Supplier Engagement: Lessons from the Front Lines

Prefer to watch? 

Transcript:

Beth Jones [00:00:00]:

From the supplier side, then try and get facetime with the customer. I don't mean at the point of data exchange, but I mean outside of that, thinking about supplier days and events, try and get that FaceTime to be able to present your own interests as well. So data exchange shouldn't be one way and I think it can be leveraged as a nice opportunity for suppliers. If you can be that really responsive supplier that can get the data and share it back in a very timely way. Is that then giving you the opportunity to speak to your customer about new opportunities and new innovative technologies you might be pursuing? Do they want to buy a glass bott from this new site where you've installed a hybrid furnace? Let's say so are there those opportunities then that you can generate to talk about what you're doing from a decarbonisation standpoint? And then I suppose from the customer side, be really focused with the ask Data for data's sake is the worst kind of data. And I think you really need to be intentional about what information you're requesting, intentional in being able to communicate that to the supplier. So make sure that they understand why you're requesting this data, how it's going to be used and how you want to collaborate with them on decarbonisation opportunities off the back of this data collection exercise.

‍

Saif Hameed [00:01:20]:

I'm Saif Hameed and this is the State of Sustainability Podcast. If you like what you hear on our podcast, please join us in Chicago for the State of Sustainability Summit where we discuss all the topics that we cover on our podcast and more in person. The signup link will be in the show notes below. Supply chain engagement. Everyone's talking about it. Everyone has a slightly different take on how to do it. It's probably the most effective decarbonisation lever available, but it's become a bit of a buzzword. In this episode, we're going to cut through the noise to distil what it really takes to run an effective supply chain engagement programme to drive measurable impact.

‍

Saif Hameed [00:01:57]:

I'm joined by Beth Jones, supply chain decarbonisation lead at Altruistiq. Beth brings hands on experience working with some of the world's largest companies to decarbonize their supply chains. We're going to tap into Beth's insights, explore strategies, trade offs, practical steps that make supply chain engagement programmes truly effective. Super excited to have Beth with us. Beth, thank you for joining us.

‍

Beth Jones [00:02:20]:

Thank you so much for having me, Saif. I feel like this is a long time coming. I've been waiting.

‍

Saif Hameed [00:02:25]:

It's been a Long time coming, Beth. It's been a long time coming. Exactly. I see you across the screen from me in countless conversations in our team with our customers. It's great to have you on the show. And we can actually kind of let you do most of the talking this time, so thank you very much for that. I'm kidding. You actually do most of the talking in the other calls as well, but I'm pleased to be facilitating that here.

‍

Saif Hameed [00:02:45]:

Beth, maybe just a softball to get us started. Supply chain engagement is a clear purpose, but what does a successful approach actually look like? Where should companies begin? Let's kind of go big picture and we can drill down from there.

‍

Beth Jones [00:02:59]:

Yeah. So I think the first thing that I would say is that a lot of the companies that I'm working with and speaking to on a regular basis, when they're first setting out with their supply chain engagement programme, they often don't have alignment even within the core project team. So you have very different interest groups even within that one internal team that's focused on this project. And then obviously, beyond that team, thinking about procurement teams, other professionals, professionals that will be working on the supply chain engagement programme, again, they often don't have an aligned vision. And so what I would say is, when you're first setting out, really think about what is the key purpose that you need to be aligned on at your organisation level and at the senior levels of your organisation, what is the priority? And then have you got the frameworks in place to be able to deliver against that purpose as well?

‍

Saif Hameed [00:03:46]:

Beth, I love this. Before you go further, Beth, I want to just drill down into this piece about different teams having different objectives, because I actually think that get talked about enough. Could you tell us a little bit about the different teams that are usually involved and the different types of objectives you come across?

‍

Beth Jones [00:04:01]:

Yeah, for sure. So I would probably bucket. I can bucket the different teams into a few different areas. And so I would say there's typically a group that I would call the reporters. So these people are potentially focused on scope through reporting, publishing emissions data, and they're really interested in granularity accuracy. Can we trust the data that we're receiving and can we get supplier data to then improve the accuracy of our reporting? Then you normally have the people that I would describe as impact drivers. So they're really focused on decarbonisation, maybe thinking about potential collaboration opportunities with suppliers and what actual on the ground interventions can they pursue jointly with their suppliers? And then finally, probably for want of a better phrase, we have the tick boxes And I think the tick boxes are people that maybe get brought into the supply chain engagement programme, but are not fully bought into the purpose of that programme yet. And so typically what we invest a lot of time in upfront is working with those different stakeholder groups to help the tick boxers become impact drivers or reporters and really think about why this programme should matter to them as well.

