“Do good, feel good” or “Do good, and save lots of money”? Whichever you find the more enticing, we can certainly conclude that it pays to care in procurement!
Pat McCarthy, SVP and GM, SAP Ariba North America, is one of the driving forces behind SAP Ariba’s Business with Purpose initiative. Over time, he’s noticed how business attitudes have shifted as corporations become more socially aware. “For companies in the past it was pretty simple, the charter was pretty simple – increase profits for their shareholders or their owners. But today we find that many companies are taking on a higher mission to make the world a better place to live and work and to run their businesses with a higher purpose.
Of course, you don’t need Pat to tell you that sourcing from minority owned businesses, eradicating slave labour or watching your carbon foot print is a good thing. No one would try to contest that. But aside from the “do good, feel good” ideology, is Business with Purpose actually good for your business, or is it going to cause your procurement team a whole lot more – in money and stress!?
“We know that purpose driven companies out perform the market by almost 5 per cent” says Pat. “In other words they can do good and do well. Procurement has a unique opportunity to lead the way.”
And so it would seem that there’s a strong business case far beyond the moral imperative to embrace a higher cause in your procurement team.
Peter Holbrook, CEO Social Enterprise UK, gives six reasons why this is the case.
1. It’s cost effective
“We’ve undertaken research with PwC to look at what social value means for people within procurement departments” begins Peter. “We see that in the majority of cases when you take a social value or an environmental lens to procurement your new suppliers coming in to support your business are in most cases creating value add but are actually cheaper. [You will find] suppliers are much more cost efficient as a result of being more socially and environmentally imaginative.”
2. It brings in top talent
Attitudes of the millennial workforce is a significant factor for organisations to consider in today’s world if they want to recruit and retain the best talent. Employees, for the most part, want to feel as though they are working for companies who care for more than simply profit, who are making the right decisions for the world around them as well as the right decisions for the business. As Peter explains “the good work your business does can give you the cutting edge or differentiation to bring in the very best talent. When [organisations] take these approaches and staff believe they are authentic they are more likely to stay in the business in the long term.”
3. It makes suppliers more responsive
The research Social Enterprise UK carried out with PwC revealed that in two thirds of cases suppliers were more responsive in purpose led companies. This, Peter explains, is due to the relationships created that meant suppliers “were more responsive in terms of responding to the changing needs of companies buying from them.”
4. It makes your organisation more innovative
Purpose driven companies, according to Social Enterprise UK’s research carried out with PwC, “brought on new products and services to market, which is the traditional way we assess innovation.”
5. It keeps you ahead of the game
“We all recognise that businesses have to change and adapt to help meet the challenges that we all face. Using supply chains as a way to do this is a way of really being cutting edge, staying ahead of the pack and building brand differentiation that all companies increasingly need to be able to define themselves.”
6. It gets your customers on board
“We have researched customer loyalty” says Peter, “And whether it’s members of the public or in B2B relationships – [people] are more likely to remain with companies that are also creating a social benefit.
Peter has some reassuring advice for anyone feeling overwhelmed by the challenge of becoming a purpose-led procurement team. “The risk is that we overcomplicate it. There’s something to be said for proportionality. Start small and start easy- culturally within a company you’ll get much greater buy in if it feels as if its accessible and something that can be achieved relatively simply rather than an additional burden you’re putting on everybody.
“It’s about starting a journey and taking small steps to evolve your methodology and your approach and being fairly honest about where you are succeeding and where some of the challenges exist. No one is assuming and no one should assume that when a company starts embarking on this route that they will come to the ultimate solution within weeks months or even a couple of years!”
Sign up for #FeeltheLove, the first Procurious and SAP Ariba Procure with Purpose webinar, which takes place later today at 10am EST/ 3PM GMT.