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January 2020

environmental social and governance

ESG and Your Supply Chain

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Why You Should Incorporate ESG Into Your Supply Chain

 

Companies that incorporate environmental, social and governance (ESG) factors into business practices can not only create more ethical companies that align with core values, but they can also enjoy a potential increase to the corporate bottom line. That’s because customers, employees, investors and other stakeholders increasingly want to associate with companies that consider ESG.

Taking these factors into account can unlock new opportunities in areas such as hiring by expanding talent pools to include diverse candidates; marketing by showcasing environmentally-friendly products to customers; and finance by making it easier to attract equity investments or take out loans by demonstrating sound governance. Becoming more ESG-focused can also extend beyond internal operations to include your supply chain.

As the United Nations Global Compact notes on its site, “A company’s entire supply chain can make a significant impact in promoting human rights, fair labour practices, environmental progress and anti-corruption policies.”

Aligning Values With Finances

While many companies may be open to incorporating ESG factors, they may think that doing so requires sacrificing profit. However, the tide is increasingly turning towards consumers seeking out ESG products and services, and many are willing to pay a premium.

For example, between 2013-2018, “products marketed as sustainable grew 5.6x faster than conventionally-marketed products,” according to an NYU Stern School of Business Center for Sustainable Business and IRI®study.

Moreover, 44% of Millennials believe that companies they do business with should always be environmentally-friendly, even if that causes a small price increase, according to a survey by Markstein, conducted by Certus Insights.

One way companies can improve their standing in this regard is to seek out vendors that align with ESG factors. Doing so can even be helpful for companies that sell services rather than physical products. For example, an accounting firm that uses environmentally friendly suppliers for office supplies, lighting, trash disposal, etc., may be able to more easily market itself as a green company and appeal to younger customers who want to work with a firm that goes beyond just focusing on finances.

Similarly, working with diverse suppliers such as women-owned, veteran-owned or minority-owned businesses can improve the social responsibility of a company by demonstrating inclusion and equality. Doing so is important considering that 70% of consumers “want to know what the brands they support are doing to address social and environmental issues,” according to the Markstein and Certus Insights study. And most of these survey respondents agree that social responsibility expectations apply equally to small and large companies.

Expand Your Supplier Network

Incorporating ESG factors into your supply chain not only helps attract stakeholders to your business, but looking at suppliers with this new lens can also expose your business to vendors that you may not have otherwise considered.

For example, looking at governance factors like the composition of a company’s board of directors or looking at how a supplier treats its own employees may cause you to spot risk factors with the vendors you currently work with. From there, you may decide to seek out new suppliers that stand out for incorporating ESG into their businesses, and these companies may be able to work with you on related initiatives like improving the sustainability of the shipments you receive from them.

One way to source ESG-focused suppliers can be through the consulting services or procurement platform of Premikati, an SAP Ariba™ partner and a certified Women’s Business Enterprise National Council (WBENC) company.

To learn more about how Premikati can help your organization incorporate ESG into your supply chain and improve your overall procurement, please get in touch with our team.

future of product shipping

Product Shipping and Procurement

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The New Era of Product Shipping

With the rise of e-commerce has come increased expectations around delivery service, including in both the consumer and B2B worlds. When a consumer buys a product online, even two-day shipping, popularized by companies like Amazon, is often too long now, which is why Amazon and others are turning to one-day or even same-day shipping in some cases. For businesses, similar expectations apply, as employees want their products like office supplies to arrive as fast as they do when making personal purchases.

As a Deloitte study finds, the future of shipping is evolving to one that attempts to meet higher demand and increase speed by taking advantage of technology. These tech advances range from data analysis for optimizing delivery routes to the use of smart storage lockers to improve the efficiency of the so-called last mile of delivery where packages reach their end recipients. Even drones are starting to be deployed, and an expanded presence could help improve speed.

While these advances offer significant potential for consumers and businesses to receive the products they need almost as fast as buying from a retail store, at the same time gaining the efficiency of online purchasing, the transition won’t always be easy for suppliers and logistics companies. Businesses will also have to adapt to obtain the efficiency their employees crave.

Navigating New Expectations

One example of the challenge of meeting new shipping expectations can be seen in the performance of FedEx. As Reuters reports, FedEx recently cut its 2020 profit forecast, due to factors such as investing in the rollout of Sunday delivery, and the company has not always been able to keep up with expected delivery times in major cities.

These types of struggles can challenge suppliers, as even if they’re able to absorb the cost of expedited shipping, their delivery partners may not always meet expectations. Overcoming these obstacles may require suppliers to work more closely with partners like logistics companies, such as through increased data sharing, to figure out how they can expedite shipping. As the Deloitte study notes, carriers partnering with their “most forward-thinking customers to build mutual capabilities could well serve both parties.”

For procurement teams, this new era may also benefit those who can form strong partnerships with suppliers to figure out the best ways to optimize delivery speeds. For example, limiting the number of vendors you work with and spending more with certain suppliers could give you more leverage to work out an expedited shipping schedule. Your suppliers may also inform you of how you can help them help you, such as by trying to place orders for different types of products into one batch.

Moreover, data-driven procurement teams can gain insights into delivery speeds and accuracy in order to help their suppliers understand what needs to be optimized. Procurement teams can also eliminate underperforming vendors and then limit their relationships to those who can meet delivery expectations.

Improving Procurement With Premikati

Understanding your procurement activities, including delivery performance and supplier relationships, can help your organization receive optimal service quality in this new era of product shipping. Leveraging procurement services and/or purchasing platforms through Premikati, an SAP Ariba™ partner, can help you gain the data you need to make better decisions related to shipping. Our consulting services can also help you work with suppliers to optimize delivery according to your needs.

To learn more about how Premikati can help your organization thrive in this new era of shipping, please get in touch with our team

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