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Will consumers punish companies involved in supplier-driven scandals?

Survey finds that 74 per cent of respondents would be unlikely to buy products or services from a company involved in controversial supplier practices.

Consumers intend to punish companies involved in supplier-driven scandals

A newly published survey suggests that companies who are not actively monitoring the business practices of their suppliers, or who are engaged in questionable supplier practices themselves, are placing their reputations and their balance sheets in harm’s way.

The study of typical American consumers, commissioned by sourcing and procurement specialist Proxima, reveals that 74 per cent of respondents stated they would be unlikely to buy products or services from a company involved in controversial supplier practices. Furthermore, nearly 66 per cent would stop giving such a company their business even if that company was the most convenient and cheapest option.

“In recent years, we’ve seen a tremendous shift as companies are relying more heavily on suppliers for everything from their core offering to the market to back office services,” said Jonathan Cooper-Bagnall, EVP & Commercial Director of Proxima. “With this increased reliance comes increased risk and a requirement to engage suppliers with ethical and responsible track records. The results of this study suggest that companies who fail to appreciably vet and monitor their suppliers are at risk for significant commercial consequences.”

The survey, commissioned by Proxima and executed by Kelton Global, gauged the views of more than 1,000 American consumers over the age of 18 in March of this year. Other key findings of note include:

  • Even among financially-strained consumers (respondents with less than $35,000 a year in income), one in three would spend more money elsewhere to avoid patronizing a scandal-ridden company
  • Nearly a third of respondents indicated that they would proactively tell friends and family to stop spending their money with a company involved in controversial supplier practices

Cooper-Bagnall continued, “In recent years, supplier driven scandals have tainted the reputations and bottom lines of a number of well-known companies around the world. Yet, when these scandals arise, consumers are not drawing a distinction between company and supplier and are placing as much blame, if not more, squarely at the feet of the company. It is, therefore, critically necessary that companies not only vet suppliers properly before engaging them, but create a monitoring program to catch and address any improprieties before they result in public scandals.”

Walmart cops criticism over sourcing practices

WALMART criticised for sourcing water from California

Retail giant Walmart has come under fire in the US over claims the firm is sourcing water used for its bottled water products from drought stricken regions in California.

A report, compiled by a CBS affiliate in Sacramento, suggests that Walmart is sourcing bottled water stocks from Sacramento’s municipal water supply. The world’s largest retailer has drawn stern criticism for this practice given the region is in midst of a crippling four year drought that is devastating crops and forcing residents to face water restrictions.

Similar complaints have been made of coffee chain Starbucks, who were called out in a report in the Mother Jones magazine for sourcing bottled water stocks in parts of California the government has deemed as being in areas of “exceptional drought”. Since the report’s release, Starbucks has announced it will cease sourcing water from the troubled Californian regions, a commitment that Walmart is yet to have made. This lack of commitment was highlighted in the following email statement from Walmart spokesman John Forrest Ales, who outlined the company’s concerns over the drought, but stopped short of altering sourcing practices.

“The drought in California is very concerning for many of our customers and our associates. We share those concerns and are tracking it closely. Our commitment to sustainability includes efforts to minimize water use in our facilities. We have and continue to work with our suppliers to act responsibly while meeting the needs of customers who count on us across California.”

While the public outcry over this issue has been significant (a petition demanding Walmart take its activities elsewhere has garnered over 11,000 signatures), the International Bottled Water Association has been quick to stifle the issue, pointing out that bottled water accounts for less than 0.01 per cent of all water used in the US each year.

Greenpeace report urges improved transparency from Amazon

Apple, Facebook, Google progress toward a Green Internet, but coal-heavy utilities stand in the way.

Greenpeace renewable energy report

A recently published Greenpeace report urges improved transparency from Amazon, and more engagement from all major internet companies to overcome resistance to renewable energy from monopoly utilities.

Greenpeace’s research states that major internet companies including Apple, Facebook and Google continue to lead efforts to build an internet that is renewably powered, but an uncooperative utility sector and rapid energy demand growth for the internet places those ambitions under threat. Continued resistance to renewable investments from coal-heavy monopoly utilities in data centre hot spots such as Virginia, North Carolina, and Taiwan is causing the rapid growth in the digital world to increase the demand for dirty energy.

“Tech companies are increasingly turning to the smart choice of renewable energy to power the internet, but they’re hitting a wall of stubborn monopoly power companies that refuse to switch to 21st century sources of energy. Internet companies need to work together to push utilities and policymakers to provide them with 100 per cent renewable energy and avoid the creation of a dirty internet.” said Gary Cook, Senior IT Analyst for Greenpeace USA.

The report, “Clicking Clean: A Guide to Building the Green Internet,” also highlights the continued lack of transparency by cloud giant Amazon Web Services (AWS).  AWS has taken some significant steps over the last year, including committing to power its operations with 100 per cent renewable energy, but the lack of basic transparency about its energy use is a growing concern for its customers.  Although AWS did announce plans to purchase over 100 MW of wind energy this past year, Greenpeace discovered that AWS continues to rapidly expand in Virginia. Based on an analysis of permit applications by Amazon subsidiary Vadata, AWS made investments in new data center capacity in 2014 that would increase its energy demand by 200 MW in that state, where the utility Dominion powers the grid with only 2 per cent renewable energy.

