The Covid-19 health crisis accelerated awareness of environmental and societal issues. These expectations, which increasingly guide the choices of consumers, are pushing more companies to put in place or strengthen their CSR policy. The approach is no longer confined to the inside of the business and now features more prominently in the supplier selection process, with the aim of promoting a responsible procurement strategy that meets the challenges of sustainable development. In this article, we share our advice on building your CSR criteria into your supplier specifications.
What is CSR?
Corporate Social Responsibility (“CSR ”) is a voluntary approach aimed at integrating sustainable development issues into a company's vision and strategy, across the social, environmental and economic dimensions.
Since its publication in 2010, the ISO 26000 standard has been the reference framework in this area, through its 7 core principles:
- Organisational governance: integrating CSR into the company's overall strategy.
- Human rights: combating any form of discrimination or behaviour liable to infringe people's rights.
- Labour practices and working conditions: ensuring that employer/employee relations are ethical, along with social protection measures and respect for health and safety at work.
- The environment: acting to minimise the environmental impact of the company's activity and that of its suppliers.
- Fair operating practices: combating corruption and unfair competition.
- Consumer rights: adopting fair marketing practices at all times and protecting consumer health and safety.
- Communities and local development: the company's involvement with the community and in local development.
Any company can use these pillars to define its CSR policy. There is growing evidence that adopting a CSR approach, particularly within a procurement strategy, increases the growth potential of the companies concerned and consumer buy-in. As a result, a good many of them are giving these criteria a bigger role in selecting their suppliers.
How do you build CSR criteria into your specification?
Setting up a responsible procurement process can take the form of introducing CSR criteria into your specifications. That way you will quickly identify the partners who share your values. To support you in this, below are the main criteria which, in our view, will help you refine your selection and so achieve sustainable procurement.
Assess your procurement policy
First, you should audit your procurement management against the CSR policy in place within the company, in particular along the following broad lines:
- Environmental impact, that is, limiting ecological impacts throughout the life cycle of the goods or services purchased.
- Social impact, which covers aspects tied to solidarity-based and local economic development, equality, and so on.
- Human impact, in terms of compliance with employment law, social protection, the prohibition of child labour and the absence of discrimination.
Draw up a supplier specification incorporating your CSR criteria
The assessment of the procurement function should then allow you to set out a specification or a CSR charter to be observed by your commercial partners, in line with your objectives and priorities. The relevant criteria we regularly recommend taking into account in a scorecard for suppliers' CSR policy are as follows:
- Environmental management of their activity: the use of toxic substances, consumption of non-renewable raw materials, waste management, transport, reduction of their CO2 emissions, improvement of their energy efficiency, and so on.
- The supplier's ethical dimension: the promotion of ethical practices, particularly as regards the prevention of corruption and fraud and, more broadly, compliance with economic and legal regulations in the conduct of their business.
- Working conditions : gender equality at work, equal pay, absence of discrimination, inclusion of people with disabilities, quality of working life, staff training, and so on.
- Respect for and promotion of human rights : identification of subcontractors and where they are based, the use of child labour, measures promoting safety at work, and so on.
- The social and societal impact of the supplier's activity : analysis of the supplier's actions in support of the circular economy, local development, job creation, professional integration, and so on.
- Any certification to the ISO 20400 standard : this standard provides guidance on integrating social responsibility into the procurement process and therefore allows an effective assessment of the supplier's commitment to a CSR approach.
These are various non-exhaustive criteria that will help you gauge how committed your commercial partners are on CSR. To be binding, they must be built into the negotiation process with those partners and form an integral part of the contract. Where those criteria are not met, and given the reputational stakes involved, the company will then be free to bring the commercial relationship to an end.
In conclusion, a criterion that is now hard to avoid
It has to be said that price remains the sinews of war and the criterion at the top of client companies' priorities. However, the CSR question is quickly making headway and becoming more and more important in the choice of suppliers. As we noted above, consumers but also employees, clients and investors want more responsible products and companies that favour a virtuous economic model with a positive societal impact. That inevitably pushes CSR further up the ranking of supplier assessment criteria, in order to meet this demand and support the company's overall performance.
If you would like to take your thinking on this subject further, our team is of course available to talk.