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Why Contracts And Cashmere Are The Future, Says Commercial Relationship Expert

Look at your latest supplier contract. Does it specifically mention Zoom catch-ups? If not, why not? Sally Guyer from World Commerce & Contracting talks with Procurious about getting the most from suppliers and technology.

Have a look at your latest supplier contract. Does it specifically mention communication like regular Zoom catch-ups or phone calls? If not, you’re missing a trick.

Procurious Founder Tania Seary recently spoke with Sally Guyer, Global CEO of World Commerce & Contracting on getting the most out of supplier relationships and predictions about the future of procurement. 

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It’s been a wild year, but disruption isn’t unique to 2020. 

“I think it’s really interesting because there have been numerous supply chain upheavals inflicted by disaster in the last decade,” Sally says.

“You’ve got things like the volcanic eruption in Iceland, Japanese earthquake and tsunami, the Thailand floods, numerous hurricanes, not to mention the global financial crisis which also needs to sit on that list; yet we don’t seem to have learned very much,” Sally explains. 

“Most companies still found themselves totally unprepared for the COVID-19 pandemic.”

After this crisis is over, companies will fall into two categories: those that don’t do anything and hope that a disruption like this never happens again, and those that map their supply networks.

Supply networks

You should know how your suppliers (and your suppliers’ suppliers) fit together, which is why mapping out your network is so useful.

Companies who already made the effort to document their network acted quickly when the pandemic spread. Other companies were floundering and reactive. 

“We know from our research that many organisations typically don’t see beyond the first tier of suppliers, or possibly tier two,” Sally says.

“If we ever doubted the importance of visibility, the pandemic has provided a dramatic example of why it’s absolutely essential to have insight into sources of supply.”

Sally is seeing leading organisations require suppliers to participate in supply chain mapping efforts as part of their contract.

And it serves an important part of rebuilding.

“[We’re] moving away from the linear and much more to a recognition that supply networks’ supply ecosystems are a huge number of organisations all interacting with one another where there needs to be fluidity amongst them all. 

“And that’s essential to accelerate and support recovery.”

Sustainable cashmere

Companies are also investing more heavily in technology to help them gain end-to-end visibility.

Blockchain technology is particularly noteworthy.

Sally gives the example of tracing Mongolian cashmere production. The country is famous for its luxurious fibres – producing nearly a fifth of the world’s raw cashmere

And even though cashmere is considered natural and sustainable, soaring consumer demand is fueling overgrazing and damaging the land. 

So Toronto-based Convergence.tech and the UN teamed up to create an app for Mongolian farmers, backed by blockchain technology. 

Now the UN is able to interact with over 70 different herders and eight cooperatives through a simple app.

Farmers use the Android app to register and tag their cashmere. Then their location is pinned on a map to allow for end-to-end tracking. The UN works with the farmers and other producers along the supply chain to improve sustainability.

“Farmers are willing to have their goods marked in return for training on better practises, and then open markets pay fair prices for truly sustainable and high-quality cashmere,” Sally explains.

“Everybody benefits. Everybody wins.”

Better contracts, better relationships

Another way technology is transforming the supplier/client relationship is through communication.

Sally advises all clients to include communication obligations in supplier contracts.  

“It comes down to simple things like if we want to do video conferencing does your organisation support Zoom or not, because if I do and you don’t then [that’s an issue],” Sally says.

It’s not rocket science. All good relationships hinge on good communication, says Sally.

“Fundamentally, partnerships are founded on robust and clear communication, and you know I always talk about professional relationships in the same context as I talk about personal relationships,” Sally says.

“If you don’t have clear communication with your friends, with your partner, with whomever is around you, then you are not going to have a very successful relationship.”

While you can’t provide for every eventuality in your contracts, you need a robust framework to support the relationship which means communication needs to be at the top of the agenda.

Predicting the future

The year is 2030. What are the hot topics in procurement? Here are Sally’s predictions:

1) Sustainability

“We’re still a long way from creating our sustainable planet and it has to be something that we all continue to champion,” Sally says.

“We need to be promoting best practises to reach the next level where we’re actually starting to give back. Not just to seek neutrality but actually give back.”

2) Social inclusion

“I can’t imagine that social inclusion wouldn’t be important in 2030,” Sally says. “Perhaps a scorecard of corporate performance on social inclusion and social value.”

3) Technology

“Numbers suggest we’re only using 30% of the data that we are producing,” Sally says. 

“And if organisations are genuinely on a journey of continuous improvement then they need to be using data and the likes of artificial intelligence natural language processing if they’re going to continue to advance.”

4) Integration

“We need to organise for integration,” Sally adds. “We need to break down the internal barriers that exist.

“We all operate in silos. We’ve got organisations who have a buy side and sell side and they have no idea what’s going on on either side of the organisation. So those companies are starting to look at how they create an integrated trading relationships function.”

Sally Guyer can be seen in our exclusive series The Future of Supply Chain Now.

How Procurement Can Deliver Social Impact Through Sustainable Sourcing

How can procurement teams use purchasing power to improve an organisation’s sustainability and social impact?


Across industries Chief Procurement Officers are assuming the responsibility for their firm’s sustainability and social impact objectives. All while continuing to identify the best price, vendor and value for each transaction. 

