Small and medium-sized enterprises (SMEs) constitute the backbone of the global economy, representing over 90% of all businesses worldwide and accounting for more than 50% of employment. Talk of small giants big impact, in the European Union alone, SMEs make up 99% of all businesses, contributing significantly to economic growth, innovation, and job creation.

 

Despite their size, SMEs play a crucial role in the supply chain, particularly in contributing to Scope 3 emissions and the overall sustainability efforts of larger corporations. Think of the supply chain as a complex machine: big companies are the large cogs that turn slowly, while SMEs are the small cogs that turn quickly, driving speed and efficiency. Without these small cogs, operations would be slow and cumbersome. Fact is, the proactive engagement of SMEs in sustainable and transparent practices is fast becoming not only beneficial but essential for the success of their larger downstream partners.

 

The often fragmented nature of global supply chains introduces numerous challenges in effectively engaging the multitude of players involved. Traditional methods, such as Corporate Social Responsibility (CSR) checklists, have often proven ineffective in making real changes on the ground. These checklists typically include a variety of items intended to ensure that a company providing products and services in a supply chain adheres to ethical standards, and respects social and environmental responsibilities.

 

These are the typical Items on a CSR Checklist:

 

1. Environmental Responsibility:
   • Compliance with environmental regulations
   • Reduction of carbon footprint
   • Sustainable resource usage
   • Waste management and recycling programs
2. Labour Practices:
   • Fair wages and benefits
   • Safe working conditions
   • Prohibition of child labour
   • Equal opportunity and non-discrimination policies
3. Ethical Business Practices:
   • Anti-corruption and bribery policies
   • Transparent financial reporting
   • Ethical sourcing of materials
4. Community Engagement:
   • Charitable donations and community support
   • Employee volunteer programs
   • Support for local businesses and economies
5. Corporate Governance:
   • Board diversity and independence
   • Shareholder rights and engagement
   • Ethical decision-making processes
6. Product Responsibility:
   • Ensuring product safety and quality
   • Responsible marketing practices
   • Customer data privacy and protection

 

And whilst these items are all clearly important, in fact more so than ever before, we can see how ineffective they are at being complied with.

 

Here are some explanations:

 

1. Lack of Genuine Commitment:
   • Companies may treat CSR as a checkbox exercise rather than a core part of their business strategy. This superficial commitment often leads to minimal actual impact.
2. Poor Implementation and Monitoring:
   • Even with comprehensive checklists, ineffective implementation and inadequate monitoring can lead to non-compliance and overlooked issues.
3. Inconsistent Standards and Benchmarks:
   • Varying standards across industries and regions can result in inconsistency in CSR practices, making it difficult to measure and compare performance effectively.
4. Greenwashing:
   • Companies might engage in greenwashing, presenting an environmentally responsible image without making significant environmental efforts. This undermines the credibility of their CSR initiatives.
5. Insufficient Stakeholder Engagement:
   • Failure to engage with all relevant stakeholders (employees, communities, customers, etc.) can result in initiatives that do not address the actual needs and concerns of those impacted.
6. Economic Pressures:
   • During economic downturns, companies might prioritise cost-cutting over CSR commitments, leading to reduced investments in social and environmental programs.
7. Lack of Integration into Business Strategy:
   • CSR initiatives that are not integrated into the core business strategy are often less effective. They need to be embedded into the company’s operations, culture, and long-term planning.
8. Inadequate Reporting and Transparency:
   • Poor reporting practices and lack of transparency can make it difficult for stakeholders to hold companies accountable for their CSR commitments.
9. Complex Supply Chains:
   • Managing and ensuring compliance with CSR standards across complex, global supply chains can be challenging, leading to gaps and inefficiencies.
10. Limited Scope and Vision:
    • CSR initiatives that focus on short-term gains rather than long-term sustainability often fail to create lasting positive impact.

 

According to Geodis, 6% of companies have full visibility of their supply chain. Rationale: It can be very difficult to see beyond tier 1 suppliers where engagement and collaboration may be conducted via a third party and where no direct contract exists.

According to Zippia 43% of smaller companies do not track their inventory at all once it leaves their premises. Rationale: The further upstream we go into supply chain, the smaller the companies become. Many of those SMEs do not have the resources or standards in place; they are simply trying to pay the bills, and many of them are asking, “what’s in it for me?”     

