In previous blogs, SIG has covered the basic concept of sustainability, including an overview of its various dimensions. In this post, I will touch on the role that sourcing professionals can have in meeting corporate sustainability goals.
Why should sourcing have a role?
Sourcing is uniquely positioned to contribute to meeting a corporation's sustainability goals because sourcing typically has expertise in:
Creating alignment to corporate goals
Building frameworks to measure success
Researching market conditions and supplier capabilities
Conducting strategic negotiations
Designing innovative methods for value creation
Ranking the priorities of stakeholders with supplier offerings
Identifying risk and mitigating responsibly
The reduction in costs after implementing a sustainability program can exceed the costs of implementation – in other words, you’re spending money up front but in the long run, you save more than you spend. For example, if an organization were to target the spend category of corporate services and facilities management (FM), capital may be invested in working with a supplier to install a new system that reduces energy consumption at the company's North American headquarters, but in the long run, the reduction in energy costs saves the company money – which of course, can then be reinvested.
In this example, procurement and sourcing are uniquely positioned to make this happen. Most likely Sourcing negotiated the original FM contract, understands the innovative capabilities of suppliers, has heard many recent pitches on new products, and is adept at performing the analysis that proves an investment can have a significant return in hard costs, and even soft costs.
Mary Zampino, Vice President – Content, Research & Analytics
The concept of sustainable sourcing, also known as green purchasing or social sourcing, is nothing new. Sustainable sourcing is impacting nearly every area of corporate business and the consumer’s mindset. Everything from sourcing materials, talent attraction and consumer purchasing habits are changing because of the growth of sustainable sourcing. However, the term gets thrown around in the procurement industry quite a lot and is often misunderstood or misused. So, here’s a guide with all the basics you need to know about sustainable sourcing.
WHAT IS SUSTAINABLE SOURCING
First and foremost, we have to define the term. Sustainable sourcing is the integration of social, ethical and environmental performance factors into the process of selecting suppliers. It includes purchasing sustainably preferable products and services (products made from recycled or remanufactured materials), as well as green purchasing guidelines that might pertain to certain products or commodities.
SIG University Certified Sourcing Professional (CSP)program student Kimberly Morelli works at Driven Brands. She shares how essential components such as soft skills and change management can be and how she is implementing newly polished tools and best practices to tackle organizational challenges.
In the CSP program, students focus on the hard and soft skills of sourcing, including strategic sourcing and outsourcing methodologies, as well as best practices in negotiations.
My enrollment in the CSP Program from SIG University has proven to be timely and I am excited at the opportunity to have lessons that can be readily applied to our procurement organization. I also was heartened to find emphasis by SIG on positive supplier relationships versus an adversarial stance as used to be popular. The procurement team I am on has been in a state of transformation over the past few years, shifting from transactional buying to category management with a specific focus on increasing our sourcing processes. I found the CSP program to have laid a strong framework that is applicable to my organization, both in procurement and business areas.
According to Gartner’s latest predictions, in just four short years, half of all procurement organizations will have near-real-time procurement analytics – will yours be one of them?
While we can argue the probability of this claim (along with the debatable prediction that we will see a large rise in voice-command PO processes), there is certainly no denying that the way companies do business is changing. Between hyper-automation, machine learning, and a renewed focus on user-centric design, we can now access and influence limitless channels in a matter of seconds. With this massive influx of new data and opportunities for connection, sourcing and procurement must adapt to the rapidly evolving market or risk falling behind.
Like Sales with Customer Relationship Management (CRM) platforms or Human Resources with Human Capital Management (HCM) solutions, modern sourcing organizations need technologies that will empower them with visibility into their processes, proactively manage projects and mitigate risks, and generate actionable insights based on real-time data.
Why Digital Transformation is Mission-Critical for Your Business
Implementing new technology can seem daunting, but with an effective change management strategy, you’ll find that the benefits far outweigh any costs. If you’re still on the fence about adopting modern solutions, here are five benefits your organization is missing out on by continuing with its current processes.
Chris Crane, Co-Founder, Product, Scout RFP, a Workday company
What is the Sustainable Procurement Pledge and how did come about?
The Sustainable Procurement Pledge (#SPP) was born out of passion and is driven by a shared sense of responsibility. #SPP addresses people, not organizations. We are ultimately the ones who constitute organizations and who are making daily decisions in our workplaces. The biggest lever to have a positive impact is therefore with us! #SPP primarily addresses those who are connected to the Procurement function, procurement professionals, academics and students, but does not exclude anyone outside this area of activity. Those who feel concerned by the #SPP messages can start and join right away!
