“Business staying in business” is a responsibility of the procurement function

Responsible Procurement

Original author: Alis Sindbjerg Hemmingsen

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Organizations have complex supply chains with a range of customers and suppliers of goods and services that influence the way it operates. While customers set specifications and standards that suppliers must meet, suppliers constantly strive to improve the efficiency and profitability of their operations, while simultaneously seeking to delight their custom. Therefore, successful businesses must always be looking for ways to stay competitive.

At the same time, we have to open our eyes and start acknowledging and acting on the fact that our resources are threatened. Our economies motivate people and businesses to consume to such a degree that the planet cannot regenerate itself.

We have the opportunity to re-think the way we do business.

OUR RESOURCES ARE THREATENED

Many natural resources are threatened. Some are more obvious than others and some we are more aware of. But they all – regardless of how well-known the scarcity of the resource may be – pose a threat to companies with supply chains.

Responsible Procurement is an approach that allows you to influence your supply chain. It can help you make informed purchasing choices by knowing more about where the products and services you purchase are made so their environmental impact is minimized.

For instance, if you buy regularly from the same supplier why not do a bit of research into their environmental policies and practices? If every business did this, there would be demand for companies to green their practices and take on responsibility in order to remain competitive.

TAKE ON RESPONSIBILITY

The requirement to take on responsibility for society is not indicative of some passing trend, but rather a cultural shift. It is a backlash to the western world’s disposable culture and an expression of Milton Friedman’s phrase “the business of business is business” has changed to “the business of business is staying in business”. Taking responsibility for the impact of your own operations is no longer enough. The world demands more of you.

You are now also held accountable for what goes on in your supply chain. From working conditions to corruption to environmental impacts. Your procurement of products and services is under scrutiny.

Your challenge is to understand the impact your procurement decisions have on local communities, workers and the environment. And then take action to make sure that you create a positive impact. At the end of the day, that is what Responsible Procurement is all about. If you plan it well, it can promote sustainability, provide you with cost savings and protect and enhance your brand.

VALUE CREATION

Ensuring that the procurement strategy is based on a responsible-decision making approach has become an important business parameter. Additionally, it is essential for you as well to understand that Responsible Procurement, in its best format, can be a value creation process.

Responsible Procurement can have a fundamental strategic and operational impact. It can promote competitiveness and innovation. Responsible Procurement is a strategic tool, which can help minimize your company’s negative impact on people, society and the environment, while maintaining or enhancing value for customers, business partners and shareholders.

REVOLUTIONIZE THE PROCUREMENT STRATEGY

I typically define Responsible Procurement in the following way: ”Responsible Procurement integrates requirements, specifications and criteria that are compatible and in favour of the protection of the environment, of social progress and in support of economic development by seeking resource efficiency, improving the quality of products and ultimately optimizing costs.”

However, some companies see their Responsible Procurement initiatives as pure risk management and use it for compliance purposes. The strategic and operational impact is then, typically, medium to high, though it mitigates operational risks.

Improving efficiency, reducing demand for materials and cutting waste all reduce your costs and are good for the business and for the environment. Maximizing these benefits requires you to manage your supply chain and integrate business activities to create value for your customers.

Responsible Procurement is about increasing a company’s profit, improving strategic supplier relationships, strengthening the brand while remaining vigilant towards competitors and revolutionizing the procurement strategy to fit the current business picture.

And at the end of the day: ensuring that “business stays in business”.

What do you think?

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