How Contract Management Helps Your Business Go Green
As technology has been the major driver in the 2010s, the new decade heralds a new focus for business leaders: sustainability. What has previously been seen as a trend or an optional company mission, has now become a business imperative. For example, United Airlines introduced eco-friendly flights last year. And Samsung has recently suspended one of their key suppliers in China when discovered that they used child labor. When even the giants follow the sustainability path, it does ring a bell. But why has it become so important?
The sustainability approach makes perfect sense with the current ecological and social situation. The socio-environmental crisis reaches the planetary level and includes global climate change, air pollution, poverty, labor exploitation, and serious social inequalities. All these are the result of the globalized economy and consumerist strategies most businesses follow. And with the recent pandemics, we see the consequences of these strategies clearer than ever.
The socio-environmental crisis reaches the planetary level and includes global climate change, air pollution, poverty, labor exploitation, and serious social inequalities.
Meanwhile, sustainability is becoming an increasingly supported regulatory norm on the government level. Many businesses now need to change core processes to comply with the norms of the new tomorrow and the sustainable development goals (SDGs) that every large company is expected to contribute to.
But how do you make your business more sustainable?
Contrary to some beliefs, sustainability isn’t just about fair trade or recycling. The sustainable business strategy makes companies take bigger responsibility for supply chain operations, alter talent management, and even transform the physical workspace itself. In fact, all business processes are subject to reshaping. The impact on some departments, such as legal, may not be obvious and are harder to measure, but it is extremely important.
In our article, we’ve gathered the main ways legal departments can adjust to the changing landscape and contribute to making this world a better place, and how proper utilization of contract management can help them reach the company’s sustainability goals.
Zero paper waste
Let’s be straight here: thousands of printed, redlined, and re-printed contracts are not healthy for the environment. Not only do they increase paper consumption, but it’s getting harder to properly dispose of all this paper and make it available for further reuse. Think of all the contracts and other paper misuses. Seemingly small at a glance, it sums up to piles of paper waste at the end of the day, which can easily be avoided by implementing a contract management solution.
This single shift from paper documents to online paperwork meets three SDGs: SDG 13 (Climate Action), SDG 15 (Life on Earth), and SDG 12 (Responsible consumption and production). The best part here is that shifting to sustainability compliant practices is much easier than it seems. If your company chooses to take this step, it’s just a one-time onboarding effort and an ongoing sustainable workflow from that point forward.
This single shift from paper documents to online paperwork meets three SDGs: SDG 13 (Climate Action), SDG 15 (Life on Earth), and SDG 12 (Responsible consumption and production).
Speaking of contract lifecycle management, you don’t even have to do it manually because there is already a wide selection of the contract management software to choose from. A variety of easy-to-use tools help you automate workflows of any complexity. For instance, AXDRAFT also goes a step further and automates everything for you.
See your risks and budget at a glance
Growth and risk management are crucial for every business, and lacking these equals instant failure. For many businesses, sustainable policies are terra incognita, making switching to them a costly venture with little precision and a lot of room left for mistakes.
General counsels and legal operations teams nowadays have to both manage legal spend AND keep track of contract performance, while safeguarding the company’s funds. Especially in recent times, businesses cannot afford to take extra risks, hence they should maximize on contract performance.
When all contracts are kept within reach, and their data is visualized and transparent at all times, it allows legal teams to mitigate any risks and allocate available resources to meet sustainability goals.
Crystal clear contract adherence
Ok, so you’ve imposed sustainability policies on the company level. How do you actually make them work?
First of all, make sure that such policies are adhered to religiously. When the contracts are disorganized, and you can’t see all the data clearly, making sure that counterparties follow the policies is more complicated. Overall, businesses should introduce and enforce documentation that supports sustainability attributes' claims and incorporate them according to agreements into their contracts when adopting sustainability practices. Luckily, this doesn’t have to be done manually: there are numerous contract management software solutions that significantly reduce the manual labor.
