Navigating a greener sourcing approach:
How to integrate sustainable suppliers into your business travel strategy
Mounting Pressure to ‘Go Green’
In March 2023, the IPCC[i] released its sixth assessment report on climate change. The urgency to act is more pressing than ever, as is the pressure on governments, investors and global companies. Notably, the European Climate Law[ii] has mandated carbon neutrality for EU members by 2050 since 2021, paving the way for the concrete CSRD[iii] to be enforced in January 2024.
As a result, large companies will soon be required to disclose their sustainability impact and performance in accordance with EU reporting standards. This includes reporting not only on direct and indirect greenhouse gas (GHG) emissions (scope 1 and 2), but also on scope 3 emissions, covering their entire value chain and indirect supply, which includes business travel. Therefore, travel buyers are now accountable for their suppliers’ sustainability performance.
Challenges for Travel Buyers
Tackling this new challenge requires a greener sourcing approach, which includes using sustainability criteria to evaluate and select suppliers alongside cost considerations.
Several of our clients have already embarked on this journey and we’ve outlined some of the challenges they have faced, and how AREKA has helped them move forward. Common challenges include:
- Lack of actionable criteria: Many CSR assessments with sustainability criteria exist, but none comprehensively, consistently, and precisely cover all potential travel suppliers, making them unsuitable for the travel industry. While sustainability questions have made their way into RFPs, responses often go unused due to the absence of proper tools, methodologies, and criteria.Furthermore, travel buyers are facing a considerable challenge in assessing suppliers and making informed decisions based on quantitative performance metrics. Each supplier type has distinct evaluation criteria, adding complexity to the assessment process. For instance, airlines may be assessed based on SAF usage, while hotels may be evaluated for water consumption, among other factors.
- Tough trade-offs: The pursuit of sustainability and cost-saving objectives can sometimes yield conflicting results, presenting a challenging dilemma. Seeking the right balance becomes a crucial aspect when deciding between sustainability and savings for underperforming suppliers.
- Varied supplier engagement: Some suppliers may lack motivation, resources, or maturity to support a green sourcing approach efficiently. Global suppliers often lead the way in adopting greener practices, benefiting from their maturity and dedicated sustainability teams. For example, a key airline member of IATA has committed to a minimum 50% reduction in net aviation emissions by 2050, investing $1 billion over 10 years in sustainable research and development. However, smaller local suppliers might struggle to conform to emerging standards given the financial investments and the years needed to transition to greener practices.
- Uneven leverage to stir change: We observe and expect global companies to be at the forefront of this transformation to greener sourcing practices, whereas smaller companies might encounter difficulties in compelling their suppliers due to limited negotiating leverage. Indeed, green sourcing requires an even greater capacity to effectively influence supplier behavior, leveraging spend volumes and offering substantial rewards to performing suppliers.
4 Steps to Craft Your Green Strategy
The right time to launch your first green sourcing initiative is now, though some corporations have already begun. Many global suppliers are already prepared for sustainability assessments, even without industry-standard criteria. To get started:
- Initiate the change and get your strategy endorsed: Start by aligning your green sourcing strategy with your company’s core values, mission, and CSR goals, working closely with your sustainability team and top management.Gain official endorsement, ensuring a balanced approach to sustainability, service level and cost-saving. Validate the promises and trade-offs you can make, and use the insights gained to make informed decisions about rewards or exclusions and to communicate clearly with suppliers.
- Build actionable criteria: To quantify and compare suppliers’ sustainability performance, you will need to build your sustainability assessment methodology and criteria.First, define your key categories, such as environment, social responsibility, traveler experience, among other priorities. Then, formulate a few relevant questions using predefined response choices. For instance, ask about fleet age with options like “<8 years,” “8 to 10 years,” and so on. Instead of open questions, request additional context and details in free-text responses for sharing examples and references.To support this transformation, AREKA can assist in building the criteria that makes sense for you!
- Ensure promises are delivered: Incorporate green criteria into your supplier contracts to ensure long-term monitoring of sustainability commitments. This approach creates a shared challenge and stimulates discussions during your quarterly business reviews.Define clear governance, processes, and tools for monitoring the supplier’s performance and fulfilling your sustainability commitments over the next 2-3 years. For example, request regular updates from suppliers, preferably through a bi-yearly online survey for easier distribution, better standardization, and automation.Do not hesitate to refine your methodology based on supplier feedback, both during and after the sourcing process. A criterion met by all suppliers may lose its significance, and an unclear criterion is not effective.
- The journey is as important as the destination: Understand this is a long-term transformation for you and your suppliers. Be practical and patient and focus on providing feedback and rewarding progress as well as performance. Communication with all parties involved will be key for a successful implementation, and it all begins now.
Areka Can Help
At Areka, our global team of experts, have a unique set of expertise in travel agencies operations, tools and technology, payment system and contractual topics, combined with high skills in program management, change and communication. We are here to help. Contact the team today.
