Supplier Assessment — Embracing Sustainability in Procurement

Supplier assessment is needed when selecting the right supplier to achieve sustainability in your procurement process. But how do you do it? 

This article will discuss what supplier assessment is in sustainability and how important it is to assess your suppliers. Additionally, we will teach you some tips on assessing suppliers by classifying them. 

Once you are done reading this article, you will be able to assess your suppliers effectively. Thus, you will be assured that all the suppliers that you have engaged with can meet your sustainability standards. 

Supplier Assessment: What is it?

Supplier assessment, also known as supplier evaluation, is the process of assessing potential and existing suppliers by measuring their performance in procurement. In this process, their performance will be tested against different criteria to know if they still meet the organizational needs. 

Supplier assessment enables the business to engage with the best suppliers available in the market. Additionally, it aims to ensure that the needs of the business are met and to check if there are areas in procurement that can be improved by measuring the performance of the suppliers. 

Thus, if we relate it to sustainability, it refers to the process of evaluating suppliers by measuring their sustainability performance and knowing if they can attain or meet your sustainability standards. 

Furthermore, supplier assessment in sustainability can help businesses to ensure that the suppliers are compliant with their sustainability standards and that they are practicing ethical practices within their operations. 

The Importance of Supplier Assessment in Sustainability

As we said earlier, supplier assessment enables businesses to identify the best suppliers available in the market. This is crucial to sustainability as the business needs to find suppliers that are not just efficient but also adopt sustainability and ethical practices in their operations. 

Additionally, supplier assessment enables companies to utilize resources efficiently. Due to this, you will have less waste when making your products and reduce your carbon footprint. 

Supplier assessment allows businesses to carefully examine potential suppliers. Thus, they can lower the regulatory, contract, and sustainability risk factors associated with working with systems outside your business operations. 

Furthermore, supplier assessment helps organizations set sustainability standards which leads to better results in the procurement process. It lets businesses plan their goals and actions as per their suppliers’ capability and performance level, while also meeting your sustainability requirements. 

Assessing and Selecting Suppliers

Assessing and selecting suppliers is not an easy task. Thus, we will give you some tips on how you can assess them effectively by classifying them into 3 categories:

1. The first category is basic: This includes the suppliers who do not fulfill any criteria of your mandatory sustainability specifications
2. The second category is good: It includes suppliers who fulfill some of the mandatory criteria and some of the preferred criteria
3. And the third category is distinctive: This includes suppliers who fulfill all of the criteria and can offer more than you have asked.

Additionally, there are two approaches to working toward your sustainability objectives with your suppliers. The first strategy is to only select vendors that fulfill your sustainability standards. This way you are making the selection at the gate itself. Thus, you will be working with good and distinctive category suppliers.

The other practical way is collaborating with your existing suppliers on an ongoing basis to help them develop and achieve the new set of requirements. 

Two more advanced methods can be used to classify the suppliers:

1. Rated criteria 

This method uses weighted criteria to be scored and ranked in order of merit. 

2. Monetary quantifiable criteria

In this method, calculations are applied to prices to establish comparative evaluative costs, such as life-cycle costing, functional guarantees min/max adjustment, the domestic margin of preference, and where sustainability priorities are to be monetized such as energy consumption, CO2 emissions, or waste.

After classifying the new suppliers or the existing suppliers you want to continue working with, you should use the following approach for the different categories:

3. Capacity building

The best way to handle basic and good category suppliers is to work on their capacity building. You need to give them time to improve their products to meet your specifications. 

You can do this by prioritizing mandatory specifications and in a later phase including the preferred criteria for the basic category.  

4. Meet the preferred criteria

As the suppliers in the good category already meet the mandatory criteria, you should encourage them to meet the preferred criteria. You should use audits and regularly review the progress of the suppliers. 

This approach is good when the sustainability risks are low and you have time to mitigate them. Also, when the number of suppliers to meet the supply demand is very low. 

5. Work with the distinctive criteria

For the products with high risks that need to be addressed immediately, you should start working with the distinctive category of suppliers as they already fulfill all the criteria. 

This can be done when many suppliers in the distinctive category can fulfill your supply demand.

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Conclusion

Embracing sustainability in procurement involves a crucial step—supplier assessment. This process ensures that businesses engage with suppliers who not only meet organizational needs but also align with sustainability standards.

By carefully evaluating and classifying suppliers, companies can enhance their procurement practices, reduce environmental impact, and foster ethical operations. Through effective supplier assessment, organizations can contribute to a more sustainable and responsible supply chain.