‍

Beth Jones [00:05:13]:

Procurement is a classic example of people you may see as tick boxes initially, or that tends to be the perception at least. But I think what we found with our programmes is that procurement buy in is critical. And so those programmes that really excel and are successful and actually drive Scope three impact reduction are those programmes where you have your category managers involved in day to day conversations and your buyers are using the Altruistiq platform, for example, and driving insights via the platform. Those are the buckets could we keep.

‍

Saif Hameed [00:05:45]:

Going down this journey? I appreciate I'm deviating heavily from our sort of base that we wanted to cover, but I want to go a little deeper into this procurement enablement piece because many of the companies that I speak with are looking for ways to have sustainability collaborate really effectively with procurement. And I know that in a number of the programmes that you're leading, procurement is a significant accelerator on the program's effectiveness. So you touched on it a little. But could I ask you to go a bit deeper on what do you think really unlocks procurement? Getting excited, getting invested, getting effective on these fronts.

‍

Beth Jones [00:06:22]:

For procurement teams, there have been many asks of them in the past, so they've been asked to send out a survey or they've been asked to chase a supplier around a specific data point. I think what can be really powerful is when you actually simplify the ask to procurement. So you tell them, for example, okay, we need to collect product carbon footprints now, but from this product carbon footprint, you'll be able to compare how your supplier is doing versus the industry average or versus the other suppliers that you might be working with. Not only that, but you can also dig deeper into the actual product carbon footprint. So you can understand, has this supplier already transitioned at Scope one and two, for example? And so there's no point in engaging that supplier around renewable energy or other interventions that they could be taking at their facilities. And perhaps you need to go one step further through the supply chain and start going back to kind of your tier 2 or tier 3 suppliers as well. So simplifying the ask for procurement, but also giving them value in the process as well and making sure that they actually feel that this programme is going somewhere. So this isn't just another data collection exercise, but this is really going to drive insights for them.

‍

Beth Jones [00:07:29]:

Another quite nice example we've seen is that often the companies we're working with want to collect baseline year data and most recent financial year data. So actually that could be suppliers that have already shown great progress over the last five years. And it's all about actually just capturing that existing good work that suppliers have been doing. And I think that's something that procurement can get quite excited about as well, because it's something that they've been working with suppliers on. So they've been talking to these suppliers kind of day in, day out for five years and they now want to see that good work be reflected in reporting.

‍

Saif Hameed [00:08:00]:

One of the things or the values that procurement brings to the table versus having sustainability lead these conversations is that procurement understands the nature of the business relationship with that supplier. And so if you're a sustainability team, you won't often know whether the supplier that you're trying to get data from is actually a supplier that we're going to continue working with for years to come. We're going to expand volume or actually the supplier is a difficult supply relationship, whereas procurement often brings that layer of insights to the table as well. Are you finding this play out in your experience?

‍

Beth Jones [00:08:35]:

Yeah, definitely. I think we have seen programmes where we've kind of kicked off a programme, we've had very engaged suppliers and then, you know, three or four months down the line, it turns out that actually there had always been intentions to cut supply with that supply. You know, maybe we're no longer sourcing glass from Spain, and in that situation it feels like a massive waste of investment. And so, especially with programmes where you're maybe only selecting 30 suppliers, you know, your top 20, 30 suppliers to run high impact decarbonisation programmes with, you really need procurement to be involved, right from the offset to kind of cut out those suppliers where it maybe doesn't make sense to engage at this point in time. And that could also be related to commercial conversations that are ongoing. So it's not necessarily those cases where you're reducing supply from a particular supplier, but also cases where that, you know, maybe tricky commercial conversations that are ongoing and it just makes sense to slightly delay that process and maybe delay the kickoff of a programme with that particular supplier to a future cohort.

‍

Saif Hameed [00:09:35]:

And if we go back a couple of steps, I mean, you've inferred or you've sort of dropped references to the kinds of goals or outcomes that we might be looking to achieve From a supply chain engagement programme. Could you maybe just give our audience a high level summary of what are the two or three or four things that you are looking to deliver out of your team? For example, working closely with the business, is it just data gathering? What types of data? What other outcomes are you looking to deliver in terms of KPIs?

