Segment and prioritise among your value chain partners
Determining whom to engage and how to engage them can be streamlined by segmenting your suppliers based on their strategic relevance. Group suppliers into high, medium, or low priority based on the likelihood and severity of potential environmental and social impacts and based on the potential risks and opportunities for your business. First, consider procurement spend and/or volume, reflecting on your reliance on specific suppliers with unique capabilities or single-source suppliers. Next, assess the severity of unmitigated sustainability risks with particular attention to suppliers and sites located in high-risk geographies or industries. Consider the full range of sustainability issues and try categorising suppliers based on the severity and likelihood of impacts. Finally, you will also want to consider the potential for creating positive impacts through collaborative work. By viewing the intersection of business, environmental, and social impacts, you can focus your resources on the most strategic suppliers and sustainability issues while adopting a more standardised and resource-efficient approach for those in lower-priority segments.¹
EXAMPLE: Mars supplier segmentation
Mars has 40,000 suppliers, which are segmented into three groups. The first group comprises 300 key sites supplying strategic raw materials in high-risk locations. This segment requires close working relationships to address risks. The second group consists of 3,000 suppliers that require less attention, but Mars wants to monitor them via supplier questionnaires. The third group consists of all remaining suppliers. These suppliers are of the least concern, and engagement is limited to sharing expectations through Mars' Code of Conduct.²
EXAMPLE: Interface prioritises 'Seven Fronts of Sustainability³
Through a materiality analysis, Interface identified seven sustainability priorities for its 'Mission Zero' plan: waste elimination, benign emissions, renewable energy, closing the loop, resource-efficient transportation, stakeholder sensitisation, and commerce redesign. They set ambitious targets within these areas, collaborating with suppliers to adopt sustainable practices and environmentally friendly products while actively enhancing supply chain sustainability through performance assessment and improvement identification.
EXAMPLE: [INDIRECT] Vancity segmenting strategic suppliers to implement living wages
The cooperative bank, Vancity, has taken measures to implement a living wage amongst its suppliers, such as its janitorial service providers. To prioritise its efforts, the bank focuses on strategic suppliers, defined as suppliers who exceed a threshold for total annual spend (> $250,000) or hours of service (> 120 hours).⁴