SUSTAINABILITY FEATURE
SUSTAINABILITY FEATURE
CEO view: strengthening supplier relationships helps us sustain global success
For the global premiumdomestic appliance brand Fisher & Paykel, sustainability means looking after the environment and acting responsibly. But CEO Stuart Broadhurst explains it is also about ensuring supplier relationships deliver to their leading goals.
lead in design, quality and performance we know we need to work more collaboratively with our suppliers. Like most firms, we have responded to consumer expectations and invested to deliver to our end consumers’ requirements. This is also very true though with the heavy investment made in tools and processes for the “best practise” account management of our key B2B customers. But we realised we hadn’t put anything like the same effort into managing our relationships with our suppliers. When you think of how much innovation, both in technology and process, can come when working closely with your suppliers, it’s easy to see why we need to build stronger relationships with them. We want to understand them as well as have them understand us. Fisher & Paykel was established over 80 years ago and we will continue to grow a sustainable global business. We are focusing on three things to make our company more successful: product, brand and people. The first two rely on input from suppliers, and our people will determine how we collaborate with our suppliers to ensure our business is sustainable in the decades to come.
Fisher & Paykel was established in New Zealand in 1934. In those early years New Zealand was a relatively remote part of the world, because of this remoteness the business evolved to be very vertically integrated we built components and parts because we had too, and we became great at innovation that led to many world firsts like the brushless DirectDrive motor for washing machines and DishDrawer dishwasher. This meant our engineers became experts at designing and developing complete product solutions, but the vertical integration model slowed us down. Things take longer when you design and develop complete product solutions on your own. A lot has changed since those early days. Globalisation has forced many well-known brands out of business. As we grew into the global business we are today with manufacturing and design facilities across different parts of the globe we needed to make dramatic changes in how we worked with our supply partners. As the business migrated from its New Zealand roots we have been working more collaboratively with our supplier base, sharing aspects of our technology roadmap to leverage each other’s strengths – capability, capacity and scale. To be a relevant global brand delivering products that
retail, we see great efforts to share and reward best practice across different categories of supplier. Among companies that hold our own Carbon Trust Standard for Supply Chain we have seen them secure imaginative and impactful commitments from their suppliers. These include modal shifts in transport and fleet replacement, the introduction of lower carbon technologies in construction, incentivisation of waste reduction, and even contractual commitments to reduce emissions. One area of particular success has been businesses encouraging their suppliers to switch to renewable electricity, which is becoming an increasingly compelling investment opportunity. For example, it is becoming common to see co- investment or finance facilities for generating renewable energy onsite. There is also a move towards setting objective targets on climate change, based on what will be objectively necessary to stay well below the 2 degree goal in the Paris Agreement on climate change. Hundreds of companies are now joining the movement to set science-based targets on climate change, which includes setting ambitious supply chain emissions reduction goals. This increasingly involves asking suppliers to set their own science- based targets. Ultimately, one of the greatest levers for change we have for taking action on climate change within the economy is using the power of procurement to cascade positive changes down supply chains. If big buyers with substantial purchasing muscle can flex this in a way that drives a shift towards sustainability, they will help to accelerate the shift towards a low carbon future and benefit everyone.
How successful they are in reducing carbon emissions will depend greatly on relationships up and down the value chain. Typically between 60% and 95% of the carbon emissions related to a company’s activities come from outside its operational boundaries. That could be embedded carbon in materials, supply-side processes or transportation before goods arrive on site, or downstream emissions resulting from the use of products over their lifetime. But procurement teams are not always set up for the challenge of adding sustainability into the equation. Many organisations have spent years constructing and optimising highly effective commercial machines which are focused on achieving the best quality at the lowest price. But this focus means they can find it difficult to accommodate wider definitions of value–such as sustainability or carbon intensity–when selecting and managing suppliers. The good news is that it is getting easier to measure supply chain emissions and to set meaningful targets for action. Pressure for environmental disclosure from major corporations has helped. Over 4,800 companies provided responses to the 99 member organisations of CDP’s supply chain programme in 2017, who were able to collectively leverage over US$3 trillion in annual spend to request this information. Among the best performing organisations, we see proactive supplier engagement and cooperation in the supply chain. In some sectors, such as automotive, where they share common technical know-how with suppliers, we see companies directly providing consultancy and advice based on their own experience. In other sectors, such as
Stuart Broadhurst CEO, Fisher & Paykel
6 STATE OF FLUX
2018 GLOBAL SRM RESEARCH REPORT
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