‍

Beth Jones [00:10:01]:

Again, it really comes back to this point around what are the objectives of the programme? It can really vary in the programmes that we're running at least. So one example would be percentage of procurement spend covered by primary data from suppliers. I think that's a really nice metric to just track how the programme is scaling. I think particularly because we are focused on scale at Altruistiq and having that one system that can really drive impact at scale, that's quite a nice metric. Another metric which maybe would appeal to that reporters bucket is primary data share. So is the data that we're collecting actually improving the quality of our overall data? Are we actually generating better insights because we have more accurate data? So a supplier may submit a product carbon footprint. One of the things we really look into with that product carbon footprint is what is the proportion of primary data versus is the supplier actually just providing secondary data and secondary emissions factors to make up that pcf? And then a final metric which I think can be quite nice when you're leaning towards that decarbonisation and kind of impact focus would be number of interventions that you're carrying out with your suppliers and tracking over time how those interventions are scaling. So one of the things that we're working on is how can we help companies project the impact of their suppliers over time? So can we see how those supplier interventions are going to actually feed into our customers overall scope, three targets and what's the gap or the shortfall where we need additional supply chain interventions to take place?

‍

Saif Hameed [00:11:34]:

If I think about our audience members on this podcast, we typically have sustainability professionals at the large brands that are often requesting data and working with teams at Altruistiq, for example. But then we also have a number of suppliers into those brands who are, let's say, on the receiving end of the supply chain engagement programmes that you're running. What do you see as the big value drivers for them to, let's say, win the game versus play the game? I mean, you gave one good example of companies that just provide some secondary data, maybe an emissions factor that they're using from an external database versus those that have a product carbon footprint and maybe even go much further in terms of sharing details on their decarbonisation plans. When you think of the suppliers that really, let's say, ace the programme, what do you think is why are they doing it? What are they seeing as the benefit or advantage for them in doing this?

‍

Beth Jones [00:12:24]:

Really well, it feeds back to commercial conversations and how can this conversation around environmental data actually then feed into those commercial discussions? And so I think quite a nice example of this would be where particular suppliers might have multiple products available. Let's say it's a commodity business and they're selling sugar. Let's say we've seen some suppliers come and say, hey, we can provide our PCF for sugar, but actually we also have this Regen AG sugar that we've been working on. We've tried to bring this programme to you for a few years now, but there hasn't been that appetite. And so bringing environmental data in at that point to show this is the footprint of the Regen AG sugar, this is the footprint of the conventional sugar, actually can really drive commercial change and can drive decision making, particularly because it gives procurement people a much clearer understanding or justification for why those numbers are different and why it might make sense to move forwards with a more sustainable product.

‍

Saif Hameed [00:13:20]:

This topic of a green premium, so some kind of premium attached to a more sustainable product that I'm selling to my customer. This has been sort of debated quite a lot over the last few years and I've seen the sort of the LinkedIn airwaves go from one extreme, which is there's going to be a green premium for everyone. You just need to have a product that can attract a green premium and then you'll get this additional margin all the way through to the green premium doesn't exist. And we actually need to start thinking about green discounts and how do we actually get the sustainable product to be even cheaper than the mainstream alternative? My usual response to that is that there is a green premium for certain commodities and certain supply, but there's a lag between how quickly companies expect that to be available in the market. And I would expect that a large, let's say, buyer of commodities is trying to get the strategy and the targets in place on their side. They're then trying to get the infrastructure to be able to measure change, trying to get the data, trying to get the supply chain engagement programme and then there is a point where they're actually able to make those decisions and trade offs between a more sustainable product and a less sustainable, sustainable product and decide whether they're willing to pay more or less. Is that your perception as well? Like Would you say that there's a lag or would you say, actually it's probably still cost parity that we're looking at?

‍

Beth Jones [00:14:38]:

I think that there is a premium to be had in those in certain situations, but I think there is likely to be a lag. And I think what's important for the brands that we're working with is how can they tell a story when they make those more sustainable decisions. So this is not to say that, you know, that company that decided to move forward with the Regen Ag Sugar is only going to buy Regen Ag Sugar, but maybe that Regen Ag Sugar should be associated with a particular brand. And one brand of our customer, let's say, is going to move forward with that Regen Ag Sugar and that's going to be kind of advertised and a story is going to be made of that. So I think work has to go into kind of building that story and building that premium. And to an extent there is a marketing piece that is important to kind of generate that premium. But I do think there are cases where it makes sense and we have seen, have seen it work.

‍

Saif Hameed [00:15:30]:

And Beth, thinking now more large scale across the vast majority of procurement happening at our customers, how do you see companies balancing emissions reduction potential with things like just how much they're spending, volume, strategic importance, fragmentation in the supply chain? Like if you go away from, let's say the, the showcase pieces that are brand affiliated and you think now about the general procurement, how do you see those trade offs and decisions being made?

