November 27, 2021

EcoRéseau Business – With the green transition, a company has every interest in playing the long-term card with its suppliers

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What links between the company, its suppliers and the green transition? Analysis by Natacha Tréhan, lecturer, and published by The Conversation.

Europe, through the Green Deal, aims to become the first climate neutral continent by 2050. This implies reducing net greenhouse gas emissions by at least 55% by 2030 compared to at 1990 levels. These objectives will necessarily become guidelines for European companies and must be applied in their commercial, financial, production and purchasing strategies.

With regard to the latter, many companies remain reluctant to make a long-term commitment with their suppliers, mainly for fear of dependence. The most classic levers remain short-term contracts, or even “spot” purchases and competitive tendering.

Due to climate goals, many of our research nonetheless suggests that a paradigm shift is necessary. Several arguments lead us to say that long-term collaboration will have to prevail with suppliers to achieve carbon neutrality objectives.

Not everyone will be served
The first step will be to become attractive customers. Gone are the old reflexes of the dominant customer, the customer-supplier balance of power will quickly shift in favor of suppliers who will master low-carbon technologies, bio-based products or even recycling. We had already underlined this development in our research on the future of the purchasing function; the trend will intensify with the climate transition.

In many markets, the supply of greener products will not grow as quickly as demand. On the one hand, some technologies do not yet exist. On the other hand, those that are emerging require heavy and long-term investments on the part of suppliers for large-scale industrialization.

This is the case, for example, with plastic recycling technologies such as polyethylene or polypropylene. Can these materials be recycled for the agri-food sector? Today, these sectors remain embryonic, in particular because it is a question of being in conformity with the standards of the materials in contact with the consumed foodstuffs.

However, given the European objectives and the legislation, demand will continue to grow. And not all agribusinesses will be supplied.

The Nestlé purchasing department, with which we are carrying out observation work, no longer hesitates, for these reasons, to enter into long-term relationships with certain suppliers. It supports the industrialization of their technology such as the enzymatic recycling of PET (polyethylene terephthalate, editor’s note), for example.

For the supplier, if there is a choice to be made, only companies that understand its constraints and that try to meet its needs will be served. Our pioneering research work, published in 2011, on supplier motivation is therefore more relevant than ever. We were already showing that the ability to motivate suppliers and to be a target customer limits the risks of shortages.

Difficult to solve its problems with its R&D alone
Moreover, it is not only a question of limiting the risks of shortages. To progress towards more environmentally friendly companies, only co-development with suppliers will make it possible to provide comprehensive and satisfactory responses. Carbon neutrality is indeed extremely complex. It requires systemic approaches that integrate life cycles.

In the construction industry, for example, cooperating with its suppliers upstream of responses to calls for tenders on carbon reduction is essential for a construction company. This is what Eiffage is doing with the creation of a “Sekoya low carbon industrial club” whose objective is to identify and promote the most innovative solutions by associating large suppliers such as Legrand but also SMEs and companies. start-up.

Faced with the complexity of climate issues, it is unlikely that a company will solve its problems with only its research and development branch and its internal resources, however brilliant they may be. The purchasing function, by virtue of its historical role as an interface between what is internal and what is external to the company, is one of the best placed to initiate the development of innovation ecosystems.

Indirect emissions
Cooperation finally seems essential when we are interested in the figures of scope 3. The “upstream scope 3” corresponds to indirect CO emissions.2 of a company throughout its supply chain. They are on average 11.4 times greater than its direct emissions.

This is where the greatest potential for optimization lies. Unilaterally impose CO reductions2 to its suppliers means becoming a repellent customer. Supporting them means not only strengthening ties, but also finding joint optimization solutions that will allow everyone to become greener, more robust and more agile.

Schneider, for example, as part of its “Zero Carbon Project”, works with its 1,000 main suppliers, representing 70% of its carbon footprint to reduce their CO emissions.2 50% by 2025. It provides them with tools and resources to help them and offers to share its expertise.

Let us also quote the remarks of Florent Menegaux, CEO of Michelin about sustainable mobility which seem quite significant:

In this new paradigm of carbon neutrality, the ability to collaborate with its supplier ecosystem will not only condition the achievement of climate objectives but also its future competitiveness. And this collaboration can only take place in the long term.