Tag Archives: ecovadis

Big Procurement Questions Deserve Big Answers

We know that procurement professionals like to get the latest intel on the hottest topics from the best in the business – so we’ve sorted you right out.  Your big procurement questions: answered. 

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What are the surefire ways to speed up procurement processes?

Can procurement ever completely eliminate maverick spend?

Why shouldn’t procurement simply squeeze their suppliers for every dollar they’ve got?

What technology will be the most game-changing for procurement?

What’s the best question to ask a candidate during a job interview?

Procurement questions as big as these require big answers from  people who know their stuff.  Happily, we gathered 50 of procurement’s top influencers and thought leaders in Chicago last month for Big Ideas Summit 2018 and managed to steal a few quiet minutes to put some of them to the test.

Pat McCarthy,  SVP & GM – SAP Ariba

Pat on eliminating maverick spend…

“Procurement can [eliminate maverick spend] but it has to make the purchasing process a destination people want to come to”

Pat on supplier relationships…

“You have to have a great relationship with your suppliers, one where they benefit and you benefit so that making a profit and you fining value in their solutions is the right balance.”

Pat on his favourite job interview question…

“I love to ask candidates about the last book they read because I’m most interested in curiosity – are they curious, what are they curious about – it tells me a lot about them.”

Read more from Pat McCarthy in his blog Procurement with Purpose – Not All Rainbows and Fairytales. 

Doug Leeby, CEO – Beeline

Doug on eliminating maverick spend…

“I think there are certain people, especially executives, who are special and they will always go around the system. If you had the power to say only those that are in the system will be paid then perhaps you [could eliminate maverick spend] but i’ve never seen a situation that had 100  per cent compliance.”

Doug on  his favourite job interview question…

“My go to question is – what are two or three things that you’re really really bad at?  What I’m looking for is A) what they’re really bad  at but more importantly the degree of introspection they have. If they’ve been honest with themselves and done a real inventory of what their areas of development are, what are their weaknesses then they’re somebody I can trust and work with.  If I hear somebody say that they don’t have any then they’re not going to be a good fit for us”

Read more from Doug Leeby in this blog The Rise of the Contingent Workforce… And How to Manage It. 

Daniel Perry, Global Alliances Director – EcoVadis

Daniel on eliminating maverick spend…  

“I don’t think procurement can necessarily eliminate all maverick spend, buyers find ways around any rules that you might put in place.  But if you can provide a very strong vision and mission for procurement and the company in general as to why you are trying to avoid maverick spend, if you can align it to your company’s  sustainability mission or the fact that you want to try and avoid using suppliers that use modern slavery then it gives the buyer another cause for pause before going off and doing maverick spend.”

Daniel on game-changing technologies… 

“Transparency is really changing the way that business is being done these days –  there is much a higher expectation for businesses and their supply chains, who they work with and who they’re associated with so I think the technology around due diligence, around assurance, around using companies that are reputable is going to be a big game changer in the way that companies decide which suppliers to use.”

Read more from Daniel Perry in this blog, Making Sustainable Procurement Work. 

Check out all of our exclusive video content from Big Ideas Summit Chicago via the Digital Delegates group on Procurious. 

Making Sustainable Procurement Work

Now, more than ever, it’s important for the profession to put sustainable procurement at the front and center of business.

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Daniel Perry, Global Alliances Director – Ecovadis believes that the role of procurement is evolving. Evolving from being “primarily focused on cost savings and operational efficiency, to a more strategic and central player in risk management and value creation.”

Now, more than ever, it’s important for the profession to put sustainable procurement at the front and center of business.

“Stakeholders, including end consumers, B2B customers, shareholders etc. are demanding that businesses take responsibility for practices all the way into their value chain. They’re driving transparency and, ultimately, a positive impact by working with high-integrity partners. And it’s procurement teams that are in the ideal place to meet these higher stakeholder demands.”

“The power of the spend that procurement controls (often between 50-70 per cent of turnover) puts procurement at the crossroads of not only risk management and brand protection, but also as internal partners for driving value creation. Of course they want the value chain to be resilient – to avoid interruptions or damage to their company’s reputation – but they also want to provide supplier-driven innovation and support for transformative business models and offerings. –

“Procurement teams focused on sustainability do this by selecting and working with the best suppliers in a way that goes far beyond price, quality and delivery, to include performance around environmental, social and labor and ethics practices.”

