Responsible purchasing: a step towards new relationships with your suppliers?

Because they support the rise of corporate CSR policies, responsible purchasing approaches also aim to promote a new form supplier relationships.  

According to the latest ObsAr (Observatoire des achats responsables – Responsible Purchasing Observatory) barometer, 59% of purchasing departments have made improving supplier relations an essential part of their responsible purchasing process. “The supplier relationship is a key issue in the current context, for contractors as well as for the suppliers themselves,” confirms Fanny Bénard, Vice-President of ObsAr. 

International standards that guide your relationship with your suppliers

While this barometer primarily concerns French companies, it nonetheless illustrates a general trend that can be observed on the world market. This is the whole issue covered by the international ISO 26000 standards, which are dedicated to corporate social responsibility, and more specifically of the ISO 20400 standard, created in 2017 as an extension of the previous standard.  

In addition to certifying the implementation of a responsible purchasing policy, the ISO 20400 standard aims to enable companies and organisations of all sizes, from both the public and private sectors, to engage all their suppliers beyond tier 1 in a similar process. Indeed, once organisations start to consider sustainability when making purchasing decisions, they influence their entire supply chain, shifting towards more responsible practices. Companies wishing to improve their CSR performance through a responsible purchasing process cannot achieve this without taking care of all the players in their supply chain. 

In fact, through these standards, companies are encouraged to develop the relationship they have with their suppliers. The clearly stated objective is to promote the development of partnership relations between principals and suppliers, in a win-win relationship and in the interest of sustainable development, ethics and the preservation of the environment.  

Towards a new mapping of supplier risk

The challenge today is no longer just to allow buyers to base their purchasing decisions on the sole criterion of product price and deliverability, but on the entire life cycle cost. It is therefore necessary to also take the costs of use, acquisition and end of life into account. You will then be able to determine the “total cost of ownership”. This notion, in addition to the risks and benefits it entails for the company, includes the environmental, societal and social impact of the manufacturing conditions and use of the product in question. As such, it is important to establish a new supplier risk map based on CSR criteria. 

Four major topics frame the CSR monitoring of suppliers: 

• Environmental management of the entire product design and manufacturing process. 

• Working conditions, in particular respect for fundamental human rights, the absence of discrimination, the prohibition of child labour and respect for safety rules. 

• The ethical dimension of the business, in particular the absence of corruption, respect for the rules of competition and monitoring of responsible marketing rules. 

• Expanded monitoring of Tier 2 and Tier 3 suppliers to ensure that the responsible purchasing rules apply to everyone. 

From the duty to set an example…

In a recent study devoted to relations between customers and suppliers within the framework of CSR, the PWC consulting firm reported that more than 70% of suppliers are regularly contacted by their clients with regard to CSR subjects, especially at the time of calls for tenders. Most (61%) suppliers also think that their clients’ CSR requests lead them to improve their offer and can represent a source of new opportunities. 

This marked interest on the part of their clients encourages suppliers to also set up systems to monitor the CSR performance of their own suppliers. On the other hand, they are calling for greater involvement on the part of major clients to help them better promote their own CSR performance through the sales prices of their products and services. 

Admittedly, nearly half (49%) of suppliers say that they have observed improvements in the relationship between ordering parties and suppliers in recent years. Despite everything, they regret that the CSR demands of the largest players are not always consistent with their practices, particularly in terms of pressure on prices or payment terms. The imbalance in contractual clauses and unilateral contract modifications are also identified as areas for progress.  

In general, a request for additional support is expressed. This support can take the following forms: 

• Definition of a joint action plan between contractors and suppliers. 
• Establishment of follow-up meetings for this action plan. 
• Holding training workshops dedicated to CSR. 
• Contact sharing and networking actions in order to pool efforts dedicated to CSR. 
• Incentives and compensation measures. 
• Financial support. 

Suppliers are also calling for more transparency on the part of contractors. For example, they want the weighting of CSR criteria to be communicated during calls for tenders, or more customer feedback to the CSR responses provided during these calls for tenders. In general, suppliers expect their client to adopt an exemplary posture as well. 

…to due diligence

The PWC study focuses above all on the French market, but undoubtedly, it also illustrates major general trends, which go far beyond French borders. Due diligence was introduced into the law in France in February 2017 for all French companies with more than 5,000 employees, and all companies with more than 10,000 employees in France but whose head office is located outside France. This due diligence requirement aims to prevent environmental risks and also risks related to human rights or corruption, which may affect all of their activities, as well as those of their subsidiaries, in France and abroad.  

MEPs also plan to follow the French example and extend the due diligence to all European companies. The objective is to engage the responsibility of companies whose suppliers show themselves to be unscrupulous in respecting human, social and environmental rights.