Procurement work is much more than just securing the right products, in the right quantity and quality at the right place… Let’s think wider, more holistically, writes Robert Freeman, a procurement and supply chain expert at Future Procurement, a procurement coaching and consultancy organisation.
Procurement decisions you take every day influence not only your direct suppliers. Think about it – one line on an order to your supplier generates so much movement in so many places. You influence much more than you can imagine when you create an order to your supplier:
The workers at the supplier, who get their jobs.
Families of those workers, who depend on that income.
An entire community around your supplier gets the extra income in the form of taxes.
The environment around the supplier is affected by producing your order: maybe negatively if there are some sorts of pollution involved, maybe positively (e.g. recycling or re-using of other resources by your supplier).
And this is only the beginning!
Think about the sub-suppliers, the producers of raw materials, component suppliers, packaging and transportation companies, all the logistics involved and so forth… And, of course, think about the customers, and about the final consumers of the goods from your supply chain.
So, if you are taking it really ‘holistically’ – you can understand that your procurement decisions have a significant influence on the environment, society and on our planet.
Perform such an exercise and try to count how many companies and people are involved in your supply chain? How large an environmental impact is made by your procurement decisions?
If you consider the many links in any supply chain, it is clear that procurement can make a difference to the world around us through our work.
How can we make that difference?
The most important is your mindset. If sustainability issues are high on your organisation’s agenda then it will be much easier to pursue other stakeholders. Add sustainability into your organisation strategy, monitor it at top-management level and you will start seeing the changes.
There are four basic stages where procurement functions can make a positive impact on the world around us.
Stage 1: Learn and observe
Look around your industry or category to identify best practices, good examples and to find some inspiration. I guarantee that you will find many great cases of good environmental, social and sustainability impact for any area and any category.
Involve some measurable indicators for your sustainability progress. For example, carbon emissions, water footprint, share of renewable energy used for manufacturing, or recycled materials used for the products.
Stage 2: Inform and align with your partners
Once you have selected the focus areas and key performance indicators (KPIs) for your sustainability progress, you should actively involve your suppliers in sustainability work. Discuss the relevant points in your meetings with them, and host events to explain your plans and ambitions regarding ‘a more responsible way’ of doing business.
At least send them an email with your sustainability agenda!
Furthermore, send them a list of unacceptable business practices. This can be a short list of items for which you will have zero tolerance – instances where your only reaction will be stopping the business relations with that partner. For example, the list can include the use of child labour or forced labour; pay that is below minimum wage; introducing hazardous pollution into water, soil or air; or bribery of any kind.
Stage 3: Include responsible business practices in selection criteria
This stage is a deciding one: here you can show how serious your intentions are to evolve sustainability into your strategy. When you include sustainability parameters in your RFI/RFQ, suppliers will really start to change.
Let’s assume you have three suppliers with the same price, service and quality conditions. You can use sustainability parameters to make the final choice. This will motivate your suppliers to develop in-line with your inputs.
But, be ready to lose some attractive offers from inappropriate suppliers. In the long run, though, this will help you avoid risks connected to those suppliers, such as reputational or environmental risks.
Stage 4: Auditing
In order to maintain these high standards, and to ensure that your requirements are understood correctly, you can organise audits for your partners. The audits can be regular (every year or every other year), or unplanned and ad-hoc.
This will help you keep your partners’ attention focussed on your sustainability agenda.
I want to leave you with just two simple messages:
Procurement and supply chain professionals can make a real positive impact on society and the environment.
Responsible sourcing is more profitable in the long term.