‍

Beth Jones [00:15:56]:

The sad reality is that kind of factors like cost are always king. And so although we are starting to see sustainability topics or carbon come to the front in some procurement conversations, I think cost is always going to be a factor as well. What I think can really help those commercial decisions is where there are specific frameworks that are brought in that make carbon a requirement or put carbon on the agenda. So one of our customers, for example, has a framework called the 3C's Cost, Cash and carbon. And so carbon is mandatory as a discussion point in every procurement conversation. And I think it's those kind of frameworks coming from the top down that can be really valuable. I'm sure you've talked before on the podcast as well around incentivisation in terms of different bonus structures that can be in place for senior procurement people that can really put carbon on the agenda as well.

‍

Saif Hameed [00:16:54]:

Yeah, I think that my sense, Beth, is that we're likely to move to a world where there is sort of blended indices being used and you actually have a cost of carbon embedded in the procurement decision and you're factoring that in at the commodity level? I think we're likely a little ways away from that, but I think we're not actually several years away from that. I think we're probably one or two years. If we think about collaboration in the context where you as a requester, are not prepared to pay more, necessarily for the decarbonisation of what you're buying, and almost certainly not prepared to pay more for the data that you're asking for, what do you think are the collaboration levers available to really get some kind of dynamic going with your strategic suppliers such that they can work with you to bring the emissions down?

‍

Beth Jones [00:17:44]:

I think the obvious one that comes to mind is volume incentives. So maybe there's, let's say, a thousand key suppliers that you're working with and of that a thousand, there are going to be the leaders and the laggard, so there's going to be the people that will get the tick boxes right, so they'll share the data and they'll also be open to collaboration. And I think that sweet spot of suppliers that are going to move the needle from a materiality perspective are engaged, will share the data and are interested and open to collabor, will be those suppliers that are then rewarded with higher volumes. So what we're seeing in a lot of cases is supplier rationalisation strategy. So thinking about how can we streamline our operations and move towards those low cost, but also those more sustainable suppliers.

‍

Saif Hameed [00:18:30]:

Beth, if we deep dive a little on the data side of this, which, as you know, is dear to my heart, how does this look practically like? Could you just take a step by step through how one of these programmes runs from initiation, let's say, at the level of an individual supplier relationship, initiation on the brand side and then fulfilment on the supplier side and then maybe even what, what that data gets used for, I'd love to anchor our listeners on, on just what that journey looks like.

‍

Beth Jones [00:18:57]:

Sure. So typically what we see is that our customer in the first instance, so the brand, let's say, would, would focus on emissions materiality and spend in the first place. So doing that really deep granular analysis on where are my emissions hotspots within my supplier base, where are my strategically important suppliers? Maybe that the lower emissions materiality, but still important to include in these types of programmes and basically getting to a point that we can kind of cohort and prioritise suppliers into different streams. This is where, from a data perspective, having Your ERP system integrated into whatever tool you're using for supplier outreach can be super valuable because it means you're already thinking at that purchase row level. And that's how emissions data is calculated. Taking purchase data and multiplying it by an emissions factor. And it works the same when you're requesting supplier data. The way that our requesting process works is that you send that request out to suppliers for product level data and based on your purchase descriptions and your purchase material codes.

‍

Beth Jones [00:20:03]:

And already that creates a far more scalable system because suppliers can recognise the material description, recognise the material code and immediately know what data you're requesting. In a lot of cases, even that step can be super time consuming and can involve a lot of back and forth. Once the supplier receives that data request, they then have the opportunity to think, what level of granularity of data can I share back? So can I share a SKU specific product carbon footprint? That's great. Where this is a very unique sku. But take for example, a labels company. What constitutes a SKU for a labels company? Could be, I've got my rectangular label, it's in English and the font is blue. That label with yellow font is going to be almost exactly the same from an emissions standpoint. So it's kind of deciding what is the level of granularity that makes sense for me.

‍

Beth Jones [00:20:59]:

And we try to be quite flexible on that. So the supplier has the opportunity to share back a product carbon footprint at multiple different levels of granularity. And then once the supplier has that data, they can share it back, it gets exchanged. We use Pact again. I think Pact has probably been discussed to death on this podcast, but we're strong believers in Pact and Pact is essentially standardising data exchange through supply chains for product footprints. The product footprint is received back by the brand and the brand can then make decisions around, should I incorporate this product carbon footprint instead of using a secondary emissions factor in my data, does it actually increase data accuracy? And also does this drive any insights for me around potential decarbonisation opportunities?

