Manage Performance (SPM)

Develop a monitoring and evaluation strategy

Develop a monitoring and evaluation strategy that aligns with what you set out in the planning stage and in the terms of the contract. This will include consistent monitoring and evaluation tied to the key sustainability risks and opportunities identified in your planning, any challenges that arise, and new information such as supplier geographical location, newness, previous performance, resources and capacity of both buyer and supplier, level of trust, and availability of third-party verification.¹ Design monitoring and evaluation methods that are appropriate to the scale of the contract, ranging from the less complex, such as supplier questionnaires, periodic meetings, and media scanning, to more detailed (and resource intensive) processes, such as reports, inspections, and audits involving facility visits and interviews.² Clarify monitoring and evaluation responsibilities per contract stipulations, including data collection, submission, and timelines.

EXAMPLE: Disney audit validation

Disney is validating audit findings by getting feedback directly from employees through mobile phone surveys.³ The company is also identifying environmental violations by cross-checking supplier sites against IPE’s public database for violations.⁴

EXAMPLE: Hershey’s satellite monitoring of forests

Hershey’s is monitoring deforestation in its West African cocoa supply chain using satellite imagery.⁵

Proactively engage to monitor performance

Be proactive in monitoring the sustainability aspects of your contract and delivery to identify gaps and prevent contract failures. Equip contract managers with a sustainability checklist to consistently evaluate performance against contract sustainability clauses, conditions, and targets. Empower suppliers with tools like templates, online reporting portals, and check-in calls for regular information sharing. Implement an evaluation system to gauge compliance or progress (e.g., traffic light indicators or star ratings) for swift action if suppliers fall short or need support. Develop comprehensive technical specifications for progress assessment, fostering ongoing review similar to a credit score. This strategy ensures continuous evaluation and benefits trusted suppliers through streamlined assessments.

EXAMPLE: Amazon assesses suppliers

Amazon assesses suppliers’ sustainability, with findings flagged as High, Medium, or Low depending on the level of severity. Amazon refuses to go to production until suppliers remediate High-level findings. For Medium-level issues, suppliers are expected to show meaningful progress toward remediation within a defined timeline. For Low-level issues, Amazon monitors for continual improvement. There are dedicated teams based in key sourcing countries around the globe that work directly with suppliers to identify solutions to problems and promote open dialogue.

EXAMPLE: Telecom joint audit program

JAC is an association of telecom companies that have created a joint audit program specific to sustainability. Each member company is responsible for conducting a standardised audit for a portion of the group’s supplier pool and then shares the results with other members.⁶

Prioritise supportive development strategies

Many standard terms and conditions apply contract risk to the supplier but you should consider whether these will encourage better environmental and social performance. For example, if you want a contractor to actively contribute to your organisation's target for CO₂ reductions, you need to have clear contractual provisions and define how outcomes will be measured. The incentives or penalties which will apply under the contract should also reflect your sustainability and innovation goals. Prioritise a collaborative approach to improvement and remediation before punishing or eliminating suppliers with dissatisfactory performance. Include a clear, incremental remediation process with timelines for when corrective actions need to be implemented and the recourse for non-action.

EXAMPLE: Nike Supplier Climate Action Program (SCAP)

Nike Nike's Supplier Climate Action Program (SCAP) helps suppliers reduce emissions in line with Nike's 30% reduction target by 2030. It involves setting emissions targets, inventorying greenhouse gases, and public disclosure. Starting with 13 leading suppliers, the SCAP aims to expand to all strategic suppliers.⁷