Companies should engage with supply chains on sustainability through leveraging a ‘spectrum’ of approaches, says a new guide for procurement professionals developed at Cambridge Judge Business School.
There is a “spectrum” of approaches for companies to engage with their supply chains to address sustainability issues, says a new guide from Cambridge Judge Business School based on a two-year research project.
“Existing supplier engagement frameworks typically promote progressive steps towards collaboration as the ideal form of supplier engagement, but our research shows that this insufficiently captures the complexity of actual company-supplier relations,” the guide says. “Instead, there are a variety of suitable engagement approaches that can be positioned along a spectrum between more coordinated and more collaborative.”
Coordinated approaches are typically more transactional, while collaborative approaches usually involve firms learning from and innovating with specific suppliers.
A large brewing company, one of many companies interviewed as part of the guide’s compilation, illuminates a hybrid approach to working with a firm’s different supply chains – involving engagement with suppliers and a broader ecosystem in a coordinated and collaborative manner simultaneously.
Agricultural suppliers of barley and hops are an important part of the brewer’s raw material supply chain, so the company sought through a coordinated approach, via its contracts with agricultural producers, to require reduced use of fertilisers which contribute to carbon emissions. But because a contract with a key agricultural intermediary firm ran for another decade, the brewer worked more collaboratively with farmers on the ground to provide training in sustainability-enhancing practices – and only later, the company integrated such practices into contracts with agricultural intermediaries.
Another company interviewed, a major automaker, worked collaboratively with the automotive ecosystem to integrate sustainability standards into a supplier code of conduct. For example, one supplier devised a liquid alloy-producing process that uses natural sand to reduce the use of chemicals – and with the automaker’s investment and support this invention was scaled up to become an industry-wide standard.
The guide includes workbook exercises to help procurement professionals match their goals with opportunities and challenges posed along the spectrum of engagement approaches. The guide is based on research at Cambridge Judge in collaboration with the Embedding Project, a global initiative that helps firms embed social and environmental factors into their procedures, and was funded by BT Group and Huawei Technologies.
The research project, which included more than 75 interviews with sustainability and procurement leaders around the world, was led by Jennifer Howard-Grenville, Diageo Professor of Organisation Studies at Cambridge Judge, supported by Julia Grimm, Research Associate in the Organisational Theory & Information Systems subject group at Cambridge Judge during the Guide’s development.
“A notion has developed that collaborative company-supplier engagement might be superior to coordinated engagement, but our research rejects this simplistic idea, showing that each have their place” says Julia Grimm.
“Coordinated engagement does have some disadvantages, such as greater difficulty in building deeper engagement to understand individual suppliers’ performance, but it helps build consistency and creates efficiencies by directly integrating a firm’s sustainability requirements into procurement contracts. Likewise, collaborative engagement has both pros and cons: it helps build long-term relationships with suppliers and unearth untapped potential for sustainable practices, but it is resource-intensive and can limit a firm’s ability to hold individual suppliers accountable for meeting set targets. “The new guide aims to help companies find the best approach for their specific circumstances. This may involve aspects of the coordinated and collaborative approaches at different times and in different situations, and our research identified this sort of flexibility as the best way forward for most companies,” says Julia.