Sustainable practices in the supply chain: How do you achieve that?

By Jasper de Haan

Collaboration within a single organization can be complicated, let alone between multiple organizations. To truly achieve sustainability, collaboration within the supply chain is indispensable. How do you go from a sustainability strategy on paper to a viable action plan?

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The leadership of a rail infrastructure manager expresses the ambition to reduce the company's ecological footprint through smarter maintenance, thus extending the lifespan of the rail infrastructure. However, because the Procurement department still primarily focuses on the lowest price in tenders, the contractor supplies cheaper, conventional switches; qualitatively sound but not necessarily maintenance-friendly. This compromises the strategic ambition to reduce emissions.

Existing system

Many companies are genuinely willing to pursue sustainability, notes change expert Jasper de Haan from Highberg. "Customers and employees increasingly demand it. Moreover, legal requirements are pushing companies further towards sustainability."

However, according to De Haan, many sustainability ambitions ultimately falter within the existing system. "Procurement departments often still primarily consider the price. On the side of the contractor or supplier, there is also no incentive to provide maintenance-friendly, more sustainable, and often more expensive products because the variable maintenance costs do not fall on them. Contractors and suppliers are thus tempted or forced to keep prices as low as possible."

No incentive

De Haan provides another example of a major property developer. "The maintenance costs ultimately fall on the building owner or tenant. Therefore, the property developer will not feel motivated to equip a building with sustainable, maintenance-friendly lights."

"A partnership based on a shared sustainability ambition and shared interests could yield sustainable benefits for the climate and the partners. However, the current system, with contracts and tenders, currently hinders such a different way of working."

Shared interest

According to De Haan, many companies are still trapped in the traditional customer-supplier relationship. "And that's a shame because most companies genuinely want to work on sustainability. Ideally, you move towards a situation where parties collaborate based on shared interests. Where individual initiatives are brought together in one joint route, based on mutual learning and co-creation. And where you work together towards an enticing perspective, instead of just dealing with day-to-day issues."

Actively building trust

It sounds great on paper, but achieving it in practice is a significant challenge, admits De Haan. "To unlock chain power, it is important to work on collaboration at multiple levels simultaneously. To get collaboration off the ground, you have to focus on connecting leadership and actively build trust."

"In addition, it is essential to formulate shared interests and ambitions that provide value for all parties. Finally, it is crucial to make agreements about the organization and establish good process agreements. What is the division of roles, who takes the lead, who pays?"

External process facilitator

Most companies want to become more sustainable, but the current system does not yet reward them for it, emphasizes De Haan once again. "An external process facilitator is therefore essential. Especially because the system still revolves around scoring individual assignments, you cannot do without an intermediary who tries to bring all interests to the table and centralizes the problem."

"Moreover, communication often goes awry because the involved parties simply have different corporate cultures. An external party can help chain partners understand each other, acting as the glue that holds everything together."

Get to know each other

According to De Haan, a few joint sessions or a joint retreat can be a first step towards closer chain collaboration. "Especially in the construction industry, trust is not always a given. Just think of the construction fraud at the beginning of this century, where contractors made price agreements among themselves. Therefore, it is even more important to start formulating joint ambitions and getting to know each other."

Neutral position

"Then it is important to look at possible bottlenecks. Can you possibly find a solution together, or are these bottlenecks truly hindering? Again, it is advisable to appoint an independent process facilitator who hovers above the parties. Such an intermediary can think about removing the obstacles to collaboration from a neutral position."

Get to work!

Are obstacles mostly removed? And is there a shared sustainability ambition? Then, by all means, get to work, continues De Haan. "Like any change, you will initially encounter skepticism and resistance. Therefore, set up a small-scale sustainability pilot and just demonstrate that it works. Embrace the experiment! Joint success then paves the way for further expansion of the partnership."

As a chain partner, you must be willing to invest money and people in a joint approach, emphasizes De Haan. "That's why it's essential to start small."

Different KPIs

"With proven success, you can then scale up. For example, by setting up a separate company with all chain partners or by incorporating the developed collaboration into the line."

"Often, closer collaboration also brings different KPIs into play. If you are used to steering on team performance, it is essential to emphasize chain performance more."

Collaborating in the chain

To significantly increase the chances of success, it is important to work on an equal footing, emphasizes De Haan. "Sustainability is precisely a theme that you can only solve in the chain because it affects the entire chain. Changing within an organization is already a significant challenge, let alone changing with multiple organizations simultaneously. Therefore, it is even more crucial to approach chain collaboration, based on shared interests, in a structured way. Because only then does sustainability truly become achievable."

How does this help your organization's performance?

The insights in this article help you shape a chain partnership focused on sustainability. Succeeding in sustainability within the chain is a challenging task. Formulating joint ambitions and interests, good process agreements, and small-scale experiments are crucial to truly get sustainability off the ground.

Want to know more or discuss further? Contact me!

Jasper de Haan Partner & Consultant

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