The report found that Apple continues to be the most aggressive in powering its data center operations with renewable energy. Despite continued rapid growth, Apple appears to have kept pace with its supply of renewable energy, maintaining its claim of a 100 per cent renewably powered cloud for another year, followed by Yahoo, Facebook and Google with 73 per cent, 49 per cent and 46 per cent clean energy respectively. Greenpeace found that Amazon’s current investments would deliver an energy mix of 23 per cent renewable energy for its operations.

“Amazon needs to provide more information about its data center footprint and how it will move toward 100 per cent renewable energy, as Apple, Google, and Facebook have done – its rapid expansion in coal dependent Virginia should be a concern to its customers like Netflix and Pinterest who are fully dependent on Amazon for their online operations. Increased transparency will allow AWS customers to know where they and AWS stand on their journey to 100 per cent renewable energy,” said Cook.

The energy use of our digital infrastructure, which would have ranked sixth in the world among countries in 2011, continues to rapidly increase, and is largely being driven by the dramatic growth of streaming video services like Youtube, Netflix, and Hulu. Video streaming is estimated to account for more than 60 per cent of consumer internet traffic today, and is expected to grow to 76 per cent by 2018.

Apple continues to lead the way toward a green internet with several major renewable energy investments announced in the last year, including an $850 million deal to power its operations in California – the largest ever non-utility solar deal. Google’s march toward 100 per cent renewable energy is threatened by monopoly utilities like Duke Energy in North Carolina, a major hub for data centers.

Currently, customers are not allowed to buy power from anyone other than Duke, which gets only 2 per cent of its electricity from renewable sources, but North Carolina legislators are trying to increase the options for consumers to buy renewable energy from parties other than Duke Energy.

Colocation companies, the internet landlords that rent out data center space, continue to lag far behind consumer-facing data center operators in seeking renewable energy to power their operations, but Equinix’s adoption of a 100 per cent renewable energy commitment and offering of renewably hosted facilities is an important step forward and puts the company at the front of the colocation pack.

Greenpeace contacted every company assessed in the report to request data on their energy use. When companies did not respond, as was the case with Amazon, Greenpeace estimated their energy consumption using conservative assumptions and publicly available information.

Greenpeace is calling on all major internet companies to:  

  • Make a long-term commitment to become 100 per cent renewably powered.  
  • Commit to transparency on IT performance and consumption of resources, including the sources of electricity, to enable customers, investors, and stakeholders to measure progress toward that goal.
  • Develop a strategy for increasing their supply of renewable energy, through a mixture of procurement, investment, and corporate advocacy to both electricity suppliers and government decision-makers.

Chris Lynch: Big Ideas In Big Companies

“The lemon’s been well and truly squeezed… but how do we break through the next layer of cost paradigms?”

Watch our second Big Ideas Summit keynote (part 1 of 4)

Watch Chris’ keynote in FULL here

Keynote speaker Chris Lynch (CFO, Rio Tinto) spoke about fostering a culture of “intrapreneurship” within large organisations and understanding that the bigger your idea is, the more resistance it will face.

However he went on to state that by persisting with your idea, taking ideas from other sources, including suppliers, and showing the outcomes, you are more likely to succeed.

Procurious members can find Chris’ full keynote here. Not a member yet? Register for free.

Watch: See more Big Ideas from our 40 influencers

CIPS David Noble shifts a few paradigms

CIPS David Noble speaking at Procurious Big Ideas Summit

David Noble, Group Chief Executive of The Chartered Institute of Procurement & Supply (CIPS) took the stage at the Big Ideas Summit to shift a few paradigms.

Every organisation relies on buying things to run their business and as buyer you’re in an extremely powerful position. But because buyers often operate behind the scenes, many people aren’t aware of procurement and supply as a career choice.

CIPS is not just UK-based. The membership spans the globe. You can find Institute members in 150 different countries. It brings everyone together to share news and ideas through member events, networking opportunities and discussion forums.

The profession is not just all male. Half of the 114,000-strong community worldwide  is female. At a student level Singapore now has more of a female skew than male.

At CIPS nearly half the senior staff and board is female.

The membership was primarily seen as kindergarten – now this may have been true maybe 20 years prior, but things have changed.

We are in a sea change.

David says that we are in a sea change, therefore we must understand our business environment and what the Institute is doing about it.

Only 1/3 of CEO’s believe P&S professionals are ready for the strategic challenges ahead.

CIPS has set about doing work to define the future profession. And it is clear from the results of its survey that the profession has come-of age. Now it’s time to ‘raise your game and raise your voice,’ to ensure that procurement becomes pivotal to organisational success and value delivery, with a key role to play at the highest levels.

Let’s start selling this profession better by becoming the story tellers of our success.

