Strategic partnerships with ingredients suppliers, not simple vendor contracts, will prove critical to the success of environmental programs like carbon emission reductions and sustainable sourcing, says a procurement expert.
Kellogg Company recently unveiled a climate change pledge in which it called upon its key suppliers to measure and disclose greenhouse gas (GHG) emissions and reduction targets.
In light of the move, BakeryandSnacks.com spoke exclusively to William Pegg, director of Australian procurement and consulting firm Synthesis Group, about what it really took for major food companies to action and oversee such demands on suppliers.
“It’s easy to make the demands; it’s significantly different to necessarily deliver upon them. It certainly can be difficult for suppliers to deliver and then manufacturers to measure and quantify those results,” he said.
“From my point of view, that can really be circumvented by looking at how you define the engagement – are you looking for strategic partnerships or simply just vendors? The term that you give to the relationship that you hold carries a significant weight in terms of the success.”
It was critical for food companies to work strategically with suppliers towards mutually beneficial goals, he said.
"When a manufacturer demonstrates an understanding of total cost of ownership and a desire to partner with key suppliers for the longer term, a shift in behavior often occurs. A collaborative way of working often results in access to new technologies and innovation and a combined effort to resolve challenges, both of which regularly result in increased competitive advantage. Further, programs such as GHG reporting and local content assessments regularly become easier to implement due to prior healthy, constructive rapport."
“...The need to have strong relational practices within organizations and how to foster that at a corporate and personal level – there’s a growing groundswell of interest.”
Boots on the ground, good rapport
Achieving such relationships needed a team on the ground to work face-to-face with suppliers, Pegg said.
“I think boots on the ground is absolutely critical. You need individuals who understand and have sufficient technical know-how, in terms of the program in place… You can’t do it remotely; you can’t do it from afar.”
This could be done with local-based teams or teams that visited regularly, he added. "The precise structure will vary. The important point is direct engagement with suppliers, rather than being solely managed through remote engagement and or e-platforms."
Building rapport was also crucial, he said, particularly when working in different countries. “Your suppliers may have a different business outlook or culture. You have to cross that divide to build that rapport,” he said.
Develop a universal toolkit
For larger multinationals looking to implement carbon reduction or sustainable sourcing programs, developing a global toolkit for suppliers had to be a priority, Pegg said.
“By taking the time to develop those tools, systems and processes to provide to your supply base, it’s going to increase the likelihood of uptake irrespective of where they may be placed geographically,” he said.
Carbon emission measurement, for example, if left to each supplier would result in inconsistent methodologies for data calculation.
“If you leave it to the vendors, I can guarantee the results are going to be varied. Multinationals working at a global scale need uniformity of process,” he said.
Providing a toolkit and a support group to assist implementation would ensure global, consistent action in a timely manner, he explained.
Don’t be shy of investment
While developing toolkits and support networks would prove costly for manufacturers, Pegg said it was a cost worth absorbing for the long-term outcome. “Let’s remember why the suppliers are doing it in the first place – it’s because they’ve been asked to by their client.”
But, he said it wasn’t just direct costs that had to be considered – the cost implications on suppliers were also important.
“Commercially-minded individuals would say it doesn’t really matter; it’s up to them [suppliers] to be efficient, and that’s true, but at the end of the day, all suppliers need to be profitable. Given the fact we’re talking about significant global interest here, manufacturers are in the game for the long-run and they need to make sure their suppliers are too.
“If you’re genuinely interested in your suppliers; developing rapport and stimulating innovation, you also have to talk about the cost.”