The value-add of sustainability programs

It’s all too common to hear an organisation defend their lack of commitment and lack effort in this space. “It’s too expensive”, “it’s too difficult”, “it’s too time consuming” or “we’re just not ready” are typical refrains.

The benefits and ROI of sustainability include not only operational savings, but strategic outcomes. A well-developed Sustainability and Corporate Social Responsibility (CSR) program that is integrated into the company values, and is driven with executive support, can drive key business performance metrics such as:

  • Sales and reputation: A burgeoning wave of consumer sentiment is cresting. More and more customers are comparing the sustainability details of products and services, and it is changing their purchase decisions. Companies making the right sustainability investments can realise a possible increase in revenue of up to 20 per cent.
  • Employee morale and productivity: Sustainability programs can do wonders to improve employee satisfaction, reducing a company’s staff turnover rate by up to 50 per cent and increasing employee productivity by up to 13 per cent. Integrating CSR practices in your company and brand also has a hugely positive impact on recruiting.  If your company has a better sustainability reputation, it often generates more interest from applicants, allowing you to be more selective and choose higher quality candidates.
  • Increased market value: Sustainability programs can increase a company’s market value by up to 6 per cent.
  • Innovation: With more power comes more responsibility…and more options. Many companies are pursuing sustainable procurement strategies in order to find innovative suppliers that will help them differentiate their product or service offering.

Dupont, for example, changed its innovation strategy to embrace a “sustainable growth” mission, saying “If we bring the solutions to the market sooner than our competitors do, we will be more successful in continuing to grow the company.”

Making sustainable procurement work

“One of the biggest challenges companies face in sustainable procurement is measuring and understanding current performance within their supply base, in the context of global standards and benchmarks. It can also be challenging to engage suppliers as collaborators in their mission. And to get there requires a mix of expertise, the right technology, change management and process integration backed by executive commitment.

“First, the organisation needs a clear mandate from the executive team, which makes the sustainable procurement program an integral part of the function’s mission and values. This is embodied by investing in change management and communication programs and taking steps towards implementation and company-wide adoption.

“Success also requires reliable, agreed-upon indicators for sustainability performance that both buyers and suppliers can understand, and that are actionable. Many companies collect lots of unvalidated data, but buyers rarely have the CSR expertise or time to validate or interpret it – and this is where a standardised, evidence-based, and analyst-generated rating – like EcoVadis provides – comes into play.

“Additionally, CSR criteria and performance indicators must be integrated across the procurement function and include the use of clear and enforceable codes of conduct, contract clauses and tender criteria. Buyers need to believe in and leverage these criteria in their supplier development and sourcing activities.,  And, procurement groups should agree on, measure and reward on the critical CSR / sustainability KPIs in the same way they track cost savings or other key metrics. These all drive adoption in the organisation and make sustainability inherent to the procurement role.

“Increasing the benefits to a single company, a mutualised platform can make it much easier for suppliers to share the same scorecard results with all their customers, enhancing transparency and collaboration to drive network effects for maximum improvement and impact.”

Daniel Perry will be speaking at Big Ideas Chicago on 27th September. To  hear more from him and to follow the action LIVE from wherever you are in the world, register as a digital delegate (it’s free!)

Read more on this subject from EcoVadis in  Beyond Compliance – The 5 Pillars of sustainable procurement value creation

The Three Pillars of Procurement Risk Management Strategy

What are the three essential factors for  effectively addressing the shifting conditions of sustainability risks and opportunities?

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This year has provided plenty of examples of why organisations need to better manage or participate in more effective sustainability and CSR initiatives to better manage risk, and purchasing and supply chain managers are finding themselves at the forefront of these initiatives, as keepers of the risk management keys. While hot button issues like worker safety and reputation risk are only increasing in importance, transparency and sustainability are reshaping consumer demand, and intelligence trumps data in supply chain risk management.

Luckily , this  emphasis on sustainability and CSR is breathing new life into purchasing and supply chain teams, giving them a renewed sense of urgency to establish  or expand supplier assessment programs and position themselves as greater strategic assets to their organisations and industries.

After reflecting on the variety of new supplier sustainability programs EcoVadis has helped launch or evolve, our experts have discovered three key factors as essential for effectively addressing the shifting conditions of sustainability risks and opportunities.

