Commentators see consumers driving sustainability in procurement. From December 2016, new ownership put Ausgrid on a path to collaborate with suppliers to tackle ethical sourcing and produce green energy. Both could ultimately lead to competitive advantage.

It was one of the largest privatisations in Australia’s history. In 2016, the AU$16 billion sale of 50.4% of the New South Wales government’s share to IFM Investors and AustralianSuper shook up Australia’s energy and electricity distribution markets.

But the change in ownership also affected relationships with Ausgrid’s suppliers, providing the opportunity to improve supply-chain ethics and sustainability, says Coretta Bessi, head of procurement at Ausgrid.

“Ausgrid’s owners have social, environmental and governance policies determining their investment priorities. For procurement, it was an opportunity to align with this approach,” she says.
“One of the first things we did following the change in ownership was to develop a sustainable procurement policy that reflected Ausgrid’s vision of becoming a leading energy solutions provider, recognised locally and globally.”


Introducing the language of partnership

The new approach to the supplier relationship has involved a change in language used when we engage with them and we now refer to them as strategic partners.
Ausgrid’s work to strengthen these relationships began with a Strategic Partnership Summit, held in June 2018, attended by its top 50 partners.
CEO Richard Gross and EGM Transformation Hannah McCaughey outlined Ausgrid’s most important initiatives and described how its partners could support the transformation of the partnership process. The event also involved innovation workshops to explore how external parties could bring new ideas to Ausgrid.
Bessi opened the summit with a firm statement. “I began by saying, ‘We are resetting the relationship. You are our strategic partners and you influence our future.’ I spoke about how Ausgrid wants to tap into creativity and work together on innovative solutions and sustainable outcomes,” she says.
The procurement team had already been working with State of Flux to prepare the ‘Voice of External Partners’ survey. The questionnaire provided a medium for honest and anonymous feedback about Ausgrid and how they could develop more as a customer of choice.
Following the summit, Ausgrid began to introduce a ‘partner management framework’, its equivalent to SRM, for its most strategic vendors. Executives will be responsible for supplier governance and will meet with suppliers every six months. Meanwhile, relationship managers will meet with suppliers every three months to strengthen and build on the partnership approach. Contract managers continue to maintain ongoing contact with suppliers and be part of communication up and down the internal SRM chain, Bessi says.
“We worked hard to establish this new approach and communicate it to our people to ensure we are able to provide more positive outcomes for businesses wanting to engage with Ausgrid,” she says.

Tackling the risk of modern-day slavery in supply chains

One of the first issues to tackle with suppliers was sustainability. Working with State of Flux, Ausgrid created a sustainability questionnaire for its strategic suppliers, looking into issues such as modern-day slavery in the supply chain and environmental impacts. It asked about second-tier providers and which countries vendors source from.
Ausgrid is working through the results to understand the landscape more fully and identify its greatest supply chain sustainability risks. This is being done as the Commonwealth government prepares to introduce new Modern Slavery legislation.
Bessi says work has already begun to identify categories which may contain the risk of illegal or unethical workforce practice. These include uniforms, electrical components, and cast metals.
Ausgrid is working across the industry to embed consistent sustainability standards and data collection methods, reducing administrative resources for businesses and providing standardised compliance requirements for suppliers.


New models for producing and consuming electricity

At the same time, Ausgrid has been working in collaboration with partners to improve sustainability in other areas. Looking to save on the energy costs and to make its facilities more sustainable the procurement team engaged a provider of PVA solar panels. “We soon realised that if we can learn from the installation, we can help our customers.”

Since the change of ownership, Ausgrid has demonstrated its commitment to improving procurement practices by leveraging a mutually beneficial SRM initiative in an aggressive timeframe. In doing so, it is not only aligning to its investors’ and customers’ values but also ensuring Ausgrid is set for sustainable commercial success.

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