Sustainable Procurement recently moved into the blogosphere following publication of the 5th edition of an HEC-Paris/EcoVadis report, ‘Sustainable Procurement: Back to Management!’ For a view on the survey’s findings of European procurement realities within 2011, SmartProcurement spoke to Abrie de Swardt, IMPERIAL Logistics Marketing Director.
Risk management imperative
The study, which featured participation by 80 large European companies, identifies three drivers for sustainable procurement initiatives, namely risk management, value creation and cost reduction. Eighty Four percent of this study’s participants saw risk management as the number one driver for a successful sustainable procurement strategy.
“It is important to acknowledge that risk management climbed the ranks to become the primary driver for sustainable procurement, particularly in light of the pivotal role of procurement in the supply chain,” said de Swardt. The survey in fact found that 44% of companies consider risk management to be the top priority in order to avoid supply disruptions.
Backing up this finding, he cited the Massachusetts Institute of Technology (MIT) Center for Transportation and Logistics Global Risk Survey, undertaken locally by IMPERIAL Logistics and SAPICS in collaboration with MIT. “This survey identifies top supply chain risk factors and aims to further understand perceptions towards risk mitigation, as well as the types of risk management strategies within business,” he explained.
It found, for example that South Africa is more closely aligned to developed over developing economies, in terms of the top ten supply chain risk factors facing business. The country however, not only resembles developing countries regarding ‘extended electricity loss’ and ‘major software systems failure’, but is required to address these issues more frequently. From a positive perspective, the civil unrest/terrorism and product tampering/counterfeit products have less of an impact on local supply chains.
Highlighting key points
In terms of the Sustainable Procurement report, de Swardt said, “Overall, the survey indicates that sustainable procurement remains high on executive agendas, noting ‘major support from Top Management’ that increased by 24%.”
“However, as a strategic priority, despite remaining in the Top 5 Chief Procurement Officer priorities for a 4th consecutive year sustainable procurement moved down one place. This signals caution in my view, with the reality being that at all levels business cannot afford to lessen the importance of sustainability.”
He added that significant organisational changes are reported to have been implemented and 57% of the respondents indicate that they have trained the majority of their procurement staff on sustainability. “Use of formal sustainable procurement metrics is also increasing,” he reported, “with two thirds of participating companies implementing dedicated measurement tools.”
Going back to budget, 92% of the companies had either increased or maintained sustainable procurement budgets, which, according to the report, ‘should yield more changes in the future years.’
Challenges and benefits
The study states that reaching a tipping point for widespread adoption of sustainable procurement ‘is not easy’. The first challenge noted is ‘contradictory objectives’, an issue for 44% of companies surveyed. “This implies a lack of seeing eye-to-eye when it comes to the short-term financial goals vs. medium to longer term sustainability goals,” he said.
A second stumbling block to adoption of sustainability best practice within procurement lies in the reluctance of middle-management to engage in this regard. Furthermore, limited progress was reported when it came to use of advanced tools and models for integrating sustainability within companies.
The benefits of sustainable procurement are also explored in the study, with the major one being the reduction of risk, followed by enhancement of internal team motivation. “Could this indicate the importance of this approach for attracting and retaining the best people? Undoubtedly,” emphasised de Swardt.
Local sustainable procurement
“This survey provides southern African markets with an important starting point. Such research has not yet been undertaken locally and is critical to assess the degree to which procurement departments are contributing to, and can better contribute to greening the supply chain,” he said.
The business case for ‘green’ supply chains is very attractive. By addressing the problem of carbon emission and environmental pollution, companies not only limit carbon footprint and waste, but optimise supply chain performance.
In essence, it’s a balancing act that requires the identification of ways in which ‘green’ can increase revenue, reduce costs and nurture the environment. “There is still widespread uncertainty about how to move forward with green supply chain initiatives. These initiatives should clear three hurdles. They must be acceptable financially, environmentally and socially,” he explained.
Transformation to a green supply chain is a three-fold process, adding: “It requires us to become educated, measure the company’s carbon footprint and identify change levers. After establishing this, we can embark on business case supported initiatives.”
“The way in which companies manage their supply chains, across people, process and technology must be based on sustainability. This requires that we make the right procurement decisions, work closely with customers, business partners and employees, and intelligently apply supply chain modelling aided by the necessary tools,” concluded de Swardt.