Prioritise

Segment and prioritise among your value chain partners

Determine which suppliers to engage and the level of engagement by segmenting them intro groups. Segmentation helps you focus your resources on the most strategic suppliers or supply categories. And it allows you to adopt more standardised and resource-efficient approaches for lower-priority segments.¹

Start by narrowing down your highest priority groups based on how strategically relevant they are to your organisation. A common way to do this is to begin where you have the highest procurement spend or procurement volume. You may also include suppliers that are most irreplaceable due to their unique capabilities (e.g. sole sourcing). You can further refine your supply segments by assessing the severity of unmitigated sustainability risks. Pay particular attention to suppliers and production sites located in high-risk geographies or industries. And make sure to consider the full range of relevant sustainability issues. Then try to categorise suppliers based on the severity of current and potential sustainability impacts. Finally, your segmentation should also consider the supplier’s potential to collaborate for positive sustainability impact.

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 more sustainable practices and environmentally friendly products while actively enhancing supply chain sustainability through performance assessment and improvement identification.

EXAMPLE [INDIRECT PROCUREMENT]: Vancity segments strategic suppliers to implement living wages

The Canadian credit union, 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

Use scenario-thinking to support your prioritisation decisions

You can support your prioritisation decisions with future-thinking tools that challenge assumptions and consider uncertainties. These tools help by extending the scope of discussion around potential outcomes, questioning conventional thinking, and exposing previously unforeseen challenges to your value chain. One common approach is scenario analysis. This method involves describing contrasting yet plausible future scenarios to help you understand how various elements might evolve and interact. For instance, you could explore the future physical risks of climate change (such as temperature change, extreme weather events, drought and water stress, and sea-level rise) and then assess their potential effects on operations and sourcing. You could also explore different social scenarios related to growing inequality and its impacts on social stability. This process helps prepare you for a range of possible futures. And it aids in the development of effective procurement strategies that account for future uncertainties.

EXAMPLE: Walmart uses scenario analysis for supply chain planning⁵

Walmart identified potential supply chain risks and opportunities using scenario planning, with stakeholder input they created four plausible future scenarios with differing environmental, social, economic, and geopolitical trends. For instance, the "Low Carbon" scenario projected a world prioritising climate change mitigation, requiring Walmart's swift transition to renewables and the implementation of sustainability initiatives to meet rising climate-conscious demands.