Contract management solutions help structure all this data and bring the value and key clauses to the forefront. Hence you can easily make sure your obligations comply with all the guidelines, and document timeframes are valid. Contract management solutions also establish distinct KPIs on sustainability measures, which make it easier to report on. And moreover, implementing contract lifecycle management (CLM) solutions helps educate external teams on compliance and promote sustainability competency.
Sustainable procurement is an approach that aims to avoid over-consumption, reduce the waste of natural resources, and ensure an ecological balance. For any business, sustainability procurement opens up the potential to cut spending, eliminate waste, and build a better brand reputation. It places ecological aspects on equal footing with the social and economic ones, linking all three in the criteria according to which public contracts are awarded.
One example of how businesses can reduce their eco-footprint is engaging with supply chain leaders directly, which consequently reduces the number of steps and delegation levels. Achieving supply chain sustainability certainly results in monitoring contractual performance in a more efficient way - not to mention the overall positive environmental impact and reaching good environmental and social responsibility records.
Businesses can reduce their eco-footprint by engaging with supply chain leaders directly, which reduces the number of steps and delegation levels.
As of now, the pressure to adopt sustainable approaches is high and is required on the governmental level worldwide. To achieve sustainability procurement, businesses need to balance the need to embed corporate social responsibility principles while also meeting company requirements. With contract management, companies can assess and document the environmental impact and report on sustainable procurement.
Boosting your company’s reputation
Undeniably, any company’s reputation is a strategic asset in the sales cycle. When a company is expected to act on sustainability policies, and especially after it declares the intention to do so, it becomes a PR concern as much as it is an economic one. Following the world’s requirements helps legal companies reduce the exposure to potential risks associated with the clients or investees. This is extremely important because any reputational implications are immediately translated into financial losses - the least desirable outcome for any business.
That’s why it is vital for companies to be clear with onboarding and spreading internal guidelines to build a culture of sustainability within the company and broadcast it to the client base. This might seem like some extra work, but some technology and automation can take it from here. For example, contract management software will allow you to include custom evaluation criteria relating to sustainability processes. With that, you can ensure that your suppliers meet your company standards and comply with the regulations. Moreover, contract management facilitates the visibility of your supply chain sustainability, increasing overall transparency.
It is vital for companies to be clear with onboarding and spreading internal guidelines to build a culture of sustainability within the company and broadcast it to the client base.
Complying with the SDGs can strengthen a company's identity, increase employee satisfaction, and contribute to a positive public perception. The result? Improved reputation not only among your customers but also across your business sector. All this leads to smarter choices and a more competitive advantage in times to come.
Evident growth and inclusive economy
As you shift towards sustainable policies, you’ll have to cut off some supply channels, reshape business and production processes, and leverage the value of each partnership. All of these need to be measured, calculated against business goals, and clearly reported on. Smart contract management software will allow you to deep-dive into segmented data to evaluate the performance of each of your business branches against the overarching company goals, identify potential threats, and keep operation costs under control - all while remaining adherent to sustainability policies.
Meanwhile, contract lifecycle management tools shorten the sales cycle and therefore help you achieve better demand management and keep extra control over the production costs and maintain goods.
There’s some extra challenge in moving towards a more inclusive economy and expanding to the new labor force and consumer markets. Businesses have to find a thin line between generating profit and creating opportunities. All this needs to be documented and communicated to every involved party to avoid multiple interpretations and legislative and sociocultural clashes. Having a CLM solution with transparent clauses, 360-degree contract visibility, and measurable data is not a panacea, but a solid pillar to build an inclusive economy on.
The world has some way to go to achieving SDGs, as sustainability has become a business imperative for all companies. While the trend itself is obvious, there are no clearly defined and 100% proven best practices for industries, let alone single companies. In a way, each company is building its own culture of sustainability and aligning it with their unique goals, hence creating a one-of-a-kind blend. It only makes sense that the road to success under this scenario can (and most likely, will) get bumpy. Adopting proven tools and solutions can greatly contribute to this process, automate the manual work and generally smoothen out the transition.
Preserving knowledge that derives from company initiatives is essential for scaling the impact and avoiding repetitive mistakes. Contract management software solutions often allow you to accumulate takeaways and identify less efficient initiatives.