Top buyers are in huge demand around the world and can achieve extremely high positions within companies.

Driving value is like driving change. To drive change is never easy so you need to persevere, and have dogged determination. You are able to add value not just from cost reductions, but also from the innovation and creativity you can bring to the role. And because of procurement’s involvement across the whole value chain, you could not find any function with such a unique position in any organisation.

Telstra director honoured with prestigious procurement award

Richard Allen receives The Faculty’s ‘CPO of the Year’ title.

Chief Procurement Officer (CPO) at Telstra, Richard Allen, was last night announced CPO of the Year by leading procurement consultancy The Faculty.

Awarded at the Asia-Pacific CPO Forum’s annual gala dinner held at the Eureka89, Melbourne, Mr Allen was chosen from a shortlist of top performing CPOs in the region.

Sponsored by WORKWEAR Group, part of Wesfarmers Industrial & Safety (WIS), the award highlights the importance of the CPO role in organisations by recognising CPOs who hold strong functional and technical expertise, realise commercial outcomes, demonstrate leadership influence and leverage the value of procurement across their businesses.

Responsible for all outsourcing decisions at Telstra, encompassing both local agencies and overseas partners with a procurement spend in excess of $12 billion, Mr Allen is credited with making a significant contribution to the telecommunications company’s customer-focused strategy over the past four years.

Richard was nominated by Robert Nason, Group Executive, Business Support and Improvement at Telstra, who said: “Richard has been instrumental in Telstra’s transformation over recent years, and his commercial leadership has helped Telstra strengthen its customer service offering,”

“He’s introduced innovative service evaluation, to measure and increase advocacy within Telstra’s suppliers, recognising that they are often our customers, too,”

“Richard’s also led a widespread rationalisation of our supplier base, reducing it by 30 per cent, which benefits both our business and our customers.”

Another innovation introduced by Richard was his ‘reverse sourcing’ initiative where he achieved a 90 per cent change in payment terms from suppliers, which has unlocked a significant incremental cash benefit to the business.

Mr Allen’s ability to lead the procurement function through an extensive domestic change program and make a significant contribution to Telstra’s transformation is what captured the judging panel’s attention.

Judging Panel Chair it is Dr Karen Morely said: “The change Mr Allen has made at Telstra is a perfect example of how procurement can support a company’s value proposition whilst also keeping a close eye on costs.”

“Richard’s ability to broaden the role of procurement across the business and reap such strong rewards is the result of his functional excellence, leadership, commercial capabilities and personal drive.”

The Faculty’s Founding Chairman Tania Seary said: “Making a tremendous impact on one of Australia’s largest corporations and driving real change across the business is far from simple – yet Richard has shown that his technical skills and leadership combined are a perfect formulae for success.

“The Faculty congratulates Richard and the procurement team at Telstra for all their achievements over the past four years, and hope that others in the industry learn from their excellent results.”

Established in 2012, the CPO awards program, a flagship initiative of The Faculty, was created to recognise and celebrate the achievements of procurement professionals across Asia Pacific.

WORKWEAR Group General Manager, Chris Jones, said that while procurement is one of the fastest growing professions in Australia, awards like CPO of the Year recognise the crucial impact procurement can have on business outcomes.

“The CPO role is not just about sourcing and purchasing, but includes building or protecting brand reputation, mitigating risks and help companies deliver on their value promise.”

For more information on the Faculty’s CPO of the Year Award, please visit here.

How the UK General Election will affect digital trade

Katie Gallagher, managing director at the North’s leading independent digital trade association comments on the result of the UK General Election and how it is going to effect the digital sector in the North.

Polling_station_6_may_2010

“The coalition certainly brought in some good initiatives for tech and digital businesses, most of which until recently were focused on London. However this changed dramatically in the run-up to the election where there was borderline hysteria from all political parties about tech and the North.

“I hope that the Tories will continue to invest in the North and understand just how vital our technology sector is to job growth and the wider economy. It’ll be interesting to see how the Tech North initiative pans out, considering it was a Lib Dem initiative all along.

“While the last Government did introduce computer science into the curriculum, they also introduced several controversial reforms which were actually at odds with the desire to create work ready students with vocational, hands on experience.

“David Cameron has said his party will create more apprenticeships, and whilst we admire this ambition, digital technology apprenticeships have not been as successful as hoped, particularly in the SME community. The infrastructure still isn’t right to get enough quality talent from schools into digital apprenticeships, so I hope the new Government will look to change this. We really need to get digital education right this time and tackle this skills gap once and for all.

“I’d also like to see additional investment in promising start-ups. While we did see the introduction of some helpful finance products under the coalition, there’s still number of decent tech businesses that are struggling to access the finance they need to grow. Cameron has been known to champion UK start-ups, so I hope this remains a priority.  

“It was a challenge for us to make sure industry voices were heard in the right places with the last Government. I hope that the new Government listens this time and realises its approach to digital, skills and economic growth needs to be joined up, and the best way of doing that is from a business-led, bottom up approach.”

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