This October, the Future of Sourcing Awards will celebrate organizations and individuals that have shown innovation, leadership and transformation in categories that are critical to the sourcing industry. Interviews with the finalists provide helpful insight about their projects, the problem they sought to solve and the impact to their organizations.
Can you outline why your team embarked on this project and the problem that needed to be solved?
At Salesforce, Sustainability is a core company value and we strive to be at the forefront of advancing sustainable business practices and bold climate action. The world is facing a climate emergency that requires an immediate, unprecedented response from all sectors at scale. That’s why in April 2021 we started introducing specific, binding sustainability requirements into our supplier contracts with a first-of-its-kind Sustainability Exhibit. With the Exhibit, we aim to demonstrate the power of customer voice, redefine the role of sustainability in supplier relationships, and create a cascade of impact through our supply chain. Additionally, with more than 85% of our greenhouse gas emissions coming from our supply chain, our suppliers’ progress is critical to meeting our own climate goals. The Exhibit is a tool we can use to mobilize our suppliers to dramatically reduce and compensate for their own emissions.
How were things done originally and what was the inspiration to innovate the process?
Sustainability has always been important to our supplier relationships, but before the Exhibit was introduced, we were including sustainability in contracts on a limited, ad hoc basis. We were using broad statements in our supplier code of conduct to indicate our expectations and relying on the power of influence to drive action. We recognized that to truly accelerate global action we needed to innovate, moving beyond simply influencing suppliers to requiring climate action as a contractual obligation.
What KPIs did you use to measure success for this project? (For example: performance, customer satisfaction, revenue, sales or relevant financial gains?)
Our primary measure of success is percent of spend with suppliers that have signed an agreement with the Sustainability Exhibit. This KPI is highly visible throughout Salesforce, as this fiscal year a portion of variable pay for executive vice presidents and above will be tied to four ESG metrics, one of which is increased spending with suppliers who have signed the Exhibit. We’re also measuring progress against our commitment that by 2024 60% of our supply chain emissions are attributable to suppliers that have set science-based targets (SBTs) to reduce greenhouse gas emissions. The Exhibit requires suppliers to commit to and make progress towards these SBTs. As of our most recent annual report, 40% of our supply chain emissions come from suppliers that have set or committed to setting a SBT.
How do you plan to ensure that the new model remains relevant and adapts to the future needs of the market?
We crafted the Exhibit to be adaptable by minimizing overly prescriptive terms, and we’ve designed our engagement strategies to be able to accommodate shifts in our business or the market. We will iterate on the terms and implementation strategies as needed based on feedback from suppliers, internal stakeholders, and subject matter experts. Ultimately, our vision is that contractual sustainability requirements become the norm. That’s why we’ve made the Exhibit publicly available and share our approach as a blueprint for others. This new model is well-timed as the business world is already experiencing a sustainability transformation, especially under the pressure of climate change.
What advice do you have for those who may want to implement this innovative approach in their own organizations?
We have a few learnings that we can share with other companies looking to introduce sustainability and climate action into supplier contracts.
First, create flexibility by providing the North Star rather than the route. Sustainability is a journey, and it will look different for every company depending on their industry, size, geography, etc. Drafting terms that set clear, ambitious expectations for where you want suppliers to go, while allowing for flexibility in how and when they get there, makes it easier to maintain the intent and rigor of those terms through negotiations with a wide array of businesses. One example of this is requiring suppliers to set SBTs, which provides a global framework for the level of decarbonization a business must achieve to meet planetary needs. Acknowledging a supplier’s sustainability maturity and existing strategies also helps foster collaboration.
Second, empower your sourcing team. Your sourcing team doesn’t need to be sustainability experts to implement sustainability terms in contracts, but they’ll be much more successful if they are comfortable with the concepts and have tools that support negotiation. At Salesforce, we provide our sourcing team with an Exhibit playbook and training, as well as direct support for priority negotiations. Perhaps most importantly, our sourcing leadership is fully bought in, which enables the team to prioritize the Exhibit even in complex or escalated situations. We also make sure our sourcing team knows that they’re playing a critical role in Salesforce achieving its corporate goals, and we’ve heard that engaging with suppliers on sustainability adds to the sense of purpose of their day-to-day work.
Third, align the consequences of non-compliance with intended outcomes. A particularly innovative feature of our Sustainability Exhibit is the “climate positive remedy”, which requires suppliers to fund carbon offset projects, renewable energy, or tree planting if they don’t follow through on the sustainability obligations. In that way, even if a supplier falls short of expectations, the Exhibit can drive a more sustainable outcome than business as usual. This is often a key conversation point with suppliers that can help create and maintain a collaborative negotiation, because it reinforces our message that the Exhibit really is intended to support the shared goal of benefiting the planet.
For additional information about our approach and lessons learned, companies can check out the articles we’ve published on developing sustainability terms from scratch, integrating sustainability into contracts, and the role of third-party assurance providers.
How much time did this specific innovation take to implement into your organization?
It took us about 9 months from conceptualizing the Exhibit to roll it out to suppliers. During this time, we were developing the language to optimize outcomes, getting buy-in from key partners (such as Legal, Procurement, Finance, Sustainability, Government Affairs, and Philanthropy), consulting with internal and external subject matter experts, strategizing messaging to suppliers, and training our sourcing and legal teams. Top-down alignment on our sustainability priorities helped ensure this work ran smoothly and collaboratively. Implementation is an ongoing process as we continue to add the Sustainability Exhibit to templates for additional agreement types, introduce it to new suppliers, add it to existing contracts through amendments, and train the team on process improvements.
