The path to a cleaner, healthier planet runs through the supply chain. The chief procurement officer could soon be the chief sustainability officer, or even the chief purpose officer.
A company’s procurement officer and sustainability officer might become one and the same, as more people realize that creating a healthier, cleaner world depends on buying products and services from ethical, eco-conscious suppliers.
According to an EcoVadis procurement expert, investors, consumers, corporate executives, and other organizational stakeholders all realize that corporate responsibility does not just build a better world, it also drives financial value. Global businesses are committing to key sustainability objectives: reducing greenhouse gas emissions, eliminating slave labor, avoiding plastics, conserving water used in production, tapping into renewable energy sources, and more.
Procurement teams are at the forefront when it comes to driving such programs. Money saved on purchasing can be spent on achieving brand purpose, delivering better customer experiences, and implementing sustainable business practices like resources circularity.
Procurement is at the forefront when it
comes to driving sustainability initiatives
A Shining Example of Sustainable Procurement
Johnson & Johnson is one company that has coupled its procurement and sustainability practices so suppliers can help the company achieve its mission.
The company requires procurement partners to adhere to its code of conduct and follow responsibility standards. It also opens doors for small and diverse suppliers, such as certified businesses owned by women, minorities, veterans, and disadvantaged people, through its Supplier Diversity Program.
For example, Johnson & Johnson buys office supplies from WildHearts Office through Ariba Network. As a “business for good” company, WildHearts is the UK’s leading B2B social business and a member of Social Enterprise UK, a leading global authority and network for social enterprises committed to social procurement. WildHearts promises to help save lives if you change your office supplies provider. The group’s profits go to a foundation that addresses economic injustice by giving people, such as struggling female entrepreneurs or those affected by social immobility, “a hand up, not a handout.”
Managing Expenses Intelligently
Johnson & Johnson manages its $2 billion purposeful procurement spending with the help of technology like Intelligent Spend Management, a program using multiple SAP solutions to tackle broader business challenges in each spend area — travel, procurement, external labor — coupled with SAP S/4HANA or SAP Analytics Cloud to unify the data.
“It’s impossible to operate 21st century businesses without a single view of spend,” said Jennifer Morgan, member of the Executive Board of SAP SE and president of the Cloud Business Group, at the recent SAP Ariba Live event in Barcelona. “The spend management mandate is expanding, both within functions and across the organization. That creates an opportunity to improve collaboration across finance, procurement, and to tackle joint business challenges with increased spend transparency.”
Procurement with Purpose
According to the Global Procurement Survey 2019 commissioned in collaboration with Dr. Marcell Vollmer, chief digital officer at SAP Ariba, it will be important for procurement to continue to look for ways to bring intelligence to expense management by evaluating emerging technologies and embracing innovations to elevate procurement’s role in driving revenue beyond cost savings.
Vollmer says the future procurement organization will orchestrate global supply networks, drive supplier innovations, mitigate risks, and align the supply chain with companies’ ethical and social values.
Sustainable brands like Johnson & Johnson are shaping the future of commerce worldwide. These companies are led by business leaders and practitioners who see social and environmental challenges as an essential driver of brand innovation, value creation, and positive impact.
Since procurement owns the relationships with an organization’s vendors, it is in the best position to establish transparency and sustainability requirements for supply chain activity. According to the most recent benchmarks in procurement, depending on the industry, the average spend that procurement controls is at 82 percent of total spend. This puts the chief procurement office in a very powerful position when it comes to financing a company’s efforts to achieve its sustainable development goals.
As Padmini Ranganathan, global vice president at SAP Ariba, noted at SAP Ariba Live, the chief procurement officer is helping to protect the reputation of the company by creating social and environmental impact, thereby adding value to the brand and the shareholders.
“When you detect slavery in the supply chain, you don’t stop doing business in a particular country,” she explains. “What you do is mitigate the impact by creating standards that become the norm. Integrating supplier risk assessment into the procurement process enables companies to address business challenges and take action using reliable data.”
More and more companies are looking to make the world a better place, and many are turning to new technology and Ariba Network, in partnership with supply chain risk assessment experts like EcoVadis, to effectively manage their costs with conscience.