Businesses are grappling with pressure from investors, employees and customers to generate greater shared value and to help address the world’s most pressing societal challenges – like climate change and social inequality. And procurement teams have to find answers. 

Amidst movements like ‘procurement with purpose’ or the Sustainable Procurement Pledge, more executives are turning to procurement teams to drive their company’s social impact agenda and help achieve their sustainability targets. 

In fact, commitments to sustainable procurement increased by 81% between 2016 to 2019. 

This has been fuelled by a rise in executive-level support. Just 13% of respondents in the 2019 Sustainable Procurement Barometer cited leadership buy-in as a challenge to sustainable procurement, compared to 50% In 2013.  

By nature, not all social impact initiatives can be implemented overnight. Here’s a look at how procurement teams can execute immediate, evergreen and long-term strategies to use the function’s immense purchasing power to improve their company’s societal and sustainability impact.

Immediate impact

First, procurement teams must ensure that their strategies align with the company’s larger social or sustainability goals. By working with social impact enterprises like Givewith, procurement teams can identify issue areas that are financially material to the firm. 

Then they can embed Givewith’s social impact programmes directly into their RFPs – requesting the supplier allocates a percentage of the transaction to a pre-vetted non-profit, social enterprise or NGO – to generate new funding for the cause and advance the company’s corporate commitments. 

By adopting social impact sourcing solutions, companies can appease both Chief Financial Officers and CSR leads by simultaneously catalysing social progress and generating cross-company value. 

Suppliers are very willing to support these initiatives on behalf of the buyer in these negotiations because social impact generates shared value and helps advance their company’s KPIs.

As companies continue to adopt strategies that mitigate risk – which can take years to fully implement – they can immediately advance business-relevant causes entirely outside of their supply chain operations by funding programmes of interest to their causes, such as those that allow 500 girls of colour to attend coding workshops in 13 cities across the United States. 

Evergreen opportunities

In addition to social impact sourcing, procurement teams should consistently seek ways to improve supply chain diversity, transparency and sustainability. 

Using software solutions like SAP Ariba can help companies vet unethical suppliers that spur slavery, poverty or inequality. Likewise, adopting buyer solutions like EcoVadis can help companies gain insights into the intricacies of their global supply chains and see the ethical and environmental performance of their vendors. 

In addition to pre-emptive vetting, procurement teams should consistently monitor and measure their suppliers’ performance to track sustainability results. Tracking and measuring this data over time can help the company manage risk and improve its operations. 

Long-term strategies

Following in the footsteps of international frameworks like the UN Sustainable Development Goals, the world’s largest, most forward-looking companies are beginning to adopt timelines for achieving their social impact and sustainability goals. 

This is a big opportunity for procurement. It can become a strategic arm of its organisation by working closely with the company’s executive team, financial decision-makers and social responsibility leaders to set sustainable procurement benchmarks and calculate how these efforts are advancing the company’s larger mission.  

In addition, procurement teams should also work closely with their suppliers to identify ambitious yet realistic goals that benefit both parties. 

They can encourage opportunities to co-create and co-innovate with suppliers on sustainable solutions.

As the pressure on businesses to help solve the world’s most pressing challenges continues to grow, so will the pressure for procurement to act ethically and more sustainably.

That’s why procurement leaders need to adopt social impact sourcing strategies that will benefit their business today and well into the future. 

Disrupt – Or Be Disrupted

We have to try to engage proactively with a changing business world, no matter how impossible it seems to predict what is coming.


‘It’s difficult to make predictions – especially about the future,’ as an old Danish proverb observes. 

The saying – sometimes attributed to physicist Niels Bohr – makes perfect sense. Predictions are hostages to fortune, and it’s not difficult to think of a number of well-known forecasts that turned out to be embarrassingly wide of the mark. 

Thomas Watson, then president of IBM, wrote in 1943 that he saw a world market for ‘maybe five computers’. Steve Ballmer, then the chief executive of Microsoft, said in 2007 that there was ‘no chance’ of the newly launched iPhone gaining any significant market share. Telephones were just a toy that would never catch on, wrote the president of Western Union, William Orton, in 1876, when inventor Alexander Graham Bell offered to sell him the patent. 

And so on, and so on. 

Nevertheless, not everyone has the luxury of being able to avoid being held to account. Especially those of us who run businesses or supply chains.

For us, we have to make predictions: it’s our job. And right now, we’re facing a choice – disrupt or be disrupted. Here’s why. 

Why do we need to make future predictions? 

A business or supply chain that is ill-prepared for the future is a business or supply chain that may not have much of a future. 

In the current business environment, we all need to make predictions about the future. But even so, making predictions about disruptive trends is excruciatingly difficult.

While it’s easy to laugh at how wrong predictions can be, at the time those predictions may well have appeared to be sober, hard-nosed assessments. 

All of which is worth bearing in mind as businesses and supply chains around the world begin figuring out what to do about 2 key disruptive trends that are competing for our attention. 

1. The sustainability agenda

From the fuel that powers our trucks, ships, trains, and aircraft, to the paper and plastics that make up our packaging, logistics is very much in the crosshairs of sustainability activists’ sights. 

