As a core strategic focus, sustainability has escalated quickly over the last five to six years, with retailers and suppliers recognizing the importance of sustainable practices and their impact on the environment, society, and profitability. Most businesses have set their sustainability agenda and are beginning to make good progress on implementing initiatives (e.g., reducing carbon footprint) to meet targets developed by the government or themselves. Focus in this area was not unduly slowed by the pandemic, underscoring the importance that it now holds in boardrooms.
However, much of the work being done in this area is through the effort of individual companies working on unilateral plans. There is an emerging opportunity to amplify the positive impacts of sustainability initiatives for trading partners by working together within their one-to-one relationships or across industry groups.
At Advantage Group International, we are privileged to be at the centre of business collaboration, providing data analysis, reporting, and visualization services to help global businesses track their key performance indicators (KPIs) and make informed decisions based on the results. Despite the positivity and focus on sustainability, we have learnt that it ranks near the bottom in correlation with overall supplier-retailer relationship engagement, showing that there is a gap between the importance of sustainability as a strategic focus versus how sales and category leaders view its importance and effectiveness in driving engagement between retailers and suppliers (Advantage Global Competency Analysis, November 2022).
The complexities of managing sustainability when dealing with multiple trading partners can present significant challenges. Often, sales-focused individuals manage the relationship between retailers and their suppliers, but these individuals may not prioritize sustainability initiatives. Therefore, the challenge is ensuring that all parties involved in the trading process integrate, understand, and support the sustainability agenda.
The pathway to implementing a sustainability engagement program
One solution to this challenge is to implement a sustainability engagement program. This could be initiated by either a retailer or supplier, as the purpose of such a program is to encourage retailers and suppliers to work together to develop and implement sustainable practices that benefit both parties. The program should include a clear set of goals and objectives that help trading partners understand the benefits of sustainability and how it can help drive business growth.
The first step in creating a sustainability engagement program is to build awareness among all stakeholders. This includes educating sales-focused personnel who may not have a background in sustainability and the importance of sustainable practices. It also involves working closely with suppliers and retailers to ensure they understand the expectations regarding sustainability and its impact on their business.
Once awareness has been established, the next step is to develop a set of sustainability guidelines that all parties involved in the trading process must adhere to. These guidelines should outline the expectations for sustainable practices, including reducing waste, implementing renewable energy sources, using sustainable materials, and reducing carbon emissions. The guidelines should also explore opportunities for shared sustainable initiatives that can benefit all parties involved.
Part of building an effective sustainability engagement program is identifying KPIs that are monitored and managed regularly. The KPIs should focus on measuring the environmental and social impact of the sustainability initiatives and the progress toward achieving the program’s goals. By measuring and monitoring progress, it becomes easier to demonstrate the value of sustainable practices and adjust the strategy accordingly.
We have found, via multiple programs run with retailers and suppliers globally in the past 12 months, that communication is the most crucial aspect of the sustainability engagement program. Companies prioritizing sustainability must regularly communicate with their trading partners about sustainability initiatives, progress, and challenges. This communication should be two-way, allowing both parties to share their experiences and feedback.
Establishing KPIs is a crucial step in any business strategy. KPIs help to track and measure progress toward achieving specific goals or objectives. Once KPIs are established, they need to be tracked and reported regularly.
Why engagement programs are key to bridging the gap and achieving sustainability goals
Advantage Custom Solutions developed a tailored engagement program for a major grocery retailer. We were charged with helping them achieve their stated strategic intent of becoming one of the most sustainable retailers in the world. Via a survey, we aimed to understand the supplier’s perspective on sustainability, including assessing their readiness, priorities, and view of the retailer’s engagement on the sustainability agenda. More than 150 sustainability experts completed the survey in the supplier’s organization across all the retailer’s categories.
The results informed their operational strategy and were used as input for their sustainability materiality assessment. The grocery retailer became a prime leader in support of sustainable packaging. They have also continued developing collaboration with suppliers around their sustainability agenda.
The engagement program was able to gauge where the suppliers’ minds were regarding the retailer and their sustainability agenda. This was key to making impactful changes across the supply chain that were mutually valuable — it achieved what the retailer wanted by developing sustainable packaging that was recognized nationwide, identified and considered the supplier’s sustainability priorities and paved the way for future collaboration on sustainability.
It’s an exciting time to work in this area of relationship development with sustainability engagement between trading partners, which is critical to driving change across the supply chain. Retailers and their suppliers must work together to develop and implement sustainable practices that benefit both parties and reduce environmental impact. Sales-focused personnel must be included in these initiatives to ensure they prioritize sustainability in their decision-making processes. By building awareness, developing guidelines, monitoring performance, and communicating openly with trading partners, retailers can effectively drive sustainability initiatives and achieve sustainable business growth.
About Advantage Group International
Advantage Group International is the leading advisor in business-to-business engagement solutions globally. Trusted by many of the world’s leading brands, Advantage Report has become the gold standard for improving performance between suppliers and retailers in over 40 countries. Established in 1988 and headquartered in Canada, Advantage Group acts as an integral link between supplier and retail partners, using data, feedback and strategy consulting to illuminate opportunities for mutual growth, strengthen relationships and provide invaluable insight. Advantage Group helps people and organizations work better together.