Beyond Price: How Sustainability Is Reshaping Supplier Selection

Sustainability is no longer a peripheral concern; it’s a core consideration in supplier selection as more and more companies step up to reduce their Scope 3 emissions and carbon footprint. From maximising container space utilisation to implementing guidelines for the integration of sustainability practices in procurement processes, a multitude of practices can be achieved to push for more investments and efforts in ESG initiatives.

The traditional focus on cost-cutting for procurement can clash with the growing importance of sustainability. This interview seeks to shed light on how to bridge that gap. Wanni, representing the corporate side, emphasises the need for firm guidelines on supplier practices, and strategizing their plan around considerations apart from pricing. Brett, with a supplier perspective, highlights the progress made by large suppliers and the collaborative approach needed to support smaller players. While rising costs may be an omnipresent factor, the growing role of sustainability efforts in supplier selection will become a defining trend in the coming future. This conversation also stresses on the importance of fostering ties with governing bodies and their evolving role in this space.

Do you truly believe procurement will follow the guidelines of a corporate structure, knowing that their KPIs are based on how cheap they can procure?

Wanni: I would say the corporate governing function has to be firm on the supplier requirements and procurement team need to believe that the sustainable option does not have to be the most expensive option. We should not have pricing as the only KPI in procurement.

Brett: There is very definitely a direction on responsible procurement. With international supplier partners there is well established progress in the areas of CO2 & GHG emissions, and for example international passive packaging manufacturers are well progressed on Life Cycle Analysis for their products. For small/medium enterprise partners, the capability to support ESG goals needs a greater deal of collaboration and support – progress will not be achieved with “waving a stick” and “I want 20% less in my rates” approaches. ESG includes progressive development of their Quality, Corporate Compliance, HSSE (Health, Safety, Security & Environment) and Workers Rights capabilities – and to make real progress they cannot do this on their own, they need support of more mature organizations like our own.

Maximizing container space utilization - for an example >90% - means that less containers are required, which can contribute to CO2 avoidance. Is this part of your strategy?

Wanni: Space utilization with strategic planning is always part of our strategy. Consolidation of non-urgent shipment and last mile planning are also areas we are looking at for CO2 avoidance

Brett: Maximizing load capacities (whether by air, sea or road), more efficient route planning, reduction of ad-hoc shipments, reduction of reverse logistics/repeat delivery incidences are all opportunities for CO2 emissions reduction we are working with both international and domestic transport management.

How can we as suppliers get end customers e.g. clinics/hospital/patients involved in the sustainable journey?

Wanni: We might want to understand our customer’s stand on sustainability journey first. Most of the customers nowadays are having their own plan to carbon zero in place then as suppliers we could highlight the value-add in this journey with the solutions we are currently having. However if customer does not have any plan in this area, more marketing work will be required in this area.

For small suppliers in Asia, with limited knowledge of GHG and emissions etc, what kind of actions would you recommend taking as a start?

Brett: I think the place to start is a materiality assessment – this takes the inputs from a range of stakeholders, and helps them to identify what their priorities – material issues - need to be. Then they need to look at what actions they already have in place in these priority areas – it is rare to start from scratch, most often then are some activities already ongoing that may not have been viewed though the lens of sustainability before. Then, look at what peers, competitors, other industries are doing and learn from them. Do not try to reinvent the wheel. Lean on support from more mature partners to assist the journey – real progress comes with collaboration.

In Asia, do you think the company's sustainability effort and decarbonization roadmap will soon be part of the tender scoring system to drive the engagement?

Wanni: Yes- a lot of governments and companies in ASIA are drafting their roadmap on this.

Brett: Even dating back to 2015 we were see manufacturers starting to include a Sustainability qualifier in the RFP’s for partnership – generally by way of assessment by companies such as Ecovadis. Today, the degree to which a partner can support a manufacturer’s carbon scope 3 emissions reduction target, in addition to meeting other ESG targets, are becoming qualifiers.

Our Speakers:

Wanni Tang, Director – Service Operations & Customer Experience, ASEAN, Korea & ANZ, GE Healthcare

Brett Marshall, Vice President – Quality & HSSE, Zuellig Pharma