Designing and evaluating a supplier sustainability scorecard for procurement decisions

Thesis Abstract

The study addresses the growing imperative for procurement to embed sustainability into supplier selection and performance management, recognizing that conventional cost-driven approaches inadequately account for environmental, social, and governance (ESG) risks and opportunities across supply networks. The aim is to design and evaluate a supplier sustainability scorecard that integrates ESG criteria into procurement decisions and to assess its effectiveness in improving supplier performance and procurement outcomes. Specific objectives include (1) identifying a comprehensive set of sustainability indicators aligned with global frameworks (e.g., GRI, SASB, ISO 20400) and industry best practices; (2) developing a weighted scoring model that balances economic, environmental, and social dimensions; (3) validating the scorecard through expert elicitation and a pilot implementation in a mid-sized manufacturing firm; (4) evaluating the scorecard’s impact on supplier selection, contract performance, and risk mitigation; (5) examining the organizational readiness, data governance, and change management requirements for adoption; and (6) providing a validated framework for continuous improvement and scalability. A mixed-methods design is employed, combining quantitative and qualitative approaches to ensure robust evaluation. The population comprises 42 key suppliers engaged by a mid-to-large manufacturing company with annual procurement spend exceeding $220 million. A stratified random sample of 28 suppliers across critical tiers (tier 1 and tier 2) is selected for quantitative assessment, while semi-structured interviews are conducted with 12 procurement professionals, 6 supplier executives, and 4 sustainability managers to capture diverse perspectives. Data collection instruments include a pilot-tested supplier sustainability questionnaire, performance data extracted from ERP and supplier scorecards, audit reports, and interview guides grounded in stakeholder theory and the legitimacy theory of sustainability. Validity is enhanced through expert panel review, content validity indexing (CVI), and triangulation across data sources; reliability is ensured via Cronbach’s alpha and composite reliability checks for the survey instrument, aiming for ? ? 0.80. Analytical techniques involve exploratory factor analysis to identify underlying sustainability dimensions, followed by confirmatory factor analysis to validate the construct structure. A multi-criteria decision analysis (MCDM) approach, specifically TOPSIS and Analytic Hierarchy Process (AHP), is used to derive supplier rankings under the new scorecard. Regression analysis investigates the relationship between sustainability scores and supplier performance outcomes (on-time delivery, quality defect rates, and total cost of ownership) over a 12-month post-implementation period. The study also employs thematic analysis to interpret interview data, with triangulation to relate qualitative insights to the quantitative model. Ethical considerations include informed consent, data anonymization, and compliance with corporate data protection policies. Expected findings include (i) a validated, parsimonious set of sustainability indicators clustered into environmental, social, and governance dimensions with demonstrated reliability and validity; (ii) a weight-optimized scorecard that improves discrimination among suppliers and aligns procurement decisions with strategic ESG goals; (iii) statistically significant positive associations between higher sustainability scores and improved supplier performance metrics, reduced risk exposure, and more favorable contract terms; and (iv) insights on data governance, information systems integration, and change management requirements for effective implementation. The study contributes to knowledge by operationalizing a theoretically grounded, evidence-based supplier sustainability scorecard that integrates stakeholder theory and legitimacy theory within a practical procurement framework, and by providing a transferable model with demonstrated applicability to similar industrial contexts. The study’s main conclusion is that a rigorously designed supplier sustainability scorecard can enhance procurement decision-making, drive supplier improvement, and reduce sustainability-related risk when embedded in a holistic data governance and change management program. Practical recommendations include formalizing data collection protocols across suppliers, investing in supplier sustainability training, integrating the scorecard with existing ERP and procurement systems, and adopting a phased rollout with continuous monitoring and periodic recalibration of weights. Implications for policy and practice emphasize the alignment of procurement with sustainability mandates, the need for standardized ESG data reporting across suppliers, and the development of industry-specific benchmarks to facilitate benchmarking and scalability across supply networks.