The role of business is quickly changing. Consumers, employees and investors expect businesses to act sustainably with more transparency – while also giving back to the communities that they operate in. To drive corporate social responsibility and sustainability holistically, companies need to examine their actions and operations to ensure their day-to-day activities align with the organization’s larger corporate commitments.
Considering procurement’s immense purchasing power, more executives are turning to their Chief Procurement Officers and procurement teams to drive innovation, sustainability and social impact. Transactions can transform lives when procurement professionals implement solutions that generate profits and tangible impacts that benefit society at-large. Here’s how procurement leaders can integrate better business practices into their RFP processes to generate new business value that benefits their department and their stakeholders, too.
The Next Chapter of Procurement with Purpose
Broadly, the notion of procurement with purpose is about using “their third-party spend to support causes that go beyond the immediate needs and operations of the firm – whether that might be carbon reduction, supporting diversity, encouraging local enterprise or reducing plastic waste.” Whether it’s increasing supply chain visibility to ensure ethical labor conditions or prioritizing vendors that uphold similar corporate values like diversity and inclusion, there is a huge opportunity for procurement leaders to take their CSR vision and make it a cross-department reality. For instance, organizations like SAP Ariba are helping buyers identify sustainable suppliers with fair human practices as part of their commitment to procure with purpose.
While mitigating risk and vetting vendors is an essential part of procurement with purpose, it’s also about generating positive, forward-facing impacts. Procurement innovation is top of mind for CPOs, whether its supplier collaboration to developing environmentally friendly products, or embedding social impact into B2B transactions, there’s an array of new and exciting methods to ensure procurement propels the company’s larger social goals.
Adopting Social Impact Sourcing
As the business landscape changes, so does procurement. Today, procurement is no longer just about delivering sourcing-centric cost savings. Similar to other industries, it’s evolving to support the company’s larger corporate strategies and long-term goals, which is why leaders in the space are “also expected to enhance their influence with C-level peers and extend their business impact into strategic areas such as procurement risk management, corporate development and innovation,” according to Deloitte’s Global Chief Procurement Officer Survey 2019.
There’s an incredible opportunity for procurement to take their organization’s CSR mission and make it a cross-company reality through their everyday spend. Procurement leaders can generate unprecedented value from their purchasing dollars by aligning their sourcing operations with their company’s social and sustainability goals. Adopting new technologies like automation can help teams streamline their routine purchasing tasks, which can free up more time for procurement leaders to identify strategic purchases that actually advance the company’s corporate values and business objectives. By adopting social impact sourcing – in which the buyer and supplier agree to direct a percentage of the total transaction to a mutually agreed upon nonprofit, social enterprise or social impact – procurement leaders can make their company’s purpose-driven aspirations into tangible change.
The Business Value of Social Impact
While CSR is a critical part of an organization’s success, all too often, it’s restricted by financial budgets and limited resources. It’s no surprise that executives are seeing the disconnect between their CSR objectives and the action taken to achieve them, considering 78% believe their businesses are failing to deliver on their social pledges. However, companies that prioritize social impact only after they’ve achieved their key business objectives are missing out on a major opportunity, considering CSR projects have been shown to improve the company's reputation and positively impact job performance.
Procurement can play a critical role in advancing the company’s CSR goals by tracking the KPIs of their socially responsible spending. Not only can they help to advance the company’s social impact strategy, it can also generate new business value for other departments such as human resources, investor relations, and marketing and communications. For example, by working with human resources and internal communications teams, procurement can share their social impact internally to boost employee morale. They can also help gain external exposure for the company by reporting the impact of their sourcing practices to Environmental, Social and Governance rating agencies like GRI, MSCI and SASB.
Today, procurement can play a major role in advancing the company’s corporate commitments. By focusing on sustainability, social responsibility and innovation, procurement teams can generate unprecedented value for themselves, their companies and their communities.