WASHINGTON, D.C.—The Sustainable Purchasing Leadership Council (SPLC) released a free market research guide that allows organizations to easily identify high-quality tools for rating the sustainability of their suppliers. The guide allows users to compare third-party sustainability rating tools to find the one that best meets their organization’s needs. Each of the rating tools included in the guide were screened against 40 criteria that SPLC’s members determined were important for the credible use of supplier sustainability ratings within procurement and supply chain contexts. The rating tools included in the market research guide can be used to evaluate suppliers on dozens of environmental, social, economic, and governance issues, in diverse regions of the world.
Tim Hopper, Responsible Sourcing Manager at Microsoft, spoke during a webcast announcing the new market research guide, saying, “Supplier sustainability ratings help us focus on what our job is, and that is to segment our suppliers and to improve their performance. But we did some research that revealed hundreds of third-party providers and even more products within that.” Many of these existing tools were created originally for the investor community. The SPLC market research project helped determine which of those tools were also applicable to a procurement context. “This is a significant point,” Hopper notes. “Alignment of investors and purchasers allows companies that receive these requests to have one consistent signal on how they actually manage their impact. This allows them to focus their resources on solutions that will appeal to both their investors and their customers.”
According to Sam Hummel, President and CEO of SPLC, “We increasingly have members and Chief Procurement Officers, especially, ask us, ‘How can I know whether my suppliers are sustainability leaders or laggards? How can I put them on a path towards leadership that benefits us and them?’ After researching hundreds of existing tools that assess the sustainability of businesses, our members came to the conclusion that third-party sustainability rating tools are the best way to separate leaders from laggards and motivate high sustainability performance across all suppliers. But with more than 50 rating tools on the market, we realized that identifying which ones are most credible for use in a purchasing context is a big job for purchasing decision-makers. This market research guide makes it much easier for procurement, supply chain, and sustainability leaders to pick a supplier sustainability rating tool and get started evaluating and engaging their supply base.”
SPLC’s market research identified the best supplier sustainability rating tools on the basis of a number of factors, including the extent of the sustainability issues covered, the rigor of their data verification, the transparency and impartiality of their methodologies, the fairness and comparability of the resulting scores, and more. Issue areas considered included environmental impacts, such as emissions, energy, hazardous substances, land use, and water, social impacts, such as labor practices, community engagement, wages, health and safety, as well as economic impacts, such as conflicts of interest, ethics, honesty in marketing, and more. Forty-five companies, government agencies, and NGOs advised on the research criteria and methodology.
Influence of Ratings on Suppliers
Cindy Bush, Environmental Health & Safety Director for Tessy Plastics, a medium-sized manufacturer, spoke on the webcast about the influence sustainability ratings can have on suppliers, saying, “Several of our customers have clearly declared sustainable procurement aspirations of having 80 percent to 100 percent of their tier-1 supply base be placed with socially responsible suppliers. Being asked to do the sustainability assessment has really helped propel us towards the success that we’re experiencing today. We developed our first EHS Management team in response to some of the questions in supplier sustainability rating scorecards. Since 2012, we’ve reduced our waste, company-wide 53 percent while we’ve tripled in size and number of employees. The results of our sustainability program, which was spurred by the supplier sustainability rating requests, differentiates Tessy Plastics from competitors.”
SPLC strongly encourages purchasers to use high-quality existing tools and resources wherever possible, to reduce marketplace confusion and survey fatigue. High quality third-party rating tools provide a shared solution to a number of shared problems purchasers face, such as determining what data is relevant to collect from different types of suppliers, verifying data provided by suppliers, training and supporting suppliers in reporting, converting supplier sustainability data into a simple but fair score for use in purchasing decision-making and supplier relationship management, benchmarking suppliers on their sustainability performance, and providing corrective action guidance.
Increasingly, SPLC is seeing companies and government agencies make use of supplier sustainability ratings in a variety of procurement and supply chain contexts, including risk management screening, pre-qualification criteria, preferred supplier programs, business reviews, RFP and contract language, bid scoring, balanced scorecards, integration into procurement metrics and dashboards, supplier performance improvement plans, and even enterprise-wide sustainability goals.
During the webcast, which drew the attention of 1,128 people from 55 countries, a quick poll of attendees showed that only 23 percent of attendees’ organizations were already evaluating all of their suppliers on at least one sustainability criteria and 12 percent have publicly announced a goal for their suppliers’ enterprise-level sustainability performance. An additional 31 percent reported that their organization is currently considering setting a goal for their suppliers’ enterprise-level sustainability performance.
Visit the Supplier Sustainability Ratings website.