1. Program Reach and Depth

When setting up a supplier monitoring system, the assessment methodology should cover all key themes in sustainability and Corporate Social Responsibility. It’s common for homegrown or initial assessment programs to start by tackling just one issue, like environmental sustainability or human trafficking. To truly have an impact and effectively manage risk, however, the system should cover criteria across environment, labor and human rights, ethics/anti-corruption, and the supplier’s own sustainable sourcing practices.

Geography is also a significant factor when designing and implementing a program. Most modern supply chains span over 100 countries, so the assessment methodology should be appropriately adapted to cover this spread, engaging and supporting suppliers in local language wherever possible and taking into consideration variances in regulations and culture, at least for the top regions.

Finally, the size of the suppliers/third parties you are working with is another important dimension to examine. Many of them will be small- or medium-sized enterprises (SMEs) that are not listed on any stock exchange, and with little required reporting or public information. The monitoring system and methodology should be adapted accordingly to measure these SMEs.

2. Seamless Integration: Change Management and Processes

To make sure your teams and partners have the best chance of success with a new or changing sustainability and CSR initiatives, the methodology and processes used to both collect data and adopt performance indicators must be integrated into current, familiar processes and workflows.

There are two elements to this:

Change management

It is essential that the supplier sustainability monitoring solution vendor be able to support you and your team in the required change management program that will drive adoption of the initiative. This could include consulting on strategy and rollout, program branding, communications and supporting content development, training, support/helpdesk, onboarding services and reporting.

System and process integration

A key enabler to maximizing the impact of sustainability criteria on purchasing behavior is to integrate the assessment system into the current supply chain management platforms such as e-Sourcing, e-Procurement, CLM, SRM or similar platforms.Supplier monitoring solutions that come with an API that can be used to integrate the CSR indicators to other platforms are a huge advantage here. This way, you can give buyers and category managers access to current and complete sustainability data within the tools they are using today.  

For a deeper dive into these criteria and checklists, get this free Ebook covering “Five Essential Criteria For Selecting A Supplier Sustainability & Risk Monitoring Solution.”

3. Creating Measurable Value

No matter how thorough or amazing the assessment solution, it will only be effective with supplier participation. Here are a couple key ways sustainability monitoring programs can provide value to suppliers, which is vital to engagement and the ultimate success or failure of the initiative:

Alignment with relevant labels, certifications and standards

Suppliers will always care about compliance and a core feature of any monitoring system is to ensure suppliers adhere to the relevant global, regional and/or category-specific labels, certifications or standards. Examples might include FSC for fiber-based products, REACH registration of chemicals in Europe, or EnergyStar for appliance makers in North America, and so on. There are thousands of such labels, certifications and standards across the 120+ countries touched by global supply chains. A comprehensive supplier assessment program must take into account all  relevant assessments and maintain an annually updated list in each major region/country. In doing so, suppliers can ensure that their efforts are “valorized” in the monitoring process, making it more efficient for them to participate.

Actionable results, benchmarks and feedback

The results of a sustainability assessment should be digestible and actionable by both the buyer’s side (procurement and supply chain, EHS&S, risk), but also for the supplier.  Visually exhausting spreadsheets of checkmarks, or a list of documents from a supplier is often hard to understand and thus not actionable by a purchasing or category manager. These roles want instead to understand how suppliers’ sustainability performance compare to their peers and what the norm for the industry or geography is. Also, being able to also clearly understand performance over time is another vital part of any system. Solutions that make the short list should provide actionable results and indicators, benchmarks for comparing performance, and feedback on areas of improvement.

Continue reading The Three Pillars of Procurement Risk Management Strategy

Sustainable Procurement: Reversing The Race To The Bottom

Don’t dismiss the importance of supply chain sustainability! Learn from the mistakes of others and count yourself out of the race to the bottom! 

A short-sighted focus on cutting costs and speeding products to market is resulting in a race to the bottom that will cost companies more in the long-run. Top performers in sustainable sourcing will emerge with stronger supply chains, higher margins, more trusted brands and happier customers.

Consumers are increasingly putting their money behind sustainability, with Nielsen reporting 66 percent of global consumers are willing to pay more for products from companies they perceive as sustainable. This is forcing every industry to innovate in a way that makes transparency and sustainability permeate throughout the entire supply chain. Companies are often stuck in a race to the bottom, focusing on offering the lowest possible prices to compete with retail giants like Amazon and Walmart. Manufacturers who sell through these giants are also competing with each other, facing immense pressure from their customers to have the lowest price each week. Although price may seem like the best factor to emphasize, quality and sustainability considerations are often sacrificed in favor of cutting costs and speeding time to market. Even companies that have made sustainability promises often retreat after the initial pressure wears off due to perceived higher costs, but the long-term impact of irresponsible sourcing will impact their bottom line even more in the end. In fact, a recent BCG study found that gross margins were 4.8 percent higher for companies that were top performers in sustainable sourcing compared to those who were median performers.