According to an Eco Vadis study, CSR contract clauses have become little more than box ticking, paper-pushing exercises. Rationale: This process diminishes into a formality of irrelevant standard clauses being pushed en masse to all suppliers.

 

The fact is we simply cannot separate relationship management from the drive for sustainability in supply chain. The two are profoundly connected. 

 

This is where technology becomes a critical enabler. Suppeco is dedicated to revolutionising supplier relationship driven compliance deeper into the value chain, by offering seamless access to its core technology and an array of orchestrated partnerships across the entire ecosystem. Our platform provides actionable visibility, enhances collaboration, and eliminates barriers to ensure continuous involvement, improvement, and compliance throughout the supply chain. With years of experience observing the shortcomings of conventional methods, our innovative platform is crafted to overcome these challenges, turning sustainable and transparent engagement into a practical reality for all supply chain participants.

 

What does this mean at a practical level?

 

Creating a Desire:

Creating a desire among SMEs to see beyond their role as simple cogs in the supply chain, whilst also addressing their commonly held perception of being immaterial in the grand scheme (a myth that we can debunk), involves showcasing the longer term benefits that align with their values, or more immediate and addressable benefits. This can be done by:

 

Highlighting Visibility and Recognition: Many SMEs might find value in being recognised as a responsible supplier on a larger ecosphere. This aligns to the responsible supplier narrative which is impacting deeper into supply chain. Suppeco’s ability to enhance visibility across the supply chain can be leveraged to highlight the contributions of SMEs towards sustainability efforts, thus providing them with more recognition and potentially more business opportunities​​​​.

 

Shared Values and Trust: Building a program that emphasises shared values, trust, and mutual growth can create a strong motivation for SMEs to align with sustainability goals. This approach goes beyond contracts and focuses on building relationships that are reciprocal and based on shared sustainability goals​​​​.

 

Creating a Need:

In parallel, creating a need involves making participation in sustainability efforts a requirement for doing business. This can be achieved by:

 

Setting Clear Standards: Establish clear, achievable sustainability standards that SMEs must meet or demonstrate progress towards achieving, to continue their business relationship. This provides a structured framework within which SMEs can reasonably operate, ensuring their efforts align relatively along side the larger goals of their downstream partners.

 

Compliance Mechanisms: Implement robust compliance mechanisms to monitor and ensure adherence to sustainability standards or to demonstrate progress made towards achieving them. Ensuring SMEs are not only aware of the standards but are also held accountable for meeting them helps maintain the integrity of the supply chain and ensures that all players are contributing to the collective sustainability goals.

 

Incentives and Penalties: Introduce a system of incentives for making progress towards, or meeting or exceeding sustainability goals, and penalties for non-compliance. This encourages SMEs to actively engage in sustainability practices by providing tangible benefits for compliance and clear consequences for falling short.

 

Continuous Improvement: Use ongoing assessments and feedback to drive continuous improvement in sustainability practices. Continuous improvement fosters a culture of excellence and adaptation, which is crucial for long-term success.

 

Implementing a Strategy:

To be successful, it’s necessary to create A combined approach that could effectively engage SMEs by both creating a desire, and establishing a need. In Suppeco, downstream participants can structure any relationship space with the capability to manage, measure, and promote sustainability efforts​​. This structured approach ensures that SMEs not only see the benefits and feel the necessity but also have the tools and support to make the transition smoothly.

 

This strategy acknowledges the crucial role SMEs play in the supply chain and uses both intrinsic motivations and extrinsic pressures to encourage sustainable practices. By using Suppeco’s capabilities to enhance these relationships and provide actionable insights, we can support SMEs in becoming proactive partners in sustainability.

 

SMEs can take several impactful steps that are both feasible for them and valuable to their larger downstream customers. Here are some practical steps, and strategies, that an SME could implement using Suppeco’s platform to enhance their recognition and value in the supply chain:

 

Improve Data Transparency and Traceability:

Action: Implement systems to enhance transparency of their production and supply processes. This involves adopting digital tools and practices that track and record every step of the production process, from raw material sourcing to final product delivery. SMEs should ensure that this data is accessible and shareable with their downstream partners.

