In the latest instalment of our ‘Five minutes with’ series, Richard Guest, Associate Partner and Head of the Procurement & Supply Chain Practice at Berwick Partners, talks to Clive Berrington, Group Commercial & Procurement Director at Network Rail.
Together they discuss Sustainability and Supplier Diversity within Network Rail; where the business is on its journey and how Procurement has played a key role.
Clive, let’s start with an introduction to you and your role within Network Rail:
I am the Group Commercial and Procurement Director at Network Rail, we’re a FTSE 30 equivalent company, managing around £8Bn spend. We have a Commercial & Procurement (C&P) function of around 1,000 people in the organisation, split between a national team and five regional teams who work closely together.
I am the professional head of the organisation, with accountability for C&P reporting to the Executive Committee and Board. I also directly oversee the national C&P team where we undertake those procurements that the business determines are better sourced once driving the most value.
There is a lot of complexity to procurement in Network Rail. For a start, we contract under public procurement legislation which has its challenges, and we source such a wide range of things from relatively simple goods and services, to major projects in the built environment. This includes, for instance, the Transpennine Route Upgrade, a multi-billion-pound, transformative, long-term railway infrastructure programme that will improve connectivity in the North.
Tell me how important sustainability is within Network Rail and how high is it on the agenda?
You can see from the government agenda that there has been a push over the last few years to move sustainability towards the top of the agenda in the UK. As the host of COP26 (UN Climate Change Conference), Britain is pushing other major economies around the world to commit to ambitious sustainability targets. As an Arms-Length Body, these government commitments naturally have a big influence on Network Rail as an organisation.
However, it is clear to me that this is a passion for many of the leadership team with Network Rail. For example, we have our own Environmental and Sustainability Board sub-committee which I think is relatively rare in big organisations. The business has published its Environmental Sustainability Strategy from 2020 to 2050 which makes sustainability and decarbonisation central to what we do. I think the proof is that we are doing things about it and not just words – we are making a commitment to things. It’s important you have that top-down buy-in but you also have passionate people throughout the organisation who want to make a difference to society.
Network rail has made ambitious targets; £2.5Bn spent with SME’s, carbon emission reduction targets and by 2025, 75% of your suppliers will have science-based reduction targets. What was Procurement’s role in setting these?
97% of the carbon emissions that Network Rail are responsible for is driven by our supply chain or the purchase of electricity; only 3% is from within the business. That brings to light how important Procurement’s role is in this and how we ensure it is front and centre in what we do.
There was a lot of work done by Procurement and elsewhere in the business when setting these targets, working with our supply chain to understand what was feasible and how hard we could drive things.
75% of our most carbon-emitting suppliers will have science-based targets by 2025; my team want to go quicker, so I wrote to our top 100 suppliers earlier this year to say ‘Thank you for working with us. We want you to sign up to science-based targets and we’ll work with you to help you identify what they are in your business and how we can work together to reach these’. It is showing our suppliers how important sustainability is to us. In the not to distance future, they won’t be able to work with Network Rail unless they have signed up and are driving down carbon emissions.
How important is supplier relationship management and collaboration in achieving this?
We have collaborative forums with our supply chain, this was particularly evident during the start of COVID-19, when we would sometimes hold twice weekly calls with our key strategic suppliers to talk about what we are doing and how we can work together to keep things going. In some respects, the pandemic accelerated this degree of collaboration. It was always in our plans, but the need to do this, combined with the ease of speaking virtually meant we did this more frequently. We received fantastic feedback from our suppliers, and we have continued that dialogue on this year. In May, we had a virtual conference with over 1,300 people on it, which is much bigger than anything we have done before.
What we have seen is that there is an open environment with our suppliers, and we better understand what is driving them and where we need to be a better client and share more information. Sustainability and D&I is coming into that sphere where suppliers are happy to share what they are doing and showcase it.
What we have found is that it’s about having the conversation of sustainability regularly and bringing it into forums. We can get ideas from suppliers but also give them some guidance. Some suppliers are willing to admit that they are only starting on this journey, and we are seeing an openness in conversations, but that’s because communication has been a two-way street.