We all need to have a strong sustainability agenda. Ignoring the issue is not an option. But right now it’s difficult to see what options we have. 

A few years ago, the focus was on ‘peak oil’ and running out of the stuff. Now investors are alarmed at the prospect of so-called ‘stranded energy assets’ – reserves of fossil fuels that may never be extracted because of their impact on climate change. 

2. Geopolitical uncertainty and the perils of a hyperconnected world

After sustainability, the next disruption that will affect all of us is ongoing geopolitical uncertainty. President Trump’s trade wars. Brexit. China and its ‘Belt and Road’ strategy. Seemingly perennial Middle East tensions. These are not comfortable times in which to be determining supply-chain strategies. 

Nor is it solely geopolitical uncertainty that impacts supply chains. From the Japanese earthquake and tsunami of 2011 to the more recent coronavirus outbreak, again and again we see what an interconnected world we live in. 

Within days, an event on the other side of the world can disrupt supply chains thousands of miles away. Supposedly resilient, they turn out to be more fragile than anyone imagined. 

Roll it all together, and it is increasingly difficult to avoid the suspicion that present approaches to supply chain management aren’t as effective as we practitioners fondly imagine. 

What can we do? 

In short, we need something else – not least a change of mindset. Because transformation is only possible when we are willing and able to let go of our old patterns, old models – and old concepts of what constitutes supply chain management. 

Put another way, the biggest risk that businesses may face today is the risk of doing nothing at all. It is not an exaggeration to say that businesses can choose to disrupt, or to be disrupted. 

As I point out to my students, Uber is the world’s biggest taxi company, but doesn’t own a single taxi cab. Airbnb and Booking.com are the world’s largest hoteliers, but don’t possess any hotels. And after being in business for a quarter of a century, Amazon – the world’s biggest bookseller – is only now experimenting with physical book shops. 

It’s time for something more radical 

Even some of the world’s leading thinkers on business and supply chains believe we need something radical, and we need it now.

In late 2018, for instance, influential management thinker John Elkington took to the pages of the Harvard Business Review to officially ‘recall’ – i.e. take back – a concept that he had first launched 25 years ago: the Triple Bottom Line.

Simply put, he argued, the Triple Bottom Line was no longer enough. Something else was needed. Something bolder. 

To those in the know, Elkington’s admission was startling. The Triple Bottom Line had an enormous impact on businesses’ and supply chains’ approach to corporate and social responsibility. It replaced a single-minded focus on profitability with a broader focus on social, environmental and economic impact – the Triple Bottom Line. 

There’s no doubt that it’s made a big difference. But it isn’t enough, Elkington acknowledged. Too many businesses see it as a trade-off mechanism, rather than as an absolute test. 

Something else is required if businesses are to really ‘shift the needle’. Right now, though, we don’t yet know what that something else could be. 

But one thing seems certain: despite Donald Trump’s dismissive remarks at Davos this year, Extinction Rebellion and Greta Thunberg won’t let up on the pressure to find it. 

Supply chains need a radical rethink, as well 

Another concept that may be ripe for re-evaluation is the very notion of the supply chain. Look at many real-world supply chains, and it is difficult to escape the conclusion that ‘chain’ is too mechanistic a description of fulfilment processes – too linear, too unidirectional, too evocative of inflexible conveyor belts. 

In industry after industry, real life doesn’t work like that any more, if indeed it ever did. 

What can we replace the term ‘supply chain’ with? I rather like the suggestion that ‘supply web’ would be a better term.

It is closer to what many of us deal with in practice. It brings with it values of flexibility and resilience, as well as facilitating two-way flows and multiple sourcing connections. 

Does such relabelling help? Shakespeare, after all, aptly observed that a rose by any other name would smell as sweet. 

But with all due to respect to the Bard, I disagree. We need that mindset change. We need to let go of our old patterns and old models – and embrace new thinking.

As practitioners, ‘supply chains’ imprison our thinking, locking us into paradigms that constrain us. ‘Supply webs’ open us up to new possibilities, new paradigms and potentially new and different processes. 

And with the challenges the world faces, those new possibilities, paradigms and processes have never been more needed.

Disrupt – or be disrupted. Be an Uber, Airbnb or an Amazon. And not a moribund traditionalist. 

‘Often The Right Way Isn’t The Easy Way,’ – Sustainable Sourcing From A World Leader

Whether or not your business is prioritising sustainability right now, there’s no doubt that it will be the focus for many of us in 2020 and beyond.


As we all well know, executing on sustainability can be challenging. Is it even possible to have full supply chain transparency? How do we manage the requirement to be sustainable against risk and cost savings? Almost all sustainability initiatives, while well-intentioned, can be fraught with complexity. 

While this may be the case for many of us, one person who believes that sustainability isn’t as complex as it seems is Chris Fielden, Group Supply Chain Director for Innocent Drinks. Innocent Drinks is a revolutionary health drinks company that gives an incredible 10% of their profits to charity. Beyond this, Innocent focuses on sustainability throughout every part of their supply chain, from creating a plastic bottle that’s made from 100% renewable material to developing a carbon neutral factory. 

