Supernegotiate
Big Bold KPIs : Kpi 05 : Supplier Management : Re-define everything you know about this KPI
The fourth KPI is becoming really important. It's about sustainable sourcing. More specifically Scope 3. Scope 3 is about the reduction of the carbon emissions in your suppliers and their sub suppliers domain. It is challenging because you are required to monitor the manufacturing activity level wise emissions in your suppliers activity in all of their factories and in all of their respective sub suppliers. It is quite a difficult task and we are just getting started with that kind of a complexity. The approach that is being followed today, which in my view, it's still okay, is the total carbon emissions reduced. And you have seen firms who are committing to their net zero goals, some are committing at 2030, some are committing at 2040, some are committing at 2050. In nutshell, every firm will become accountable for achieving a net zero status in the future, some sooner than the others. However, in my view, there is a better way of monitoring or let's say addressing the scope three, which is setting up the percentage of clean energy use for your suppliers manufacturing activity. Let me give you an example. If in your suppliers factory, you're buying a product and the suppliers factory is powered by a coal or a furnace oil or diesel gen sets to manufacture your product assembly. You must enforce your supplier to use a 20% or a 30% at least. Energy using a green energy source such as solar or wind or something else. Setting up these thresholds is far more easier and have a greater impact than just setting up a net carbon emission reduction target and then struggling to let's say monitor what's the baseline, what's the new reduced, let's say emission, etc. Now this concept is not new. In fact, this concept is loosely connected with what Apple has already done and I was very fascinated by that specific project of Apple's in the sustainability domain. The screenshot that you're looking at your screen is something from I think a couple of one, one and a half years back where they have introduced this feature in their settings that the user can choose to charge their phone only when a clean energy is available from their grid. Now this is only available for certain region in the US but you understand the concept. Instead of just monitoring the reduction in carbon emissions because people can buy carbon credits and green wash their way, focus upon the actual utilization of the green energy resources. This concept will get more credibility and more attention as the world becomes more mature about handling scope three. So focus upon the utilization of the green resources and green energies rather than just plain reduction of the carbon emissions because people can always buy those carbon credits and claim their net zero status which is wrong in the first place. In fact, you must introduce this scope three aspect or the percentage utilization of the green energy in manufacturing process kind of targets in your sourcing process. If you have not introduced sustainability in its part of your sourcing projects, sourcing evaluation frameworks yet you're already lagging behind from in fact most of the legislative requirements. From two years from now or three years from now you will be asked to prove if you're shipping a product to a certain country your sales or the marketing team will reach out to you so that you have to prove that the product has been manufactured using the sustainable sources more so you will have to prove that you promote sustainable sourcing practices and you will have to showcase these evaluation activities your sourcing process of how exactly have you implemented this. So please go today and then implement a new procurement evaluation framework and do two things a in your evaluation criteria introduce sustainability how you will do that if you want me I will make a detailed video on this particular aspect separately. The second thing you should do is start measuring or start implementing the percentage utilization of green energy in the manufacturing process at your supplier side. Parting comments it will become quite challenging eventually you will be forced into do this but please start mapping your value chains list down your suppliers in an excel file please do not go through any external third party tool nobody knows what is going on how to map this everybody will ask you for this data eventually so start in a very simple excel file list down your top fifty hundred two hundred two thousand suppliers and over the next three months or so list down there tier one and there tier two suppliers this becomes quite complex because your each supplier will have multiple factors right and consolidating this information needs at least three to four months of dedicated effort start now