What happens when companies put supplier success first? Better sustainability performance and smarter decision-making across the whole supply chain.
When companies develop a product compliance or sustainability programme, they typically approach their requirements from a procurement perspective: “How do I know whether the part I’m buying contains hazardous substances?” or “Can I prove this wasn’t made using forced labour?”. The result is a checkbox compliance programme focused on authoring regulatory reports.
But this approach overlooks a critical aspect of a successful supply chain sustainability programme: supplier engagement. No programme can survive without supplier buy-in. Without it, companies end up with a programme that stalls out waiting for suppliers to respond to sustainability surveys or they have limited visibility into what’s actually in their own products due to low data quality.
Plus, because smaller suppliers may not be as mature in ESG reporting, supplier training is essential to capture the data needed for reporting under regulations like the Corporate Sustainability Reporting Directive (CSRD).
This means that, to develop a meaningful compliance and sustainability programme, companies need to start treating suppliers like partners:
- Ensure suppliers understand what’s being asked of them and why
- Make it simple to submit parts and ESG data
- Assess and review supplier sustainability performance and provide corrective actions
- Take steps to reduce supplier fatigue
What is supplier fatigue?
Most suppliers are fielding a massive amount of customer data requests and nearly all of them are reporting that the number of requests keeps going up and those requests are getting more complex. One manufacturer we spoke with said the number of customer compliance inquiries has skyrocketed 500% over the past few years.
In most cases, suppliers are also being asked to provide the same information multiple times to separate customers – all using different survey formats. This can (and does) lead to lower response rates, longer wait times and lower-quality data. In addition, because suppliers typically aren’t held accountable under product regulations, there may be little incentive to engage in a customer’s compliance programme.
All of this adds up to a lot of embedded risk. If supplier fatigue is not being mitigated (just as companies manage cybersecurity threats), it can undo all of a company’s internal compliance efforts.
The convergence of compliance and ESG
Product compliance and ESG regulations are converging, holding manufacturers accountable for what goes into their products and supplier sustainability performance. Supply chain professionals should approach sustainability from a product compliance perspective, because that’s where regulations are headed.
For example, look at the EU’s Ecodesign for Sustainable Products Regulation (ESPR) and new restrictions on per- and polyfluoroalkyl substances (PFAS). Today, companies need to have transparency into their suppliers’ business practices, beneficial owners, carbon footprints and more. This data goes deeper than “what’s in the part you’re selling me” to “let’s be business partners.”
And that’s difficult to overcome without a system in place designed with supplier success at the core that proactively addresses ESG and product compliance under one platform.
Most buyers are also suppliers
Most companies that buy parts are also suppliers to another company. This means supply chain and compliance professionals (or one person wearing multiple hats) must balance collecting data from suppliers while responding to customer requests.
It doesn’t make sense to assume the flow of supply chain data is cleanly divided by buyers and suppliers, yet many businesses implement processes or technology that do just that. Instead, companies need one ecosystem for their parts and product sustainability data; something that centralises all the data and shares it everywhere it’s needed — both internally for product design and sourcing, and externally to satisfy customer compliance demands.
Supplier engagement gaining traction
The vision for a supplier-focused approach to supply chain sustainability management has momentum. For example, the leading independent research and advisory firm, Verdantix, recognised supply chain sustainability software as a category distinct from product compliance or ESG in its Verdantix Green Quadrant: Supply Chain Sustainability Software 2024 Report.
It highlights the importance of suppliers and included scoring categories for:
- Supplier success
- Supplier engagement, training and management
- Supplier sustainability performance assessments
The report also provides a comparison of the 15 most prominent supply chain sustainability software vendors in the market and reinforces the growing need for businesses to enhance transparency and embed sustainability considerations into supply chain decision-making, requiring greater supply chain visibility and collaboration. It’s evidence that manufacturers are better able to stay ahead of emerging regulations and gain a competitive advantage by prioritising supplier engagement.
Assent is working with global suppliers to create a sustainability network of supply chain data, including parts, materials and ESG data. We were recognised in the Verdantix report as a leader, with market-leading scores in supplier-related categories.