Prior to his keynote at Procurious’ Big Ideas Summit, we sat down with Chris to see how he helps drive such incredible sustainability achievements at Innocent: 

Live your values – and incorporate them into your business model

Have you ever looked at a corporate values chart and thought to yourself, ‘those don’t really seem to matter here?’ Many of us feel the tension between aspirational values and lived values, but one of the reasons Chris thinks that Innocent is so successful in sustainability is because they don’t do this. 

Chris believes that sustainability can’t simply be a ‘tick box’ but it needs to be front and centre of a business’s genuine value set if they want to achieve it. On this, Chris says:   

‘Innocent drinks is a values-led business, absolutely. We believe in [and live by] sustainable capitalism. We hire people against those values.’ 

‘Often the right way [to do things] might not be the easy way, but we do things the right way anyway because we truly live our values.’ 

Even beyond this, Chris says that sustainability needs to be incorporated throughout an organisation’s entire business model: 

‘Here at Innocent, we’ve incorporated sustainability into our entire business model through becoming a B-Corp.’  

Give your people freedom 

Sustainability is often about pushing boundaries and doing things that haven’t been done before. So, in order to achieve that, Chris thinks you need to give your people creative freedom – and this is exactly what’s happened at Innocent. 

‘[The carbon-neutral factory idea] came about primarily because we told our people not to accept no. We told them “don’t accept it when someone says it can’t be done.” In all aspects, we try not to constrain our people.’ 

Not limiting people also applies to the suppliers you work with, says Chris. In fact, when you don’t give suppliers limitations, you can sometimes achieve things you never would have imagined. When planning Innocent’s carbon-neutral factory, Chris gave his suppliers an unusual challenge – which yielded an unusual (yet highly beneficial) result: 

‘With the carbon-neutral factory, we said to the contractors we employed – just geek out and tell us what you would do if you had unlimited funds and no restrictions.’ 

‘Doing so meant that it actually turned out cheaper than we budgeted and the solution is ever better!’ 

Giving their people and suppliers freedom has meant that Innocent’s new carbon-neutral factory,  to open in Rotterdam in 2021, is truly one of a kind. Costing over $250 million, it will incorporate initiatives such renewable energy, sustainable water use, and resource-based waste management. Its Rotterdam location will also mean considerable C02 is saved, as the drinks are produced close to where ingredients arrive, saving trucks over 13,000 trips a year. 

Not being afraid to fail 

Despite Innocent Drinks being a relatively large company (it recently surpassed £10 million in donations alone), everyone works hard to cultivate an entrepreneurial spirit, says Chris. And a big part of this is not being afraid to fail. 

‘Failure is a big part of what we do. We only have to be 70% sure of what we’re doing. And failure has led us to where we are – we’ve doubled in size because we’re not afraid to fail.’ 

This can sometimes be hard to stomach as a procurement professional, Chris thinks, as we’re trained to mitigate risks. But Chris insists that Innocent still do this: 

‘We do have risk registers so it’s not as if we’re being cavalier!’ 

Where to from here? 

With Innocent being at the forefront of all things sustainability, it’s hard to imagine what Chris might still want to achieve. But there’s always more, says Chris, and ultimately, he’d like to see more businesses taking an active role in helping the environment: 

‘I would love to see more businesses doing more – but we can’t wait for politicians to mandate this. The impetus needs to come from us.’ 

Ultimately, Chris has an important message for all procurement professionals out there: 

‘If you put sustainability at the heart of your agenda, then know this: you can make a difference very quickly.’ 

What are you doing to drive the sustainability agenda at your business? Let us know below. 

Want to learn more about exactly how Chris is driving the sustainability agenda at Innocent, and how you can do the same? Chris is speaking at the 2020 Procurious Big Ideas Summit on March 11, and you can hear all of his insights through becoming a Digital Delegate. Grab your free pass here.

5 Ways To Achieve Marginal Gains In Procurement

By Eugene Onischenko / Shutterstock

At the Big Ideas Summit 2019, Justin Sadler-Smith, Head of UK & Ireland, Procurement & Supply Chain at SAP Ariba shared his view of procurement in an insightful and thought-provoking presentation.

Among the issues that Justin talked about was an ever-decreasing time for procurement to react to the changing market environment and put actionable strategies in place. Because if procurement isn’t fit for purpose, not delivering against stakeholder expectations, then there is the potential for huge, negative impact from a brand and shareholder perspective.

There is a whole mix of uncertainties which are causing people to reassess how they are doing business and then ultimately doing it in a different way. Organisations, and procurement as part of them, need to be looking at what we are doing tomorrow and reinvent ourselves to become more competitive than they have been in the past.

As part of this Justin talked about an issue that is fast becoming a key for procurement to take account of and account for in its day-to-day operations. And that is leaving behind a positive legacy. Here is Justin explaining it in his own words:

Faster Reactions, Greater Purpose

When it comes to procuring with purpose, procurement professionals around the world need to be able to react quicker to changes in order to set the foundation for the legacy we should all be leaving behind.

Justin argued during his presentation that it’s almost as if procurement is in a race. In simple terms, those who are fastest to react, fastest to respond to changing demands are those who will win. It might not even be procurement who are the ones triumphing in the race, and that could spell the end for procurement as we know it.