Relevance: This allows larger customers to monitor compliance with sustainability standards and regulatory requirements, thereby reducing risk. Transparent data provides a clear picture of the entire supply chain, helping identify potential issues before they become significant problems and ensuring that all parts of the chain are operating sustainably and ethically.

Suppeco supported: Utilise Suppeco’s capability to offer actionable visibility deep into the supply chain. This supports live assessments and continuous improvements by providing real-time data on production processes, quality control measures, and sustainability metrics. Suppeco’s platform can aggregate this data, making it easy for SMEs to share it with their larger partners and demonstrate their steps taken to reach and maintain compliance and their commitment to sustainability​​.

 

Enhance Quality and Reliability:

Action: Focus on achieving consistent quality control and reliable delivery schedules. SMEs should implement suitable quality management systems and adopt best practices to ensure that their products consistently meet required standards. This may include regular audits, employee training, and process optimisations. 

Relevance: Reliable quality and delivery reduces the risk of disruption in the larger companies’ operations and enhances the SME’s reputation as a dependable partner. Consistency in quality and timeliness helps build trust and long-term relationships with downstream partners.

Suppeco supported: Deploy Suppeco’s performance management features to monitor and improve on-time deliveries and product quality metrics. The platform can track performance data, identify areas for improvement, and provide actionable insights to help SMEs enhance their processes​​.

 

Adopt Sustainable Practices:

Action: Integrate greener practices in their operations, such as using renewable energy sources, reducing waste, and optimising resource usage. SMEs should evaluate their current practices and identify areas where they can reduce their environmental footprint, such as switching to more sustainable materials or improving energy efficiency.

Relevance: Helps larger customers achieve their corporate social responsibility (CSR) goals and reduce their overall environmental impact, aligning with global sustainability trends. Sustainable practices not only contribute to environmental protection but can also lead to cost savings and improved efficiency for SMEs.

Suppeco supported: Leverage Suppeco to document and report on sustainable practices, making it easier for larger customers to include SME contributions in their sustainability reports. The platform can help track sustainability metrics, set improvement targets, and showcase achievements​​.

 

Collaborative Innovation:

Action: Engage in collaborative R&D projects with larger customers to co-develop solutions or products that are innovative and meet evolving market needs. SMEs should actively seek opportunities to partner with their larger customers on research and development initiatives, sharing their expertise and resources to create innovative solutions.

Relevance: This positions the SME as a strategic partner contributing to innovation, rather than just a supplier. Collaborative innovation helps SMEs stay competitive and relevant, while also providing larger partners with new ideas and solutions that can drive business growth.

Suppeco supported: Use Suppeco’s collaboration tools to manage joint projects, ensuring alignment and facilitating innovation through shared platforms. The platform can support project management, communication, and documentation, making it easier for SMEs and their partners to work together effectively​​.

 

Enhance CSR Initiatives:

Action: Develop and implement programs that contribute positively to social issues in their communities, like supporting local employment or sustainable sourcing. SMEs should identify social and environmental issues that are relevant to their operations and develop initiatives to address them.

Relevance: Enhances the corporate image of their larger customers by association and meets increasing consumer and regulatory demands for ethical business practices. Strong CSR initiatives help build a positive reputation for SMEs and can lead to new business opportunities.

Suppeco supported: Utilise Suppeco’s CSR performance tracking to provide documented evidence of CSR activities, which can be integrated into the larger customers’ CSR reporting. The platform can help SMEs set CSR goals, track progress, and share their achievements with stakeholders​​.

 

By focusing on these areas, SMEs can significantly enhance their value proposition to larger downstream customers. Suppeco’s platform can play a pivotal role in facilitating these actions, ensuring that the efforts are measurable, visible, and aligned with the strategic objectives of their larger partners. This approach not only strengthens the SME’s position in the supply chain but also contributes to a more resilient and sustainable business environment. 

 

If you’d like to discuss any of the points raised in this article, just reach out. We are always happy to chat. 

Further reading on this most important of topics:

SMEs the Secret Sauce to Sustainability

It’s Time— Actionable Visibility for Resilient, Sustainable Supply Chains

Mercy Productions and The Case for Corporate Sustainability

The Pervasive Belief in Contractual Imposition

Procuretech Podcast – Suppeco ‘s real time ESG compliance with universal visibility in supply chain   

 

Have a great day.