Interview with Luca Guzzabocca, head of Logistics Costs and Supply Chain Management
at GRUPPO MONTEPASCHI.
1) Why is Sustainable Procurement important for GRUPPO MONTEPASCHI?
Sustainable Procurement is one of the significant engagements GRUPPO MONTEPASCHI has in CSR policies. For GRUPPO MONTEPASCHI, Sustainable Procurement is important because we are aware of the impact we can have by changing the way we procure goods and services. As the third largest bank in Italy, we work with more than 24 000 suppliers, from whom we purchase a large amount of goods and services. As the oldest bank in the world, we believe that making far-reaching efforts towards a more Sustainable Procurement process can bring real changes in the market. Sustainable Procurement is not about competition between companies: it is about differentiation. We hope that our action in order to embed sustainability in our supply chain will be followed by other companies, that others will join our vision.
2) What part of the program are you the most proud of?
Honestly, there isn’t something specific we are proud of. What we are proud of is Gruppo Montepaschi’ holistic and pragmatic approach towards Sustainable Procurement. The approach GRUPPO MONTEPASCHI has built is based on a holistic view. To formalize our Sustainable Procurement program, we have dedicated a lot of time to increase our awareness on all the issues involved, and different areas of the company were implicated in the execution and the overall management of our Sustainable Procurement Program. Further, the approach we choose for Sustainable Procurement is really pragmatic: our Sustainable Procurement program is not only geared towards buying environmental-friendly products, but the program also takes into account the cost savings and the benefits the company can gain from the Sustainable Procurement process. We look at the proper trade-off between sustainability and competiveness.
3) Is it feasible to assess and develop the CSR performance of suppliers?
Yes, of course it is feasible to assess and develop the CSR performance of suppliers.
For the assessment of suppliers, the decision to introduce EcoVadis was part of our holistic view on Sustainable Procurement. EcoVadis allow us to look after the CSR commitment and profile of our suppliers. In 2009, we launched our first CSR evaluation program with EcoVadis, which involved 50 suppliers. The outcome was very interesting for our suppliers because they got the chance to look at themselves in the mirror. Once EcoVadisprovided us the results of the assessments, we organized one-to-one meetings with our 50 suppliers’ portfolios to explain the results in detail to all the persons interested. All of our suppliers wish to do something regarding their CSR performance, but there are differences according to the size of companies. Big companies are familiar with CSR topics and issues, they have set up plenty of CSR initiatives, and they report on their performance. On the contrary, the CSR approaches of small and medium enterprises are more critical, so we have to make more effort whilst outlining our requirements to them.
For GRUPPO MONTEPASCHI, it is a priority to support our suppliers, and they are learning from our meetings. We really expect to make a significant step forward in CSR commitment with our suppliers.
4) What results have you achieved?
Regarding our organization, we have included three dedicated resources to manage all aspects related to Sustainable Supply Chain Management, and we also provided training and awareness to all Procurement and Logistics staff (418 hours overall). We improved our procurement process by assessing the CSR performance of our suppliers using the EcoVadis rating solution (50 top suppliers assessed in 2009; plan to cover 650 by 2012), and by defining a new selection process for products and services, which combines sustainability requirements with economic, technical, quality and innovation criteria.
GRUPPO MONTEPASCHI has also developed contract standards to capture sustainable requirements with a fair and mutual responsibility approach towards suppliers. In order to measure the performance of our program, we have implemented a KPI framework and a control process to monitor supplier performance regarding sustainability and identify opportunities for improvement.
Finally, as a direct consequence of introduction of CSR concepts, the group has been able to achieve savings of 12.800.000 €, thanks to new energy, printing and office products policies (98% of the Group’s electric power coming from renewable sources; optimization of print device; majority of orders for office products restricted to a green catalog etc).
5) What advice for a Purchasing Director who would start today?
I would give four principal pieces of advice to a Purchasing Director who would start today embedding sustainability in the supply chain. The first piece of advice is to learn day-by-day how to manage Sustainable Procurement in an effective way. Benchmarking activity and knowledge sharing is the key for a good start. My second piece of advice is about the time objective of a Sustainable Procurement program. It is essential not to have a short term objective, but a long term objective of 20 years isn’t required either. In my opinion, a step by step 3 year plan is appropriate to embed a Sustainable Procurement process. Thirdly, a company should invest in a full-time person to be their “champion” in Sustainable Development. This person will have an important role to play regarding Sustainable Procurement, including inspiring the process, supporting buyers and pulling good practices together internally.
Finally, and this piece of advice is of the essence: if a company doesn’t have a CSR commitment, if CSR isn’t supported at top level, embedding a Sustainable Procurement policy will be very difficult. A clear and firm CSR commitment from a company is crucial in order to set up a Sustainable Procurement process.
Many thanks to Luca Guzzabocca for participating in this interview.
Links:
GRUPPO MONTEPASCHI website: click here
GRUPPO MONTEPASCHI CSR reports: click here
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The key findings on corporate responsibility are:
• 93 % of corporate CEOs believe that sustainability will be critical to the future success of their companies.
• 81% of CEOs (up from 50 % in 2007) said that sustainability issues had become part of their company strategy and operations.