The issue here is that many procurement professionals just haven’t been trained to do this. Without adequate training, much like an Olympic athlete, or Tour de France rider, there is no chance of being able to meet these demands and deliver what is required.

How do procurement professionals get trained up then? There’s no use knowing that there is a need to change unless there is willingness to do so, as well as more support to implement it.

Help is at hand, however, from an unexpected source. When Sir David Brailsford became Performance Director at British Cycling, he came up with the idea of breaking down the individual aspects of a race and then improving them one by one. The notion of ‘marginal gains’, was that a number of small, 1 per cent, improvements would collectively add up to a major competitive advantage.

It was this thinking that helped British Cycling dominate on the track at successive Olympic Games between 2004 and 2012, and then Team Sky/Ineos win seven of the last either Tours de France (not to mention other events and Grand Tours).

How then do we take this concept and apply it to procurement? Justin has shared his thoughts on this, helpfully broken down into five key areas.

Marginal Gains in Procurement

  1. Data – Where is data stored within your organisation and how easy is it for you to get it? How is HR data incorporated in your function? You need to look after people – those who own the data – as this is the life-blood of the organisation and you need to make the breadth and depth of your data valuable and usable.
  2. Productivity – procurement can drive this in an organisation by looking at different areas of automation that probably haven’t been looked at before. For example, how many people are really looking at AI as a way to change their organisation, without worrying about the spectre of job losses?
  3. Innovation – this is the concept of co-innovation by working in collaboration with suppliers to building differentiation. For this you need to get closer to your supplier base and remove any barriers to working closely with the right suppliers.
  4. Purpose – what do we mean by purpose? It’s the idea of driving social responsibility through supply chains at multiple levels. This is well beyond a tick box exercise now – it’s a must for good business as well as for making a better world. The idea runs beyond risk mitigation and focuses more on building value through sustainability.
  5. Well-being – people are living in a much more stressful period globally. However, by driving these needs and having a purpose, it can change the game when it comes to how people operate and feel. For procurement, this means attracting, retaining and caring for their top talent and nurturing their people.

Procure with Purpose

Procurious have partnered with SAP Ariba to create a global online group – Procure with Purpose.

Through Procure with Purpose, we’re shining a light on the biggest issues – from Modern Slavery; to Minority Owned Business; and from Social Enterprises; to Environmental Sustainability.

Click here to enrol and gain access to  all future Procure with Purpose events including exclusive content, online events and regular webinars.

After Saving Costs, Now Is The Time To Save The World!

We, as procurement professionals and as citizens, have a responsibility to take action to tackle the challenge of working sustainably.

By Malchev/ Shutterstock

August 1, 2019: this could be when we reach the “Earth Overshoot Day” this year. For the rest of the year, we will be living on credit. When it comes to natural resources, that is.

“Earth Overshoot Day marks the date when humanity’s demand for ecological resources and services in a given year exceeds what Earth can regenerate in that year.” Source: OverShootDay.org

At the time of writing of this article, the actual date for Earth Overshoot Day is still unknown, but for several years in a row, we have reached the limit in early August. Based on this precedent, we can safely assume that it will be very similar this year. We may even reach it in July—a first! The situation also varies greatly by country. Some countries already reached it in February/March!

In short, this means that we would need 1.7 Earths to sustain our current level of consumption of natural resources.  Considering that we only have one Earth to go around, this is a very preoccupying statistic, and even more worrying is the trend and speed at which the day is arriving earlier and earlier each year:

This situation is clearly not sustainable and we, as procurement professionals and as citizens, have a responsibility to take action to tackle this challenge.

The end of the tragedy of the commons?

 “The tragedy of the commons is an economic theory of a situation within a shared-resource system where individual users acting independently according to their own self-interest behave contrary to the common good of all users by depleting that resource through their collective action.” Source: Wikipedia

To exit the tragedy of the commons, there is an urgent need for us to mobilise and act on a global scale. All economic actors have a role to play.

Governmental institutions can foster sustainability in two major ways. Firstly, by investing in businesses, research, and infrastructure and secondly, by creating regulations and policies to develop and promote socially- and environmentally-friendly practices. By adopting the right mix of carrot and stick, governments can steer behaviors and economic growth towards more favorable and sustainable outcomes.

Investors/shareholders also have an essential role to play, because by exercising their influence, they can push organizations to make sustainability a top priority. In fact, many green companies go beyond legal/governmental requirements and make sustainability the heart of their business model.

“[T]he next phase of business sustainability, what we call “market transformation,” is founded on a model of business transforming the market. Instead of waiting for a market shift to create incentives for sustainable practices, companies are creating those shifts to enable new forms of business sustainability.” The Next Phase of Business Sustainability in The Stanford Social Innovation Review (SSIR)

These companies and investors understand their obligations and interests, because the long-term survival of an organization depends on the health of its surrounding ecosystem. The concept of “Creating Shared Value” explains why a new type of investors is becoming more visible and active:

“Impact investing has become a broad umbrella that includes all investing with a focus on both financial return and social impact, but in its best form, impact investing prioritizes impact over returns and achieves outcomes that traditional investing cannot.”Jacqueline Novogratz, founder, and CEO of Acumen, a non-profit global venture capital fund whose goal is to use entrepreneurial approaches to address global poverty

Consumers represent another powerful force. Not only do they drive demand, their buying decisions also have the power to influence what products companies produce and, to some extent, how they produce them. The growth of the “business of sustainability” and of the “circular economy” are indicators of this shift.

