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After the best relationship with suppliers

Global value chains allow your product or service to reach the consumer or end user. Different companies and people in national, regional or global markets are part of this process; the strong arrangements that have arisen from the pandemic, the container crisis, climate change and the war between Russia and Ukraine define a new meaning for the type of relationship that must be established between all these parties, so closely dependent on each other .

From the Business Alliance for Development (AED) we know about Costa Rican companies that do not have a formal record of their supplier companies or companies that receive more complaints about the performance of actors in their value chain than their workers. Not only is this bad business practice, it’s like shooting yourself in the foot at a time when around the world we should be thinking about sustainable development. Sustainability in companies means that environmental, social and governance considerations are incorporated into the companies’ business strategy, seeking to generate not only economic value, but also social and environmental value, through responsible business behaviour.

The aforementioned and other crises affect the path of many companies and this is an important moment to make stronger progress towards sustainability. These moments must be addressed not only with cost reduction activities: risk analysis, regulatory compliance, sustainability objectives and resilience in supply chains must be analysed.

Companies must manage all parts of this value chain to maximize benefits and minimize risks. Value chain mapping involves knowing the input-output structure that refers to the origin and destination of transactions, the geographic coverage that shows how extensive the chain is in territorial terms, the governance of the chain as well with the policies and rules accordingly. with which the actors in the chain work.

Manage risks to minimize negative impacts, enhance positive risks and protect the company’s reputation.

Benefit from efficiencies, which allow to reduce costs and increase productivity.

Developing sustainable products and services to meet the demands of the most conscientious consumers.

How is it managed?

Through good segmentation it is possible to focus on the critical aspects of the chain, it is about achieving a balance between the recognition that there will always be risks and the need to prioritize those that represent a greater risk to the business and the society.

Step by step sustainable management of value chains means:

Definition of supply categories in your chain

Not limited to direct suppliers, raw materials used by those suppliers must be considered

Identification of key suppliers in each link of their value chain

Look for information on labor practices, human rights, environmental impacts and corruption

Determining vulnerability based on these materials

It can be very useful to talk to other companies in the same industry, suppliers, civil society and other actors.

“The supplier codes allow to establish basic criteria for the purchasing processes and the basic alignment of sustainability in organizations.”

In addition, it is highly recommended to include sustainability criteria in the purchasing and contracting processes, depending on the level of impact. Actions to be taken can range from creating code, to providing support, developing audits and implementing incentives.

The supplier codes allow the establishment of basic criteria for purchasing processes and the basic alignment of sustainability in the organizations that are part of our value chain.

Another good practice is the incentives that reduce the number of audits and therefore lower costs, establish priority supplier and distributor programs, increase the volume of purchases, deliver recognition, enable the participation of suppliers and distributors in planning sessions sustainability, cost sharing for sustainability improvements. and provide ongoing technical assistance.

At AED we are currently working with our associated companies on these issues. It is not an easy task, but the crises we face now and the uncertainty to come must be faced with courage and responses focused on sustainable business strategies that allow better reactivity, resilience and regeneration.

The author is executive director of the Business Alliance for Development.

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