The Future of Procurement Part 2

Procurement CSR – can procurement be a force for good? 

Our team attended a very interesting presentation by Peter Smith from Spend Matters at eWorld in which he asked how procurement can be a force for good? Reflecting on his career  in the profession, Peter talked about various areas where procurement can influence decisions beyond cost savings that have a much broader impact on organisations. One of the opportunities he talked about for procurement to have real influence is in Corporate Social Responsibility (CSR) which is of course a vital area for many retailers and manufacturers.

Our Head of Research, Sharmina August, also attended a very informative presentation by Andy Davies of the London Universities Purchasing Consortium, in which he stressed that procurement and supply chain professionals really can have a positive influence on people’s lives if they take the opportunities that are open to them. We asked him for this thoughts for this report.

He told us: “Procurement and supply chain professionals have the opportunity to help millions of people who are trapped in conditions that threaten their human rights.“Technology allows for far greater transparency in supply chains than ever before, and ignorance of slavery is no longer a valid excuse. It’s not about cancelling contracts with suppliers who have poor employment practices, but working with them to manage the risks, improve conditions and lift workers out of slavery. Truly, procurement can and should be a force for good.”

The issue of child labour and modern slavery is actually much bigger than many of us realise. There are currently thought to be 21 million people in forced labour around the world right now. That’s double the number of people taken from Africa to be enslaved between 1698 and 1900. There are no official numbers for how many people are victims of modern slavery in the UK, but the National Crime Agency believes the number to be in the tens of thousands. The introduction of the Modern Slavery Act in 2015 resulted in all companies turning over £36M+ in the UK producing Modern Slavery Statements.

However it is fair to say that the extent of action in these statements varies significantly: at one end of the scale you have the likes of the John Lewis Group, spending thousands of pounds per product ensuring the supply chain is ethically sourced, and at the other you have the many companies who have a paragraph explaining that they’re asking their suppliers to make sure everything is above board.

Adidas is another organisation that has taken huge steps to eradicate forced labour from its supply chain by focusing on both its Tier One and Two suppliers. They been have consistently ranked as an industry leader by KnowTheChain, a valuable resource for companies and investors to understand and address forced labour risks within their global supply chains.

The role of procurement is no longer just about cost cutting, it is now about value in every sense of the word. Cynically, it can add greatly to a company’s image and manage its risk, but on a deeper level it can make a huge difference to the lives of some of the world’s most disadvantaged people. Peter Smith told us: “There are many ways procurement can contribute to these agendas – which of course can also benefit our own organisations as well as the wider world. Modern Slavery has rightly had a lot of focus recently – but whether it is issues of provenance in buying raw materials, the use of plastics, or global warming, what happens in our supply chains is critical and procurement can, therefore, have a real influence and be that force for good in many different ways.”

The future procurement practitioner will need to be able to combine their company’s procurement needs with their CSR requirements. Supply chain technology is making this an easier undertaking, and as there are few specialists in this area, it is definitely an area in which existing practitioners need to evolve to meet demand.

We asked Justin Sadler-Smith of SAP Ariba: “How can technology contribute to procurement being a force for good?” He told us: “Procurement can harness the power of sourcing and purchasing technology to ensure that when they do assess and select suppliers, they do so against clear CSR requirements.

For example, if they have access to a Supplier Network, this job is made easier both in terms of time and selection. “The more buying organisations that access the network with these requirements then create a huge surge in demand for compliant suppliers to provide transparency in their supply chains and ensure they are taking adequate steps to stop slavery, child labour, exploitation etc.“This then really shows the value Procurement can deliver… not only mitigating risk in your business, but also positively impacting the world.”

Another example of where procurement and supply chain technology can have a positive impact is the environment. Christophe Hinfray, Vice President at TK Blue Agency, which helps companies measure and reduce their environmental footprint while reducing their cost, told us: “Recent progress in Big Data and real time device tracking systems allow Supply Chain Managers to better track the situation worldwide, pilot complex activities and optimise performance as never before. Cost reduction is only one of the benefits, together with improved customer service and, last but not least, reduced pollution and CO2 emissions.”

Of course, senior roles in CSR exist in a lot of big organisations but we don’t see many examples of procurement departments employing specialists in this field. Is it time for more investment in this area?

In case you missed it, Part 1 of our Future of Procurement series of articles took a look at Brexit and in Part 3 we’ll review Technology and the Procurement Skill Set.

And if you’d like to read the full Insider report you can download it here.