In the long-run, participating in the race to the bottom is bad for business as it results in cheaply made, low-quality products and services that undermine the viability of the companies they are sourced from. This will all eventually be discovered by consumers and other stakeholders, and will open companies up to varying kinds of risk, including economic and financial, reputational and quality control consequences. Because these risks can impact a company’s bottom line, it is crucial to consider how sustainability can mitigate risk before it happens.

Unfortunately, hesitation and fear around competition (antitrust) laws are deterring businesses from working together to promote sustainability. A new report from the Fairtrade Foundation found that businesses are wary of working with rivals to improve the quality and security of their supply chain, but with fluctuating trade fees and climate change they have no choice but to collaborate. Instead of competing with peers to be fastest and cheapest to market, companies should be working together to promote sustainable procurement. When companies within an industry work together, it sends a much clearer signal to suppliers about the importance of responsible practices. With the right indicators and tools, those buying organizations can help suppliers advance in maturity and improve their practices – not only in sustainably issues but across all business operations. Companies should be working with other industry players – instead of against them – to ensure efficient and effective sustainable practices.

Learn from the mistakes of others

Nike, Asics and Puma saw the consequences a lack of sustainable and ethical practices could bring when more than 500 workers in four factories were hospitalised after fainting on the job. Outsourcing factory jobs to Cambodia may have saved the company some money on labor and wages, but unethical work conditions including long days and soaring temperatures canceled out any small benefit the retailers may have seen. The reputational and operational consequences turn out much worse than the small cost reduction initially intended. Improving ventilation and adding air conditioning, although good intentions, only put a band aid on the problem – these retailers and other companies should be working together to implement ethical and sustainable procurement practices as part of a long-term solution.

Geopolitical considerations

The turbulent political and trade climate in recent months is also challenging. Companies in almost every industry in the U.K. are facing a difficult choice between joining the race to the bottom to secure post-Brexit deals in terms of purchasing cheaper products from other countries and promoting high-quality, ethical and sustainable practices. Unfortunately, lower standards mean lower quality products and services, which will not just limit the emphasis placed on tackling issues like climate change and modern slavery, but also impact business revenues in the long run. NAFTA is having a similar effect on North American companies, making the consequences of the race to the bottom a universal concern. Instead of panicking about the effects of eminent trade deals, companies should be focused on working together to pursue sustainable procurement and mitigate risk before it happens.

Fortunately, many local and global governments are encouraging businesses to get on board and combat modern slavery, environmental sustainability and other risks in the supply chain. California recently signed the “Buy Clean California” act, which will clamp down on imported carbon emissions by creating rules for the procurement of infrastructure materials purchased with state funds. The U.K. just pledged $53 million to combat modern slavery with a focus on improving the apparel supply chain, joining the U.K. Modern Slavery Act in attempting to ensure business compliance. Australia may follow suit and introduce its own laws designed to root out forced labor and compensate potential victims.

At this point, we shouldn’t be thinking of it as “sustainability for sustainability’s sake,” but sustainability for risk mitigation and improved business operations. Technology is evolving to help companies better trace suppliers and other parties and improve transparency throughout the supply chain. Regulations around the world are banning or limiting unethical practices. The movement towards sustainability has changed in the last decade, placing the burden directly on companies to ensure responsible practices – both within their own operations and those of their partners. It may seem daunting to invest in sustainability while competitors are continuing to race to the bottom in pursuit of producing the cheapest products fastest, but companies that go above the standard will find it truly improves their bottom line and creates more value throughout their supply chain.

Pierre-Francois Thaler is co-founder and co-CEO of EcoVadis, a supplier rating company that helps organisations institute corporate social responsibility (CSR) and various sustainability programs. Pierre brings 15 years of experience in procurement and developing innovative sourcing solutions. Prior to starting EcoVadis, Pierre was CEO of B2Build SA, the first B2B marketplace for the European construction industry, and also served as a director of Ariba’s Procurement BPO business.