What is a “green supply chain”?

Ensuring that businesses minimise the environmental damage their operations result in is critical to the planet which we live in. However, direct environmental damage is only one (often small) part of the equation: industrial businesses have suppliers with a long chain of sub-suppliers (and sub-sub suppliers, etc.) which will also have environmental effects with regards to their operations in producing the goods and services to ultimately benefit the business at the top of the supplier chain. 

green supply chainA classic example of this is Tesla – a car company that whilst electric and not producing CO2 emissions directly, has come in for some criticism of hypocrisy given the CO2 emissions from the supply chain that leads to the Tesla being built, in particular its electric batteries 

So… in layman terms, how environmentally friendly a business is should be an aggregate of both direct emissions and also indirect emissions from suppliers in its supply chain. Easier said than done… 

In layman terms, how environmentally friendly a business is should be an aggregate of both direct emissions and also indirect emissions from suppliers in its supply chain. Easier said than done… Click To Tweet

In practice, companies at best are able to factor in their suppliers’ environmental effects to their own. They struggle completely to have visibility one step down in their supply chain – mainly because of a lack of visibility around tendering out to suppliers (and how procurement officers pick those suppliers). This gives rise to the importance of transparency within the supply chain: the more transparent information is around supplier selection in tendering, the more ability businesses have to ensure that environmental factors are taken into account. ­

This is an analogous issue to the bribery risks industrial companies are taking day in day out (see my other blog post on the topic). In both cases, buyers have little visibility or transparency of the tender process out to suppliers (relying on plausible deniability that filling out more paperwork checklists provides).

So, instead of simply talking about it endlessly, how can we take action? 

How can we create a green supply chain?  

1. Build environmental standards into supplier questionnaires, and make them centrally available to the market

Suppliers are endlessly filling out buyer questionnaires. The same questions tweaked, over and over and over again are being sent by word attachments to buyers via email. There is a good reason for this, in terms of counterparty data collection and assurance of counterparty processes.

Adding in environmental and sustainability-related questions, and incorporating this as standard in the complex tendering process out to suppliers, is key to making suppliers divulge this information (and for it to factor into the supplier selection process).

Within the DeepStream platform, for example, Sustainability and Environmental questionnaires can be built and pushed to suppliers. These answers and data, importantly, are owned by the respective supplier. This means they can then market it to other buyers on the DeepStream network: showcasing their credentials and increasing visibility. 

2. Have a central repository of supplier information and documents for the industry

Visibility and information is king when making judgements around the environmental impact a supplier may have on a businesses’ supply chain. So, instead of having this locked in your email inbox or on an excel list or your own supplier data list, a central platform where you can see supplier information is key to making better decisions around which suppliers to tender out to and select.

There are a number of “supplier verification” type companies out there, which all make money from doing actual verification/ providing certificates. This is necessary, however, they all want to own all of the supplier verification/ certification.. So it leads to a closed ecosystem. You can only see the verifications standards provided by that one verifier company (when there are hundreds out there!). 

So for a “single source of truth” for suppliers, a more open approach is required, a central repository that is happy to host various certifications and environmental data points for suppliers on one profile. 

On DeepStream, suppliers take control of the information and documentation (certification, ISO standards, compliance with modern slavery act, environmental standards, etc.) and hold it on a secure platform where it can be unlocked to different buyers and the market as a whole. This allows buyers to also organically collaborate, as supplier information is hosted on a common platform – not on their internal systems. 

Digital visibility allows for much higher informational visibility around supplier sustainability and environmental credentials.

3. Monitor and oversee your tendering process, in an easily (real-time) auditable way, ensuring environmental standards are part of the criteria of supplier selection

Ensure a digital and auditable tendering platform is in place to tender out to suppliers. Currently, regardless of the ERP systems in place, nearly all buyers who engage in complex tenders do so via email and attachments. Procurement officers engage bilaterally with supplier officers in running tenders. Yes, there are policies etc. in place, however, visibility of the actual tendering process is close to nil.

what is complex tenderingEmails are extremely hard to audit, with audits only taking place post a flagged event taking place (which are hard to flag when there is not real-time audit/ visibility!). How can procurement departments easily oversee selection criteria and easily manage bids side by side in one place so that not only price is taken into account when awarding contracts?

A proper digital platform, catering for the complex tendering process, caters for this and solves this problem, by:

  • Live auditability, in real-time
  • Control the tendering process to ensure sustainability and environmental answers will count towards supplier selection
  • Side by side comparisons of supplier bids, in one interface, rather than opaque copy-pasting into excel from email attachments
  • Ensure that key bid criteria is stripped out of mammoth PDF documents where shortfalls can be buried and become subjective

For example, when chartering vessels, does your company have oversight of the criteria used in supplier selection, transparently within the tendering process? Can you compare, easily/ quickly and clearly (without being such a frustration that it impacts quick business decision making) the:

  • Fuel type and fuel consumption of suppliers (your company may be holier than thou with solar panels installed at your HQ, but what does that matter if the vessels you lease are using tonnes and tonnes of the worst polluting fuels?).
  • Emission standards of your suppliers.
  • Etc.

On DeepStream, this is core to how the platform has been built.

4. Have a degree of control/ auditability/ visibility of how your suppliers engage with their suppliers

Ensuring your suppliers work via an auditable, digital, platform-based tendering solution helps with this informational integrity and visibility. Why?

  • Assurance that their tendering process is auditable on-demand, transparent, and not open to bad practice dealings
  • Ensuring that, if required, supplier promises to ensure environmental standards are part of their supplier selection criteria is, in fact, the case
  • Push a digital questionnaire to suppliers that can be forward-pushed on to their suppliers, all logged digitally in an auditable immutable trail

This can easily be done by incorporating this requirement of using an auditable digital platform into your own supplier selection process, helping create a truly transparent and digital green supply chain further down the chain.

This particularly applies to agent intermediaries (including brokers) – where buyers are taking legal risks. Regardless of using an intermediary, they are legally liable for dealings which an agent engages in on their behalf (relying on agents signing questionnaires is not considered a legal defence any more as digital platforms are now available that can give visibility over this tendering process).

Choose DeepStream for your green supply chain

Sustainability, transparency and auditability are at the heart of what DeepStream is doing for a currently opaque tendering model between industrial counterparties. Specifically, DeepStream delivers on:

  • Full digitalisation of the tendering process
  • Full auditability, traceability and logging of every action between businesses in the tendering process
  • Central, digital and open source certification depository for suppliers including environmental standards and certifications
  • Bespoke supplier questionnaire lists, digitally available, to assess suppliers based on sustainability and environmental criteria
  • Multi-company network approach to increase digital sharing of information and lower operational compliance risks
  • Integration of sustainability criteria in tender process for easy evaluation (side by side – just as user-friendly as when you pick which movie to watch on Netflix) based on added criteria
  • Centralised visibility to ensure best practices are being followed within tendering activities 

And whilst I appreciate this blog post is content, here at DeepStream we spend 99%+ of our time and investment actually delivering this technology to the market and our users, with now over $600mm of transactional notional in the last 12 months being tendered through DeepStream in a compliant, transparent, auditable and sustainable way.

Our technology opens the door to a more sustainable future. The industry, however, needs to actually walk through the door and embrace it – not make excuses for why they need 12 months to make a decision to do so. 

 

Jack Macfarlane

Jack Macfarlane

Jack Macfarlane is the CEO and founder of DeepStream.