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What is the significance of networking and partnering with agencies like the SRMSDC?

The corporate question was "What is the significance of networking and partnering with agencies like the SRMSDC?"

By Alvin-o Williams

SRSMDC Response:

The primary benefit of partnering with organizations like SRMSDC is to implement solutions to solve for the “S” of your environmental, social, and governance (ESG) goals that build value and contribute to transformational change without cutting margins. Together with the SRMSDC, large buying organizations can increase actual and perceived stakeholder value.

Solving ESG issues have historically caused lost revenue for organizations. For example, higher costs associated with working with diverse suppliers have always presented a conflict for corporate executives who strive for the highest margins possible because diverse suppliers historically do not initially have access to commercial or industrial-level pricing and services to remain competitive. Gartner’s 2022 CEO Survey shows that ESG and sustainability are top priorities for executive leadership. Still, there’s a gap between the strategy of becoming more ESG-conscious while continuing to grow the bottom line.

For ESG adoption to be realistic, it is first the responsibility of the corporations to systematically adopt a public stance supporting ESG and not view this as an add-on box to check; instead, as a circular way of doing business. An effective approach to this new business model involves engaging all facets of a business, including finance, operations, marketing, supply chain, and human resources. SRMSDC’s leadership has outlined a four-stage roadmap to help organizations transition from vanity measures to a circular model that creates value for corporations, people, and communities.

Phase 1: Identifying the ESG “S” issues important to your specific business or industry.

Relinquishing modest changes and focusing on bold, transformational changes will have the most significant impact. However, understanding the priorities for your business and your industry is crucial. When embarking on this journey, leadership must ask internal and external stakeholders the following questions, among others:

  • What perceived “S” ESG issues impact your organization or industry most?

  • In which “resource-conscious” ways are your competitors acting, and how might your organization improve?

  • What are the capabilities of your diverse and non-diverse suppliers? How can your organization encourage your suppliers to align with your ESG goals?

  • How can your organization best communicate your ESG goals internally across operations and externally to customers?

  • What material ESG topics are key to your business, and which do you need to tackle now?

Some ESG issues become more impactful due to mandates such as governmental regulation. For example, in the United States, organizations today must consider and manage the most difficult metric to gather their Scope 3 emissions. Those emissions, defined by the EPA’s Center for Corporate Climate Leadership as “the result of activities from assets not owned or controlled by the reporting organization,” need interaction along the entire value chain, from upstream to downstream, from providers to customers, and are the most difficult to calculate. However, implementing a Supplier Equity initiative can accelerate the process and gain system-wide engagement.

Phase 2: Set responsible goals and actionable steps to achieve them

Setting an ESG policy is a logical step to transforming your organization into a sustainable one at its core. Buy-in from organizational stakeholders on goals and associated activities to achieve them must be set, measured, managed, and marketed publicly. Compared to the antiquated spend management metric, these targets must be specific, measurable, and outcome-oriented. The goal statements you set should resemble something like this:

  • “We want to reduce our number of suppliers by 20% over the next 24 months, but in turn, we want to increase the aggregate ESG impact our suppliers have on the people and the environment.”

    • Create a roadmap to impact optimization by calculating our individual supplier impact using one of the available resource allocation management tools available today.

  • “We want to increase our supplier impact performance by 15% over the next 12 months.”

    • Create a supplier equity performance plan in which all of your suppliers (diverse and nondiverse) collectively work towards helping you achieve your ESG “S” goals.

  • ‘We want our ESG transformation to add $500,000 of topline revenue or $100,000 to our bottom line within five years and leverage our stance to improve our brand.”

    • By beating the competitors with respect to ESG “S” goals and ambitions, your brand will be able to differentiate itself by demonstrating the correlation of impact and value to its products or services. Such a distinctive disruptive feature will provide a new way to compare products/services.

Circularity should be integrated into every business decision, large or small, at the same weight that profit and capital expenditure are considered. As much as analyzing a financial budget and an EBITDA summary, organizations need to start analyzing the direct and indirect impact of Supplier Equity. All stakeholders must be familiar with the issue, the goals, and the roadmap to circularity. An outcome-based roadmap should accompany each objective that details time-stamped metrics for measuring progress and success.

Additionally, national, regional, and local regulations may help guide your organization’s goals. For example, in the United States, the recently-passed Inflation Reduction Act sets milestones for corporate sustainability through 2030. In the European Union, the Carbon Border Adjustment Mechanism, part of the European Green Deal, sets limits on carbon emissions.

Phase 3: Focus on the balance sheet, P&L, and unintentional benefits of outcome-based impact measurement

Reinvention without financial improvements is a non-starter for all organizational stakeholders and potential project sponsors. When embarking on fundamentally changing how an organization approaches the “S” of ESG, a business case must include improvements to top-line revenue, bottom-line value and an outline of the intentional outcome-based impacts.

For example, the financial services industry comes into play for many organizations that seek debt financing. As financial institutions reshape the importance of investment decisions that consider the environmental, social, and governance (ESG) factors of an economic activity or project,” companies with viable “S” ESG strategies will reap the benefits, including lower costs to borrow.

Phase 4: Establish accountability: executives, teams, and beyond

To ensure stakeholders are aligned, the value of Circularity must be clearly understood at all levels, and organizational accountability measures must be established. This long-term goal should be broken down into smaller, near-term attainable milestones that can be tracked and timed. Additionally, having a dedicated champion and project manager with the personality and given authority to hold all parties accountable is imperative to maintain a constant cadence despite the status quo operating demands of the business.

Do you need consultation on what Circular transformation could look like in your organization? We are here to help. Our leadership helps organizations do just that. Click here to contact leadership.

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