15 May 2020
Topics in this article
  • Cost Optimization
  • Sustainability

Pre-crisis we ran some research with Finance Leaders in the US and UK on various topics, including sustainable procurement. Out of 502 participants from business owners to Directors, 86% said that they currently use sustainability as a metric to help shape decision making within their business. An additional 13% said they plan on integrating these topics into future business planning.

The emerging truth was that sustainability was finding its way into corporate purpose. The nagging doubt was that “sustainability sells” and that many were seeing it as a trend to capitalize on rather than a movement to commit to wholly. Organizational and customer attitudes would be truly tested in recession. Well, now we have one.

No doubt, some “sustainability initiatives” will be canceled over the coming days, weeks, and months, but that is in no way a negative endorsement of the movement; lots of investments will be canceled. Consumers, Governments, and Business leaders will be careful about where they spend their money, and they will be looking for Financial and emotional return on investment. They will be seeking to balance cost reduction, with differentiation. They have also had an intensive period of reflection.

And with all this in mind, sustainability still has its place near the top of the agenda. The future is still sustainable. The fact that some things will be different is a threat, but it is also an opportunity; since we have an opportunity to reboot, we can put sustainable procurement at the core. As we have said in other Proxima articles, the CPO can be an advocate here, but organizations need to be joined up on its purpose, from the customer all the way back through the supply chain, to the leadership.

Sustainable by design – a new era?

There are many competing forces coming out of the pandemic. One popular movement that provides a good example is the pursuit of resilience and, in particular, the pursuit of resilience in the face of low-cost country sourcing, or low-cost complex supply chains. In these examples, adding resilience or advanced monitoring systems is going to add cost at a time when organizations want to preserve cash, and consumers want to spend less. So will sustainability and sustainable procurement take a back seat because “sustainability costs more”?

Possibly not. Although the signs point towards aggressive cost reduction campaigns, but they also lead to a need for greater innovation, automation, and sustainable long term solutions that differentiate. Also, “sustainable by design” does not need to cost more. This could well be the start of something big, where sustainable first, is a new design principle.

Sustainable sentiment is strong

It will be interesting to see what happens as lockdown eases, and consumers are freer to choose where they spend. Over the last two months, we have seen glimpses of what a more sustainable future could look like: socioeconomic, environmental, or mental health.

We have also had glimpses into the power of corporate purpose as businesses collectively came together to help the world navigate this global challenge. Notable examples included the grocers adapting their corporate mission to simply “feed the nation,” or organizations like Dyson, Babcock, Brewdog, and others demonstrating the power of innovation and agility to manufacture and supply PPE, Ventilators, and Sanitiser.

Let’s not dance around the topic – each of these firms will likely be profiting from their acts of good, and why not? Doing well out of doing good is the objective. The need to create economic value in a way that creates value for society by addressing its needs and challenges is a must in the current conditions.

If you are starting out on your sustainable procurement journey, here are a few tips for how you can start…

1. Understand what’s out there, certification is an opportunity

Pre-crisis, most commentators were expecting more in-depth regulation to come out of governments. This is still likely, particularly as there will be a need for greater social purpose and a green economy. As businesses rebuild and reboot, there is an opportunity to get ahead in regulatory cycles and embrace emerging norms. This will not only get you ahead of the game but will also set you down the path of managing risks in the organization/ supply base. Some initiatives to explore now include:

a. Fair Factories Clearinghouse
b. Prompt Payment Code
c. Living Wage Foundation
d. UN Sustainable Development Goals
e. ISO 20400

2. Embrace Innovation to unlock new sustainable value

The new world needs innovators, and sustainable innovation will be a critical tool for survival, and not just during the pandemic. Distinguishing yourself as a leader in saturated and disrupted markets, when overcoming sustainable challenges can provide untapped value opportunities.

This doesn’t have to mean making shoes from plastic, or 3D printing parts (although that works). Instigate innovation amongst your supply base, innovate your workplace, and how your employees engage with each other. American Express has reported savings of $10 to $15 million annually, as a direct result of its remote working policy, while also driving business outputs up by 43%! Sustainability is part of the new innovation playground that looks at the top and bottom line.

3. Create a visual supply chain

In today’s global networks, supply chains pose risks for any business because of financial, productivity, reputation, or other factors. As a result of the pandemic, businesses should not throw out old practices by default; rather, they should seek to create visibility, which enables fact-based, risk-informed decisions.

As has been widely noted, it is often in tier 2 or 3 of the supply chain where visibility is lost. But on the whole, businesses should seek to understand where they need to “know their suppliers” and “know their supply chains.”

4. Embrace technology to support your sustainability goals

Technology has become the wind in sustainability’s sails for both the consumer and organizations providing more data and deeper insights into what’s ethical or unethical in businesses and supply chains. It’s also the only way lots of things can be done at speed, scale, and acceptable cost.

Technology is paving the way forward for how we engage and learn about ethical dilemmas and is forcing fast paced decisions that can mitigate risk and drive value. From utilizing digital tools to audit supply chains to tracking emission footprints through energy management suites and AI, which can propel efficiencies – there’s a tool to support your sustainable objectives.

5. Utilize multi-level risk assessments

Understanding risks will help you understand where you’re likely to be exposed, and you can do something about it (Robustness and the currently popular Resilience). This will enable you to focus on ensuring that the supply base adheres to the environmental and sustainable standards expected. Specifically tailored risk-mapping approaches could include:

  • Country-level risk assessment
  • Business entity assessment
  • Factory level assessments
  • Supply chain/ critical supply
  • Crisis protocol
  • Grievance mechanism

Risk is also an end-to-end discipline from screening and selection through to lifecycle management. It’s not a one-off exercise. It’s also fairly futile if not combined with the “so what” resilience and contingency planning.

6. Bigger isn’t always better

Collaboration with small and medium-sized enterprises (SMEs) and Social enterprises have the potential to offer greater responsiveness and value as the economy restarts. Promoting local collaboration and innovation throughout your supply chain and the UK as a whole can help kick-start your cash flows and benefit the economy and broader industry ecosystem.

Social enterprises promote economic equality across the UK, which will be desperately needed in the coming months. These organizations operate under the primary premise of ‘business for good,’ and there are many services on offer, ranging from FM to IT and HR. Organizations have enormous amounts of sustainable value to unlock – so why not start today with sustainable procurement? Get in touch to find out more.

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