The idea was ignited by the Global Climate Strike on September 20, 2019. Adults and children, from all walks of life, made a clear statement and we were reminded about our prime responsibility: to leave our home, our ONE planet, in the same condition as it was entrusted us.
There are many great and profound sustainability initiatives already. They typically involve companies, governments, institutions and top leaders. However, we rarely see initiatives that address individuals. And yet, we all have the power to make impactful everyday decisions and gradually change the world. We fundamentally believe that many small changes ultimately lead to a big change?
2019 was an amazing year for sourcing. We witnessed greatness as the Future of Sourcing Awards showcased some of the most innovative projects, individuals and teamwork the sourcing industry has seen. The pages ofFuture of Sourcing, SIG's sourcing and procurement thought leadership publication, gave great insight into trends and best practices of the year as well. Below are the top articles of 2019 from Future of Sourcing that you don't want to miss. I hope these give you inspiration and motivation to innovate processes and implement change inside your organization in 2020.
How Digital Technology Will Transform Talent Acquisition
Today, intelligent automation and machine learning are boosting productivity and optimizing a wide range of back-office operations. How are these emerging technologies changing the way we find talent? Helen Castor gives us some insight.
As we settle into the holidays and celebrate with family and friends, we also look to a new decade. Absent a downturn economy, it’s hard for some to understand the importance of a strong procurement and sourcing organization. But we are so much more than just a cost-savings industry. While we are seen as an overhead, we really are the engine that keeps the company on course.
Rather than looking back at all the gains our industry has achieved this year, here are my thoughts on some of the exciting trends that I believe will pick up momentum in the next year.
1. Elevating the Role of Strategic Sourcing
Without strategic sourcing, we would not be able to improve cost, quality and service levels while guarding against third-party risk. Without the strength of our negotiations, contract development, business insights and supplier relationship management, we would fail on safeguarding our supply chains against human trafficking, conflict minerals and child labor.
I’m seeing more interest in third-party risk management from boards and company executives, and in my conversations with them, it’s clear that more resources will be devoted to supporting sustainability initiatives and the ability to act on business insights.
The pressure for companies to solve society’s most pressing problems is growing exponentially, fueled by the gravity of looming issues such as climate change or social inequality. While the majority of companies have already defined their corporate commitment and social impact objectives, many leaders are struggling to implement strategies that actually achieve their aspirations. Considering that 78% of executives believe their companies are failing to deliver on their social impact pledges, there’s a dire need for companies to drive social innovation across each department and generate positive social change through their day-to-day operations.
Amid the changing business landscape, companies are required to achieve two core objectives: generate profits and elevate corporate social responsibility. Due to procurement’s immense purchasing power, more executives are turning to their CPOs to drive innovation and sustainability – all while generating tangible impacts that benefit the communities they operate in. Here’s how procurement leaders can achieve these objectives and simultaneously generate new business value by adding social impact into their sourcing and procurement process.
This is the final chapter in our tail spend series and we’ve covered some significant ground to understand what tail spend is, why it happens, and the potential issues with ignoring it or managing it in the wrong way. In this final chapter, we'll explore the ways you can find savings in your tail and how to build a strategic sourcing framework to help you manage it going forward.
To get up to speed, you can read the entire Talking to Your Tail Spend series on our blog:
Amy Fong, Principal - Procurement and Purchase to Pay Advisory, The Hackett Group
We’ve released a series of articles to answer your questions about tail spend. We started by defining tail spend, discussed how to better work with stakeholders to manage it, and now we’re diving into the potential risks lurking in your tail spend and the problem with taking a scorched Earth approach. To get up to speed, read our prologue, Chapter 1 and Chapter 2 on what this tail spend series will help you accomplish.
What is the risk exposure in my tail spend?
Risk is an increasingly important consideration in procurement and we’re right to think about the impact of risk hidden in our unmanaged spend. The tricky thing about risk is that it can differ across companies, even within the same industry. Supplier financial risk is important to most, but what about brand risk, geopolitical risk in the supply chain, and the risk of payment fraud? Depending on the spend category, IP risk or labor practice risk may also be a consideration.
The starting point, once again, is the spend analysis, with the category manager charged with determining the highest risks for their category. If a category isn’t actively managed, it can be assigned to a risk team for a basic analysis. Given that the average company only actively monitors about a quarter of suppliers for risk, there’s a lot of unwatched suppliers even outside the long tail. Risk assessments are typically driven by supplier spend or a triggering high-risk factor.
Amy Fong, Principal - Procurement and Purchase to Pay Advisory, The Hackett Group