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Sustainability is a recurring theme in the corporate world for some time now.

Consumers both from the B2B and B2C markets are more demanding, not only when comes to quality, but also in social responsibility, environmental and innovation issues.

Eduardo Sanches, a partner at Diagma Consulting, explained – at the ME B2B Summit – the importance of sustainability in procurement, in order to stay alive in today’s market.

 

Sustainability on perspective

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The world is undergoing economic and social-environmental changes. In fact, immigration, overpopulation, social inequality, water scarcity, global warming and many other issues must be on the agenda of companies that want to be an integral part of the future.

In the pre-industrial age, we destroyed one species of biodiversity per year. Today, we destroy 100 of them in the same time period.

Faced with this catastrophic reality, it’s necessary to show that the economy can generate well-being for mankind. Businesses should make efforts to include everybody in a single, fair and secure space, and keep in mind that sustainability isn’t the lowest cost, but the best one.

 

How sustainability affects the business models of companies

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In the past, business models defined how sustainable a business could be. Today, the meaning is just the reverse.

It’s the logic of sustainability that defines the business models of future companies, and the exponential names (those that did well) are the ones that have been able to clearly see human needs.

Patagonia, the clothing brand from California, for instance, uses only recycled polyester and organic cotton to make their clothes. They also donate 1% of all their revenue to environmental groups that fight against tide’s advance.

Dell, the US-based hardware company, though well established in the market already, is creating a new business model to remove plastic from the oceans, in order to make part of the components for their computers.

Both companies, in addition to defining their business processes based on sustainability, are using network logic. That is, a strategy based on collaborative systems, where all internal members (employees) and external ones (suppliers and consumers) are responsible for building a process that is more sustainable and open to innovation.

 

Sustainability in the procurement chain

In the procurement chain, sustainability isn’t limited to environmental and fiscal issues. Establishing a sustainable relationship with suppliers, with a careful look at their satisfaction levels, is equally important.

For such purpose, a holistic view of labor relations must be promoted, along with relationships with stakeholders, considering also all ethics and integrity issues.

An example of a model that doesn’t apply to this reality is the textile industry, which still uses slave labor due to its cheap and large-scale production.

The goal is that the supplier’s business does as well as the buyer’s.

 

Suppliers are the way to innovation

As mentioned above, sustainability has also to do with supplier satisfaction and on how much this relationship can help in the development of both parties.

Mr. Sanches addressed, in his speech, how Procter & Gamble, Nestlé, Johnson & Johnson and other consumer good brands are creating open innovation mechanisms, because they realized that their suppliers are an innovation powerhouse.

P&G, for instance, has 1,500 employees in its innovation teams. And its top 15 suppliers have more than 55,000 professionals in the research and development area.

The result of this program is clearly positive: 35% of innovation going to the market comes from its suppliers, and the R&D area is now 60% more efficient.

In fact, Open Innovation is a powerful tool for sustainability, which catalyzes the construction of an innovative and efficient value network. And innovation and efficiency are key to the establishment of a brand in the future market.

 

The 3 logics of supplier decision making

According to the concept of the sociologist and philosopher Zygmunt Bauman, we are now living in a liquid modernity, identified by unpredictability, fluidity and ephemerality of relationships. This reality also implies more complexity and ambiguity in decision-making processes.

In the liquid system, there are no longer differences between professionals, citizens, heads of families, etc. The relationships coexist and, therefore, we must consider three logics to make more conscious and responsible choices in the procurement chain:

  1. The “AND” logic:

The sum of the following aspects must be considered: price and (+) quality and (+) speed and (+) delivery, etc.

  1. The trade-off logic:

There are real people behind all professionals, who yearn to make meaningful deals.

  1. The shared value creation logic:

It involves partnerships that add value in the long term, but provide also first-hand disruptive innovation (net present value).

 

Face the relationship with your supplier as a journey

Network building creates power, but many environmental and social responsibilities too. After all, when defining a purchase, the professionals internalize the externalities, since their decisions cause impacts inside and outside the company.

Defining a journey increases process assertiveness, as well as the satisfaction and engagement of all involved parties.

Sustainability broadens the management vision – which, in turn, improves awareness and causes the occurrence of changes.

According to mathematical genius John Nash, “the best results happen when everyone in the group does the best both for himself and for the group as a whole”.