So, when we ask ourselves who has the power to create a more sustainable future, the answer is really:  all of us. We can all exercise our influence as voters, investors, collaborators, and consumers to drive sustainable policies and practices forward.

And, when it comes to sustainability, procurement professionals have even more power than most!

Sustainable Procurement

Procurement plays a central role in transferring value from the upstream supply chain to the downstream of the chain. This means that, Procurement is the key player that enables a business to also “walk the walk” when it comes to sustainability by looking beyond prices and costs. Concepts like total cost/value of ownership (TC/VO) are not new, but they are still not commonly used, especially when integrating the impact on the ecosystem into TVO models.

For any sustainability efforts to be effective, businesses need to take a holistic approach. This is why truly “sustainable procurement” encompasses aspects related to the environment, labor & human rights, business ethics and, community development.

Many mature procurement organizations have already started to incorporate some of these aspects into their procurement approach, but the goal of these sustainability measures is often limited to “risk prevention.” Brand/reputation protection has long been a key motivating factor for organizations that have considered integrating sustainability into their approach.

And, as mentioned earlier, there is more to it than that. Sustainability can also be an engine for growth. So, to harness the full potential of sustainable procurement, procurement organizations must first understand and be aware of their role/duty, and then act accordingly to embed sustainability in all their activities. For example:

  • Sourcing decisions: Include sustainability in TVO models (e.g. CO2 footprint, use of best available techniques, supplier diversity, etc.)
  • Contract Management.: Incorporate sustainability clauses (e.g. reduction of waste/energy consumption, recycling, supporting disadvantaged or marginalized groups in the community, reporting on sustainability aspects, etc.)
  • Supplier evaluations: Integrate quantitative and qualitative criteria into scoring models and develop real-time scorecards that also leverage 3rd party data and public sources of information

“The obligation, and the self‑interest of every company is to build a robust society.” Tim O’Reilly

Sustainability is a challenge that requires the urgent attention of all of us. As Procurement professionals, our responsibility is even greater. Therefore, we should embed sustainability in everything we do and, as much as we are able, we should become the consciences of our organizations by ensuring that sustainability is not just an empty vision, but a practice. To do this successfully, we must ensure that suppliers

  • behave correctly in terms of Corporate Social Responsibility (CSR)
  • use performance indicators related to Environmental, Social and Governance criteria (ESG)

Only then can we play a role similar to an investor by following SRI (Sustainable, Responsible and Impact Investing) principles when making decisions and assessing options. This represents a much better purpose and meaning than just cost savings!

Sustain Me – 4 KPIs to Get Your Sustainability Project Over the Line

With your vision, drive and persistence with your corporate finance team, you will be able to define a quantifiable dollar value on your sustainability initiative…

By SkyPics Studio/ Shutterstock

Getting your organisation up to speed with sustainability is no easy task.  It’s an area of responsibility for procurement and supply chain that covers a multitude of minefields – environment, social and economic etc. But also, fortunately, some daisy fields –  stronger brands, employee value proposition and a major positive contribution to a better society.

I’m lucky to have been educated on most of the sustainability areas throughout my career and via my global network.  But if you’re early on in your career, or new to the area of sustainability, it’s a lot of ground to cover!  My best advice (and this won’t be a surprise!) is to use your extensive network to get educated and learn best practice.

When I speak with people around the world, the biggest problem they have is getting off first base. The need to get budget approval from their CFO for their sustainability project.

Many companies around the world have signed up to The United Nations 17 Sustainable Development Goals (SDGS), to all of which procurement and supply chain can make a positive contribution.  How your sustainability project is going to help your company achieve its SDGs is the first and most obvious link you need to make with your C-level and your project.

The case for purpose is just like any other corporate initiative, it has to be rooted in a strong financial return – a business case.  However, many of the important benefits that come from managing sustainability are seen to be unmeasurable. Organisations have been struggling to put a value on the impact of catastrophic supply chain events that permanently scare their corporate reputation.  The value of having positive relationships with employees and the community can also be difficult to quantify. But investors and the community are putting increasing demand on companies to validate their sustainability efforts. Reporting on sustainable communities and regional spend, by way of example. 

With the vision, drive and persistence within your corporate finance team, you will be able to define a quantifiable dollar value on your sustainability initiative.  Here’s four ideas for KPIs to get the thought processes flowing:-

1. Reduce total lifecycle cost

The early part of my career was spent extinguishing media fires set by consumers concerned about the environmental impacts of disposable nappies or aluminium cans. I quickly learnt that there are indeed three sides to every story.  Industries do so much to consider their impact on the environment and often go above and beyond what’s required, but rarely get appreciated in the mainstream media. In our “sound bite” media society, consumers rarely get to understand the concept of “total lifecycle cost”. It’s important we all build total lifecycle cost models, so we quantify and measure the total impact of the products and services we produce. This will allow us to measure whether we are increasing or reducing our total impact, that can be shared with others.

