Can you outline why your team embarked on this project and the problem that needed to be solved?
Aligning with Microsoft’s overall mission to “Empower every person and organization on the planet to achieve more,” and the company’s long-term commitment to carbon neutrality, (since 2012), Microsoft’s Responsible Sourcing team recognized a gap in its own, and hence Purchasers as a whole, ability to accurately measure the CO2 footprint of a global supply chain.
Historically there have been numerous internal and external approaches for assessing the CO2 emissions of a business. This disjointed landscape left the purchasing/supply chain industry without guidance on which standard platform by which Purchasers could converge on with their suppliers to ensure action to combat climate change lurch with an approach that was efficient and credible. Microsoft procurement’s progress follows the investment community’s shift toward a long-term perspective. Just as the investment community looks to shift the focus from short-term performance, procurement professionals are moving from immediate cost management to overall value creation and protection.
Using Investor-led Screening and Selection Tools
Asset managers and procurement professionals often begin thinking about the climate performance of their portfolio companies by screening for performance and climate risk. This approach can be broadly applied across a variety of sectors and companies. Each manager can choose to screen out specific issues or concerns or to set a standard of performance.
Microsoft’s approach to managing their indirect supply chain borrows directly from tools designed with investment strategies in mind. Their approach bypasses supply chain-specific evaluations and looks at the same scores and ratings used by asset managers. Rather than requiring an additional survey response or audit, Microsoft asks indirect suppliers to provide their score and environmental data disclosure through the global non-profit organization, CDP. Well-versed in survey fatigue themselves, CDP’s global disclosure systems help mitigate survey fatigue amongst corporate sustainability teams already flooded by requests from investors and customers by standardizing and streamlining the reporting process.
In building their approach to the supplier evaluation process, Microsoft also led the development of a qualification process for enterprise-level ratings with the members of the Sustainable Purchasing Leadership Council. The resulting research and qualification tool is free and available to the public, so that others can enhance their approach to sustainable supply chains.
How were things done originally and what was the inspiration to innovate the process?
Based on its commitment to carbon neutrality, Microsoft has long held a preference for working with suppliers who prioritize sustainable business practices. However accurately evaluating this landscape was difficult with a wide variety of emissions tracking tools, a lack of capacity for suppliers who wanted to improve their CO2 footprint but didn’t have the resources to make changes, and a lack of clear emissions expectations and incentives for suppliers to qualify to do business with Microsoft.
Shared tools accelerate our ability to understand, and ultimately take action, on our suppliers’ performance. This has been a paradigm shift and has allowed us to scale our supplier engagement to address the majority of our spend and enable us to share our performance in a taxonomy that resonates with our key stakeholders.
What KPIs did you use to measure success for this project? (For example: performance, customer satisfaction, revenue, sales or relevant financial gains?)
Outcomes of the project were mapped against the initial project goals to include:
- Creation of a Standard: The SPLC vetting process enabled the recognition of CDP as the standard in environmental reporting.
- Engagement of Suppliers: In 2018, the majority of Microsoft’s indirect spend was with suppliers who disclose their emissions and set targets through CDP’s global disclosure platform.
- Tangible CO2 Reductions: In 2018, Microsoft’s indirect Suppliers reduced their collective footprint by 18.1 million metric tons of CO2.
- Recognition of Suppliers: The annual Microsoft Supplier Program (MSP) Excellence Awards recognize and inspire the entire supply chain by recognizing the leader. Recent award winners include Tech Mahindra, Akamai and Infosys.
How you plan to ensure that the new model remains relevant and adapts to the future needs of the market?
Beyond simply setting high standards for Suppliers, Microsoft’s Responsible Sourcing team continues to closely work with the SPLC and CDP -- providing an ongoing commitment of significant time and resources to help those suppliers meet new and stringent environmental scoring requirements. Given a diverse set of Suppliers, in terms of product/service, size, and climate change knowledge base, the Microsoft Responsible Sourcing team partnered with CDP to provide Suppliers with a series of webinars to train companies on how to improve their understanding of CDP’s disclosure process and the environmental questionnaires.
Suppliers were invited to participate in webinars across a variety of time zones, languages and topics (from greenhouse gas accounting to target-setting to risk mitigation) to meet their educational needs and help them build the internal business case for implementing comprehensive sustainability programs across their global business. In addition to CDP led webinars we completed training for our suppliers on our own carbon neutral model.
Further, by incorporating CDP disclosure and scores into our systems, we can be sure that our systems incent the evolution of best practices and baseline expectations of emission reductions management. Our approach and model imbed these evolving practices into our supplier engagement practices.
What advice do you have for those who may want to implement this innovative approach in their own organizations?
Review, and adopt, the resource that was developed by the Sustainable Purchasing Leadership Council that is free and available to the public, so that you can converge on the best rating tools available and apply your spend to be part of two (investor/purchasing) market signals to have a positive impact. Further, you will enjoy the benefits of reduced survey fatigue and stakeholder alignment.
How much time did this specific innovation take to implement into your organization?
Developing and executing on the resource that was developed by the Sustainable Purchasing Leadership Council that is free and available to the public took one year to complete, but now that that is done and we have closely collaborated with CDP, the time needed to begin launching a program in minimal. To get started you simply need to identify suppliers you would like to engage on this topic and invite them to be rated by the CDP. Additional resources will be required based on how deep you embed this into your procurement frameworks as well as engage your suppliers to improve their performance.