Procurement with Purpose — Why Bother?
Peter Smith, Author of Procurement with Purpose and Managing Director of Procurement Excellence
Why should we and our organisations bother with the ESG agenda (environmental, social, governance), sustainability or procurement with purpose? Some might answer by saying, “because it’s just the right thing to do”. But that is too subjective to hold water in the real world. What if I think it is obviously the right thing to do, but my boss doesn’t? I might like to offer smaller minority-owned suppliers a better deal than I offer large firms — but my shareholders might not be too happy with that.
Working in a manner that is positive for the planet and its people does generally make us feel better about ourselves and our jobs, and firms with a good record in terms of sustainable business practices appear to have important advantages now when it comes to recruitment and the “war for talent”. But we should not embrace procurement with purpose just because it makes us personally feel good.
The first real imperative is regulatory. Increasingly, organisations don’t have a choice when it comes to implementing some ESG initiatives. And the range of topics covered by the regulators is ever-increasing. In many countries, companies are now required to report on their own greenhouse gas emissions, the impact of their activities on the environment or other related matters. That approach is well-established in terms of climate change but is gradually extending out into other environment-related areas. For example, the global Business for Nature coalition of over 200 companies is calling on governments to promote more “nature-related financial disclosures” in company reporting, potentially covering issues such as biodiversity, water usage or deforestation in the supply chain.
But this goes beyond the environment and climate. Modern slavery regulations and laws now apply in many countries and require action by businesses and indeed public sector organisations, as do laws around bribery and corruption, discrimination and equality issues. Perhaps most dramatically, Germany’s new Supply Chain Due Diligence Act is due to be implemented in 2023. It requires large companies to make sure social and environmental standards are observed in their supply chain by conducting appropriate due diligence activities, and is seen as a blueprint for similar EU legislation in the future.
The German law will require companies to identify, prevent and address human rights and environmental abuses within their own and their direct suppliers’ operations. That is quite a daunting task, as most procurement professionals will immediately recognise! (We will be talking about the Act during the first webinar in the series mentioned later).
Moving on from the regulatory aspect, the other core reason for embracing procurement with purpose is simply that our key stakeholders are demanding it. As well as staff (a group mentioned earlier), the key players here are customers and investors. Investors are key as they provide the funding for businesses, but customer preferences and requirements are the driving force behind many of the current positive actions. Sensitivity to issues such as plastic waste in the oceans has grown massively in recent years, scandals around human rights violations have hit companies’ share prices, so smart firms have made purpose-related issues fundamental to their marketing or even their whole business ethos and approach.
But it is not just about avoiding the negatives; purposeful business can drive business growth too. At one end of the corporate scale, global giants such as Unilever have invested significant amounts of time and money in activities ranging from supporting small family farms in developing countries, to supplier collaboration which is driving innovative new recyclable packaging technologies. Smaller firms are growing their businesses through innovative and sustainable approaches too; on the Isle of Wight, off the south coast of England, Rapanui is focusing on “circular fashion”, making and selling clothing that customers send back to the firm (free) for recycling and re-manufacturing when the item’s useful life is over.
No doubt the staff in Unilever and Rapanui feel good about what they are doing. But it also feeds into the competitive advantage that they and every firm wants to create. Business and procurement with purpose can undoubtedly provide such advantage — as long as it is done with the right strategies and implemented carefully, of course.
On that note, I’m chairing four webinar panel discussions organised by Jaggaer over the coming weeks, with the overall title of “Procurement with Purpose: Protecting People, the Planet and Profit”. They will cover different aspects of that broad topic and our aim is to be relevant and useful wherever listeners are on their “purpose journey”, by sharing experiences and providing practical advice. Panels include experts from firms such as Ecovadis, the Hackett Group, riskmethods, Spend Matters and TealBook, as well as senior procurement practitioners.
You can register free of charge here and the webinars have also been approved by the Institute for Supply Management® (ISM®) as eligible educational activities for continuing education hours too. We hope you can join us.