• If CEOs recognize the progresses made by their companies moving from a sustainability strategy to execution, they also say several barriers to achieving their goals still remain, such as: complexity of implementation (cited by 49 %), competing strategic priorities (48 %), lack of recognition from the financial markets (34 %)
But this study was also very interesting in highlighting the importance of Supply Chains Sustainability:
• Supply Chain is the topic which importance has increased the most in the past 3 years (88 % of CEOs consider companies should embed Sustainability issues through their global Supply Chains, up from 59 % in 2007).
• Supply Chain is also the area where implementation gap is currently the biggest: although 88 % of CEO’s believe that they should be integrating sustainability through their supply chain, only 54 % believe that this is being achieved within their own company.
• 78 % of the CEOs believe that companies should collaborate with a variety of stakeholders, such as suppliers, NGOs and governments, in order to address sustainability issues.
Complete study here.
P&G announced on May 12, 2010 the launch of the Supplier Environmental Sustainability Scorecard and rating process, another important Sustainable Procurement initiative in line with Wal-Mart’s “Sustainability Index” or IBM’s new CSR requirements for suppliers.
P&G’s Supplier Scorecard is designed to measure energy use, water use, waste disposal and greenhouse gas emissions of key suppliers. The company wants to encourage year-on-year improvement of suppliers by implementing this Scorecard and rating process, and also incite suppliers to use the scorecard within their own supply chains.
According to P&G Chairman of the Board, President and Chief Executive Officer Bob McDonald: “The launch of the Supplier Environmental Sustainability Scorecard represents the next step in P&G’s commitment to environmental sustainability and reflects the Company’s holistic, end-to-end supply chain strategy”. P&Gs Global Purchasing Officer (Rick Hughes) also summarizes the objectives in a video.
P&G also decided to make the scorecard “open source” and you can download the scorecard here. Contrary to Walmart whose scorecard contains 15 very simple “yes/no” questions, P&G is trying to go much further, by developing a quantitative assessment of suppliers’ environmental footprint.
P&G also announced a target to go beyond and beyond suppliers overall Sustainability indicators but also report on « Sustainability results relating directly to the creation of P&G-specific materials and services ». From what we know of the maturity of suppliers reporting system, this is an extremely ambitious goal and it will be interesting to see how many suppliers are able to provide such indicators in a credible way.
Although the results of the scorecard won’t affect adversely suppliers before a year, this announcement will certainly have a far reaching cross-industry impact, urging suppliers to take seriously into account environmental issues.
The strategic initiatives launched by Walmart, IBM and P&G (and more are coming keep posted) illustrate the profound change in the industry practices, moving from traditional auditing methods (factory site audits, based on social and environmental compliance) to a much more strategic assessment of the suppliers CSR management system. EcoVadis has been pioneering Suppliers CSR rating for the past 3 years, and we welcome those initiatives which confirm our vision.
The future International Standard on Corporate Social Responsibility, has reached an important phase in its development on 14.2.2010 . More than 67% of the countries participating in ISO have voted in favor of the standard and unless major surprise should reach the Final Draft International Standard (FDIS) stage.
The final stage wil take place in Copenhagen (again! hoping that this standard will not suffer the same fate as the international treaty on GHG emissions) on May 15th 2010, where review of the final comments will take place, in order to allow a final vote during the summer and the release of ISO 26000 as an International Standard.
What does this mean for Procurement Exectutives involved in Sustainable Procurement?
We believe that ISO 26000 will not be the magic bullet which will suddenly replace all CSR initiatives in the Supply Chain. First of all this standard will not be “certifiable”: It is not intended or appropriate for certification purposes or regulatory or contractual use. It will therefore not be possible to mandate “ISO 26000” compliance as a qualification criterias, the way some companies are doing it with ISO 14000, or ISO 9000. Furthermore, ISO 26000 is the result of long discussions, and in order to achieve a consensus with emerging countries the working group had to lower the requirements in terms of social and environmental. ISO 26000 will therefore represent a “minimum acceptable level” and could not be used as a “best practice” by organizations.
Despite those limitation ISO 26000 should represent a major step forwards for all organizations involved into CSR. It will allow executives to benefit from a framework to clearly define the topics which should be covered in CSR and the boundaries. It could for example be used as a reference in Sustainable Procurement Charter (ISO 26000 is compatible with existing conventions by United Nations and its constituents, such as ILO, Global Compact and OECD). The dialogue between Buyers and Suppliers on CSR is often compromised by lack of understanding in basic CSR concepts : ISO 26000, which will be available in several languages, and will be supported by local organizations, will be a great tool to disseminate CSR concepts and help all participants involved in international trade understand the importance of it.
Finally we believe that solutions will emerge to leverage ISO 26000, and adress its shortcomings. EcoVadis has been using ISO 2600 criteria as one of the cornerstone in the development of our assessment tool and supplier’s rating methodology. We have already assessed thousands of companies across 80 countries, mostly SME’s, using ISO 26000 criteria, and believe that approval of ISO 26000 as an International Standard will benefit both buyers and suppliers subscribing to our platform.