability and supplier audit projects should ensure that your organisation is capable of 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 the Copyright© Procurence Sp. z o.o. 3rd tier suppliers. supply chain. KEY RESULTS KEY RESULTS Source: Procurence Measuring Sustainability in the Supply Chain Slide 16
  • 17. procurence Setting the right priorities is a key factor that ensures successful implementation despite capacity 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. procurence You should steadily increase the level of transparency in your supply chain, but be careful not 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 suppliers Relevant suppliers – all suppliers that pose a significant risk impact (Pareto principle) Source: Procurence Measuring Sustainability in the Supply Chain Slide 19
  • 20. procurence Bi-directional communication within the supply chain – including formal reports and informal information exchange – is the cornerstone of sustainability management. Types of COMMUNICATION Indicate Discuss Share external Reward performance expectations information co-operation Copyright© 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. procurence You 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. procurence TOC New challenges for CSR Monitoring Sustainability Sample project implementation About Meercat Suite and Procurence Copyright© Procurence Sp. z o.o. Copyright© Procurence Sp. z o.o. Source: Procurence Measuring Sustainability in the Supply Chain Slide 22
  • 23. procurence Best-practice supplier evaluation and risk management tool Benefits 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 integration Copyright© Procurence Sp. z o.o. Source: Procurence Measuring Sustainability in the Supply Chain Slide 23
  • 24. procurence Meercat supports all the main functions required for implementing of a successful supplier evaluation scheme Supported 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. procurence Procurence 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 weeks Copyright© 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 84734 Copyright© 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