2. Increase employee engagement

Sustainability projects of every kind are a fantastic way to build your employees’ engagement with the purpose of your organisation.  In my personal life I got involved in the Great Barrier Reef Research Foundation and learnt about the impact of climate change and declining water quality on the health of our reef. Until that point, I had no idea what the impact of commercial farming, water and ocean freight passage lines had on our marine ecology. As a member of their Board of Governors, I was invited to swim the reef and was briefed first hand by the world’s leading marine scientists. Employees were also invited to take sabbaticals to the remote labs.  Nothing could better build employee engagement and understanding of climate change than these experiences. It had a huge impact on employees’ concerns and actions, but also lead to an increased respect for their company’s commitment to protecting the Reef.

I’ve also supported microfinance initiatives through an organization called Opportunity International, with a focus on small women-owned businesses in India. This gave me real insight into the plight of so many women in the world and the impact that breaking out of the poverty cycle can have on future generations.  This made the plight of small female-owned business in emerging economies very real to me, which has always helped crystallise situations such as Rana Plaza for me and the obligation we have to suppliers several layers down in the supply chain.

3. Construct a Net Promoter Score for your community

Does anyone measure this? In my mining days, this was referred to as a “license to operate.” That is, that the community trusted you to operate your business responsibly and ethically. Mining companies, probably more than any other industry, understand how important it is to ensure sustainability is at the front and centre for all their decisions. One program I worked on was a local sourcing program. We qualified and engaged suppliers from the local area to help underpin the social strength of the community in which their employees worked – a very different form of sustainability!

4. Commit a single digit percentage of your corporate spend to social enterprises

About ten years ago I began working with Social Traders, a company who was building capacity amongst social enterprises to enable them to win corporate contracts. Once again, I was reminded of the multiplier effects when marginalised members of our communities are engaged and employed.  For me it’s a no-brainer. There are definite areas of corporate spend that lend themselves well to social enterprises – (hint:  look first at any category that includes labour spend).  As one CEO said “we’re going to spend the money anyway, we may as well make sure it counts.”  It was difficult to get traction a decade ago, but I’m delighted to see now how much energy there is within the corporate sector to engage social enterprises. What’s great in these commercial relationship is that everyone wins – the suppliers, the companies, the shareholders and the employees.  It’s very powerful.

I’m bringing my years of experience and passion for procurement-with-purpose and sustainability to life by providing a global platform, Procurious, for people to share their learnings and experiences with each other.

For us it’s about demonstrating to our global network of procurement pros that purpose pays and that anyone can make a difference in their organisation, no matter how small.

Get up the learning curve as fast as you can by learning from your peer network.  Join Procurious.  Join the Procure with Purpose group, start sharing your knowledge, start asking questions and start shifting the dial on these sustainability outcomes.

Three Ways To Make An Impact In Your Procurement Career

Procurement professionals are in a unique position to step up and make a positive impact. Here are three areas where procurement professionals should direct their attention… 

In an age when people want to work for companies who are doing good in the world, when consumers vote with their wallets and achieving supply chain transparency is easier than ever before there has never been more pressure for procurement professionals to commit to, and prioritise, making a difference in the world with the work that they do.

Tom Derry, CEO – ISM, discusses three areas where procurement professionals should direct their attention…

1. Sustainability

There was a time when sustainability was merely a PR strategy with minimal corporate effort put behind it. But those days are long gone and we’re at the tipping point where businesses can finally see the financial benefits of operating sustainability.

I’m familiar with the CPO of a major food manufacturer here in the United States,” says Tom.  “One day the Rainforest Action Network was protesting on their corporate campus. It came down to the sustainable sourcing of palm oils, which is a major food ingredient. What we’re realising now is our supply chains can create unexpected consequences. In this case, palm oil was being sourced from Indonesia, which incentivised local farmers to burn down the rainforests in order to plant palm trees. The food manufacturer was jeopardising the existence of this incredible biodiverse resource, without any sense of the consequence of sourcing palm oil to make their products.”

Tom also mentions the importance of catering to customer demands.  “My own daughter makes her consumer purchase decisions based on how she views the sustainable practices of the companies. Companies have realised that if they lose that customer, consumers walk away and you never get that business back.”

But, according to Tom there’s another reason key you have to take sustainability seriously. “In the stock market, companies like JP Morgan are publishing reports on companies based on ESG – which stands for Environment, Sustainability and Governance. So it’s no longer just financial metrics that are driving stock prices. It’s your score on your environmental performance, how sustainable you are, and your governance around your sustainability strategy.

“When that starts to drive stock price, that gets everyone’s attention. Believe me!”

2. Modern slavery

With 21 to 46 million people in slavery around the world, procurement professionals have a huge responsibility in weeding it out of their supply chains?

As Tom points out, it’s a sobering statistic but companies are  beginning to do amazing things. to tackle modern slavery.  “Nestle, for example, investigated their own supply chain for fish used in pet food products and found that the Thai fishing flight was using impressed labour. They identified the problem and proactively went out to address it rather than waiting for someone else to discover it.”

This approach allows companies to avoid appearing defensive and reactive and Tom believes we’ll see more and more companies taking that kind of stance, “because they have to!

