Procurement priorities - are we hot or cold?

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Adding_value.jpgFollowing on from last month’s Sustainable Procurement exploration by Abrie de Swardt, IMPERIAL Logistics Marketing Director, SmartProcurement asked him to delve deeper into procurement priorities – especially when it comes to adding tangible value within the value chain.

The 5th edition of an HEC-Paris/EcoVadis report, ‘Sustainable Procurement: Back to Management!’ states that if we look closer at the top priorities of Chief Procurement Officers (CPOs), we find "savings" and "cost reduction" targets consecutively ranked first and second.

“For the procurement professional, these buzzwords form part of daily banter – with Key Performance Indicators,” said de Swardt. “In a sense, executives rely on the function to be the ‘on-the-ground cost saving gatekeeper’. Yet, in order for the procurement function to earn its seat at the boardroom table, its focus must shift from simple savings to delivery of added value.”

He believes that the procurement function can bank on tangible value through a focus on Sustainable Procurement. The concept, detailed in the HEC-Paris / EcoVadis study, which features participation by 80 large European companies, fleshes out the need for a fundamental shift in how we approach the procurement function.

Short- to long-term shift

To its detriment, in many cases procurement concentrates on a short-term, defensive approach. The survey notes: “The development of innovative products / services remains low despite an increase in its importance compared with the previous surveys. What is clear is that new green and social business models depend upon innovation, leaving a substantial gap to be filled in the vision of CPOs to implement a truly Sustainable Procurement vision.”

Value creation is pinpointed as a key driver of Sustainable Procurement, even to the point of being “leveraged with customers”. Fifty-three percent of this survey’s respondents consider the sustainability-centric approach to procurement to be “a way to ‘meet client expectations’”. According to the report, “this shows that many organisations are now facing new expectancies in terms of [Corporate Social Responsibility] (CSR) / Sustainability from the Procurement Departments of their clients.”

Interestingly, only 16% of the respondents use Sustainable Procurement as a way to ensure that goods procured from Low Cost Countries meet adequate environmental and social standards. Should this not be a quality standards opportunity for South Africa to capitalise on?

Truly forward thinking procurement

Abrie_deSwardt.jpg“The transformative power of Sustainable Procurement is vastly untapped by business in South Africa,” said de Swardt. The concept holds strategically sound potential for procurement professionals.

He views the prospect of procurement managers becoming increasingly engaged in sustainability as exciting. “This change in approach could literally transform the procurement job specification into the realm of ‘Responsible Manager’, by evolving from the current ‘cost-killing’ approach to a concept of Shared value Creation’ with stakeholders.”

He highlighted an excerpt from the report: “These “new” Responsible Managers will integrate a new way to manage their internal (i.e. buyers) and external resources (i.e. suppliers) by integrating factors beyond short-term financial performance (i.e. bring back the heart at the heart of the processes).”

“The CPO has a real opportunity in Sustainable Procurement,” said de Swardt, emphasising that the approach envisions a function through which all stakeholders, buyers, internal customers, managers and suppliers establish “new ways of collaborating in a network environment” based on the principles of the very latest in quality standards.

“This is not about blue sky thinking,” he concluded. “It is about communication and negotiation that is based upon a new way of doing business. A shift from from a ‘top / bottom line approach to a triple bottom line one, including the environment, social concerns and value creation for all stakeholders’.”

Is it ambitious? Yes. Though not impossible.

Abrie de Swardt will be discussing sustainable procurement at SmartProcurement World 2011, being held on 11 to 13 October 2011. To register contact Erieka Santos or send an email to delegates@smartprocurement.co.za

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