Outsourcing supply chains boosts ESG compliance

The value of goods and orders for maintenance and operating supplies is often not particularly high. At the same time, however, the items are also critically important for maintaining business operations. Not having the right part at the decisive moment can mean longer downtimes and affect production.

Why is outsourcing the maintenance supply chain worthwhile?

Outsourcing the maintenance supply chain to a specialized external procurement service provider reduces these risks. Additional benefits include supplier consolidation, reduced transaction processing, and optimized inventory, which also help reduce costs.

Moreover, this step helps companies advance in the area of Environmental Social Governance (ESG). The focus is on reducing the carbon footprint, manufacturing and using more sustainable products, and promoting ethical procurement practices. A maintenance procurement service provider is positioned between suppliers and customers and plays an important role in implementing and adhering to ESG standards and best practices.

Mouthpiece for ESG aspects

The global MRO procurement service provider RS Integrated Supply hosted an ESG forum with customers, senior executives, and leaders of the parent company RS Group. RS Integrated Supply acts as an intermediary between suppliers and customers.

Supporting communication between upstream and downstream is crucial. According to Andrea Barrett, Vice President of Social Responsibility and Sustainability at RS Group, the ESG forum gathers all insights, needs, and opportunities of the customers. It advocates for a stronger focus on sustainable and responsible product development, packaging, logistics, and ethics.

Requirements for evidence

At the same time, requests for evidence of ESG improvements, however well-intentioned, can become burdensome for suppliers. This is especially true for small and medium-sized enterprises that may lack the resources to respond effectively. It is important that reporting is as efficient and effective as possible: reporting once to the highest possible standard is better than creating many individual, customer-specific reports and questionnaires. The latter scenario can unintentionally have adverse effects. The risk is that small ESG teams simply become reporting teams and no longer have the capacity to drive the actions themselves.

Generally accepted reporting tools therefore play an important role in RS's supplier evaluation. It is very important to the distributor to ask partners to join the Science-Based Targets initiative. This is an organization that helps companies set emissions reduction and net-zero targets that align with climate research.

How does supplier evaluation via EcoVadis work?

RS has decided to be certified by EcoVadis. This is a global ESG sustainability rating. EcoVadis awards platinum, gold, silver, and bronze medals to companies based on their performance against specific sustainability and social responsibility criteria. RS sets achieving a silver medal as a priority for suppliers. EcoVadis is a valuable research tool to learn more about a supplier. It provides insight into a company's activities to ensure greater sustainability. You can also directly find out what steps have been taken towards more responsible sourcing without having to request these details directly from them. The EcoVadis registration also benefits the supplier. This gives companies a rating whose results they can share with others.

What ESG goals has RS Integrated Supply already achieved?

Procurement service providers like RS Integrated Supply can offer valuable support in managing the sometimes nearly contradictory requirements and help customers make their operations as efficient as possible by reducing costs, engaging fewer resources, and meeting compliance and responsible procurement goals.

One must constantly ask: How can we continue to advance in our next phase?

The return on investment from EcoVadis varies depending on where companies are on their sustainability journey. You can quickly see where suppliers stand in terms of their sustainability efforts and easily compare them with other suppliers in the network. The 360° watch feature also allows efficient monitoring of media coverage about the suppliers.

RS achieves continuous improvement with EcoVadis

RS also relies on EcoVadis to validate its own efforts. The results? A platinum rating for the third time, meaning the company's ESG performance was among the top one percent of all organizations assessed by EcoVadis in the last twelve months. Examples of successes include a 61 percent reduction in CO₂ emissions (excluding recent acquisitions), a nine percent reduction in energy consumption, and a 26 percent reduction in scope 3 transport emissions intensity between 2019/20 and 2023/24.

However, there are still challenges that hinder progress in achieving ESG goals - namely the perception that sustainable products cost more. For one organization, sustainability criteria may be the decisive factor, for another it may be the price because the margins in this business are so tight. However, it is clear where the trend in legislation and policies is going: we need to find sustainable solutions for all conceivable products. But we are not there yet.

In general, there is a tension of competing requirements. ESG may be a priority, but there are also many challenges. Customers, especially in the maintenance sector

need products and solutions that help them achieve their financial goals in terms of cost reduction and competitive advantage while also meeting their environmental and sustainability requirements. (bs)

This contribution is based on documents from the RS Group.