‍

Saif Hameed [00:21:44]:

And Beth, if you think about the old way of doing what you're describing, which would have been, let's say an ESG survey, and the brand might have either a third party solution that they're using to send out that survey, or they might have built something in house, or they might be using SurveyMonkey or something something else more generalised. What would you say are the pros and cons of the approach that you are describing versus something like that?

‍

Beth Jones [00:22:07]:

We all know that there's Huge, huge survey fatigue in the ESG space. Probably in general. Everyone hates surveys at this point, but I think environmental surveys are a good starting point and I would see them more as a compliance mechanism that you're starting to collect environmental data and this is something that you can maybe put in your annual report. And again, it's more of a tick box exercise. I think corporate emissions request is probably the next stage. So thinking about, okay, let's really focus in on emissions now and understand the emissions hotspots of our suppliers. The problem with this is that that doesn't actually connect to what you buy from your supplier. So maybe you buy paper from your supplier.

‍

Beth Jones [00:22:50]:

95% of what your supplier does could be selling plastic. And so having that overall emissions footprint isn't really driving great insight into how you in turn can then also decarbonize. And that's where I think product carbon footprints is the kind of perfect sweet spot in terms of getting environmental data that is actually then actionable. So it's something that you can easily switch in and out of your reporting, but it's something that you can also use to kind of identify decarbonisation opportunities. One caveat I suppose is within the product carbon footprint, beyond just having that total figure, you really want to get to a more granular breakdown from your supplier within the footprint. So particularly if you've set a scope three flag target, for example, you're going to need to understand from your suppliers as well what proportion of their PCF is relating to land use change or land management. For example, when you're thinking about the types of tools that you want to use to gather that data, you should also think about the granularity within that product carbon footprint that the platform or solution affords.

‍

Saif Hameed [00:23:55]:

Super helpful. And Beth, in that vein, I think actually the collaboration we've been running with Unilever and PACT is quite interesting because it solves part of that problem of matching. But I don't know if there's any level of that that you want to share as well, just to give a bit of colour onto what you're describing.

‍

Beth Jones [00:24:10]:

Sure. So we've been running a super exciting programme with Unilever and pact. It was a grant awarded to us by Digital Catapult. And the objective of this programme is essentially to solve this mapping problem. So going beyond actually a material description and a material code, the collaboration with Unilever and Pact focuses on invoice IDs. So are there invoice IDs which are a unique field that we can push out to our supplier and request that unique invoice ID information. And we're actually using the packed API and extending that packed API to be able to capture that that invoice request being sent to suppliers and then receive back data corresponding to that invoice id.

‍

Saif Hameed [00:24:56]:

Super exciting and keen to see that in action at scale over the course of this year. Beth, final question from me. If you had to give one piece of advice to someone leading a supply chain engagement programme, what would that be? Sorry, before I say one final question, I'd love for you to also say one piece of advice for someone being asked to participate in a supply chain engagement programme. So let's get a piece of advice for either side.

‍

Beth Jones [00:25:21]:

So I think from the supplier side, then try and get facetime with the customer where you can. And I don't mean at the point of data exchange, but I mean outside of that, thinking about supplier days and events, try and get that face time to be able to present your own interests as well. So data exchange shouldn't be one way and I think it can be leveraged as a nice opportunity for suppliers if you can be that really responsive supplier that can get the data and share it back in a very timely way. Is that then giving you the opportunity to speak to your customer about new opportunities and new innovative technologies you might be pursuing? Do they want to buy a glass bottle from this new site where you've installed a hybrid furnace? Let's say. So are there those opportunities then that you can generate to talk about what you're doing from a decarbonisation standpoint? And then I suppose from the customer side is probably along a similar line to what we've been discussing, but I think be really focused with the ask. So data for data's sake is the worst kind of data. And I think you really need to be intentional about what information you're requesting, intentional in being able to communicate that to the supplier. So make sure that they understand why you're requesting this data, how it's going to be used and how you want to collaborate with them on decarbonisation opportunities off the back of this.

‍

Beth Jones [00:26:51]:

This data collection exercise.

‍

Saif Hameed [00:26:53]:

Super helpful, Beth, thank you so much. Really enjoyed having you on the show and I'd love to actually do this again, maybe in six months or so, and actually see if the world changes much in the interim, because I know that a number of the programmes that you're running kicked off maybe six to 12 months ago and are going to reach a real scale in the next six to 12 months as well. So Big thank you for joining us and excited to have this one on the air soon.

‍

Beth Jones [00:27:19]:

Thanks so much, Saif. Bye.

‍