“It’s not just about protecting your company’s reputation, but it’s also a recognition that we all share as humans that it’s a morally reprehensible practice – and none of us want to be a part of it.”

3. Diversity and Inclusion

A third way procurement and supply chain professionals can make an impact in their organisations is to improve supplier and workplace diversity.

“We need to make sure our supply bases reflect the kinds of communities where we do business,” argues Tom. “We also need to make sure our teams, internally – and our leadership teams – reflect those communities too.”

“Diversity broadens our point of view. We become more sensitive to cultural issues.”

Remember the backlash last year when PepsiCo released an ad featuring Kendall Jenner that somewhat insensitvely echoed a Black Lives Matter protest? Criticised for trivialising and exploiting the movement the ad was soon removed but not without significant damage to the PepsiCo brand.

As Tom points out,  “a diverse team will heighten your awareness to those issues before they get out into the public domain and embarrass you. You have a multitude of perspectives on how to solve problems.”

“ISM has got a long standing leadership position in this area . We’ve got a formal statement on the value of diversity to the profession we organise a conference and sponsor a certification to help people become leader of diversity efforts.”

Part 3 of Tuesdays with Tom is available now. Click here to sign up and hear ISM CEO Tom Derry talk on sustainability, modern slavery, and diversity. 

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.

AYA images/ Shutterstock

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

3 Mega-trends In Procurement You Need To Understand Before 2019

What are the key mega-trends procurement pros need to get their heads around before 2019?

CatwalkPhotos/ Shutterstock

1. Co-Creation –  Using collective efforts to bring the best value

Since the very beginning of my career in Procurement competition was a key.  Competition helps procurement drive down prices using quotations, tenders, e-auctions or other tools.

And, of course,  it is much easier to negotiate contract terms and conditions with  if you have alternative sources.

Striving to establish, at least,  dual sourcing for every product helps you to decrease supply related risks.

But with greater experience I started to see that competition has its limits,  that RFQ’s and tenders were not bringing the desired effect.  This was particularly apparent for certain groups of products with limited supply possibilities and higher complexity.

I learned that for such segments a more efficient strategy is to cooperate with your key suppliers.

Cooperation is about alignment and harmonising performance, goals and strategies.  The very first step should be about aligning performance and KPI’s. Then you align the goals, including price reduction. At this point, the strategies of both companies should be aligned.

So cooperation is the alignment and harmonisation between two parties: the procurement organisation and the vendors.

But is cooperation and competition with suppliers enough in the modern world?   My simple answer is no. Procurement of tomorrow is about more than delivering goods, reducing prices and mitigating risks. The future of procurement is creating value for the final customer. And so the new buzz-word coming in 2019 is Co-Creation.

Co-creation is about developing and delivering products, services or systems using the common efforts of all interested parties.

2. Digitalisation

In my consultancy work I meet ten to twenty Procurement and supply chain organisations every year. It’s a big privilege to meet so many great people, and work in a variety of industries and businesses.

But one thing that surprises me is the fact that the majority of organisations are not making procurement decisions based on  complex benchmarking or performance indicators.

In fact, the majority of organisations in Europe and North America are making Procurement decisions based entirely on  cost reduction. Whatever has been discussed before quotation is ignored and whatever might happen after is neglected.

“Give me the best price: here and now! And you get the business…” – is still the driving force for many procurement organisations.

Of course, this approach is beneficial in the short term. But on a strategic level it will not work.  In the era of big data this approach is a crime. I know that digitisation and fact-based Procurement decisions may not sound like a mega trend for many readers. But before you skip this point – answer one simple question. Do you really include performance evaluation and risk analysis in all your Procurement decisions?

3. Sustainability: Part of our new reality

Sustainable procurement is not a new term.

The United Nations definition says that sustainable procurement practices are the ones that integrate requirements, specifications and criteria that are compatible and in favor of the protection of the environment, of social progress and in support of economic development, namely by seeking resource efficiency, improving the quality of products and services and ultimately optimising costs.

It might look a little complicated at first glance, but it is quite a straight forward definition.

More and more countries are shifting towards sustainable procurement; improving national procurement policies and procedures. But the true leaders in this shift to sustainable procurement are the international corporations. Using their massive purchasing power, they are able to make real impact to ecological, technological or social standards across entire industries.

Some companies use the sustainability messages for marketing of their products or services, creating positive buzz and media attention to their brand. Many more develop their sustainability agenda for mitigating or preventing risks within supply chain.

One thing that I can say for sure; sustainability is becoming part of a new reality for procurement organisations. It is not a buzzword anymore, it is an expectation customers. People are beginning to understand that low prices should not be achieved by unethical or unsustainable means.

So what can you do to introduce sustainability to your Procurement agenda?

Start by investigating in more sustainable sources and raw materials. Look around your industry or category to identify the best practices and get some inspiration.  I guarantee that you will find great cases of good environmental, social and sustainability impact for any area and any category.

Of course you should also include sustainability parameters to your RFI/RFQ evaluation criteria.

Another great idea would be to involve some measurable indicators for your sustainability progress. For example, carbon emissions, water footprint, share of renewable energy used for manufacturing or recycled materials used for products.

And remember: responsible sourcing is more profitable in a long term!