We’ve also seen some great innovation come through the supply chain, just by sharing ideas and making suggestions. Some things we trial ourselves become part of the usual way of doing things, but others aren’t suitable; in order to succeed we have to try new things. We will only become more sustainable and cost-effective if people are doing things differently and brining through great ideas – for example, the use of hydrogen trains or small ideas like using solar panels on fencing.
Innovation doesn’t have to be a brand-new idea, it could be using an existing idea from another industry and incorporating it into what we do. If it’s working elsewhere, why can’t it work in Network Rail?
Innovation often comes from SME’s; how does Network Rail’s approach differ to working with smaller suppliers than the big corporations?
When I joined this role, there was a one size fits all approach to procurement, clearly that is not appropriate and stopped SME’s bidding for some things.
The first thing we did was listen and understand where it might be too difficult to work with us and why SMEs weren’t bidding. We spent a lot of time working with these suppliers understanding what was and was not working, and then created an action plan. I nominated a champion within Network Rail for SME’s and their key role is to liaise with SMEs and come back into Network Rail and give us a hard time and make sure we are considering different types of suppliers when we go out to market! Sometimes it’s as simple of letting SME’s know there were opportunities out there to bid.
A lot of it came from thinking upfront about what we were trying to drive and then designing a process that allowed SME’s to bid. It just required some thought, commercial nous, and flexibility in our approach.
We’ve hit our target, but we’re not resting on our laurels, and we want to encourage new suppliers to come into our business to bring greater diversity.
How has the view of sustainability changed in the time you’ve been in Network Rail?
There’s been incremental change and we are still on that journey. If you look back in Network Rail twenty years ago, a lot of focus was on lowest cost and quality. As time goes on you then start thinking about whole life value cost and build other factors into your tender documents. Sustainability is now one of those. The biggest difference is we are now having the conversation at every tender event, asking ‘have we thought about sustainability?’ which is the key. This changes the significance of the subject. We admit that we are not fully there yet, but we are on that journey.
The people who are coming into the organisation have that passion for sustainability, particularly younger generations, who are asking these questions naturally, which also makes the topic more pervasive across the organisation.
Has Network Rail’s commitment to sustainability seen a difference in your ability to attract and retain talent?
Absolutely, sustainability alongside Diversity and Inclusion are things people are asking us about at interview, and the fact we are doing something about this is seen as attractive. People are seeing this as a key factor in the choice they make. I’m really proud to work for the organisation because of some of the things we do.
In the current climate, many organisations are facing significant reductions in revenue and unable to invest the working capital to drive sustainable projects. How has Network Rail responded to this challenge?
We’ve seen a massive reduction in the number of passengers using the railway, which naturally has a significant impact on how much money Network Rail can spend over the coming years. I think that tension is always going to be there around the pursuit of profit and lower cost in the short-term vs longer term sustainability. You can get a win-win in some of these things, where you are doing things in a greener way at a lower cost.
Companies can still do things with a reduced amount of money. By asking the questions ‘can we do this greener, without anymore costs?’. There are small things that can be done, without having to make big capital investments, which will be a greener choice.
Survival is important, but you need to be thinking about a strategy longer-term as well. Any strategy you will write will have shifts along the way and the last 12 months have created a big shift for everyone across many industries. Sustainability is moving up the agenda though not down and companies will need to address this if they are to survive in the long term.
What would your key piece of advice be to any business at the start of their sustainability journey be?
The way to start is to just start doing something small and go from there...there is a lot of information online like on the Science Based Targets Initiative (SBTi) website, so I would recommend reading that to get some ideas. Even something as simple as asking open questions when you’re going through the procurement process can lead to different outcomes. Whether that be on sustainability, D&I, social value, etc. It requires some effort, and it requires good commercial people to be thinking about things that aren’t just cost.
I’m confident that in most organisations, no matter how small they may be, they’ll be someone who is passionate about sustainability that they can bring ideas and challenge the status quo.
It doesn’t take a lot of skill, it just requires asking some different questions. Doing this makes suppliers think differently and this will start to snowball down through the supply chain over a period of time.
I love working within Procurement because we have such a massive influence both inside and outside of the organisation. 97% of our emissions come from outside of our organisation which means I can have a big influence as to how we can do things better in the future. Every person in an organisation can have an impact no matter how big or small.
For more information, please contact Richard Guest is an Associate Partner in our Procurement and Supply Chain practice.