Procurement technology should make it easy to source ethically.
Guest post by Charlotte Spencer-Smith,
Supply chain transparency is one of the key challenges facing Procurement and Sourcing in the coming years. There is growing awareness among consumers of the effect of supply chains on environmental sustainability and social well-being, for example, child labor. The brand damage and regulatory compliance issues that arise when environmental and ethical problems are exposed in supply chains can have a real impact on a manufacturer’s bottom line. Governments, consumers, and corporations are calling for new levels of supply chain transparency – and this is no easy task. However, new and innovative solutions are developing.
In our fast-paced times, technology is shaping our expectations of our abilities and our ambitions of what we would like to achieve. The same is true of Procurement solutions: the abilities – and limits – of the technology play a key role in shaping buyers’ expectations of their own abilities. Already, digital information services like our friends, EcoVadis, are providing buyers with information about suppliers on how they perform on ethical and CSR criteria. This is making parts of the supply chain transparent for the first time – which is a very exciting prospect for ethical Procurement. For example, Velux category manager Alis Hemmingsen wrote in this blog post last week about how to put supplier CSR performance into a sourcing process.
However, it is not enough for technology to just deliver this information. For information to be really valuable and make a genuine impact on sourcing decisions and supply chains, it needs to be delivered to the right places at the right times along the sourcing decision-making process. Just as consumer technology – like mobile devices – can automatically remind you to buy milk when you pass by your neighborhood grocery store, if a company wants to prioritize CSR and ethical sourcing, the tech it uses must pull this information into the heart of Procurement processes and make it really easy for the buyer to implement.
However, criteria like sustainability can be difficult to apply to sourcing processes because they are soft metrics, compared to, for example, purchase price, which is easy to measure and compare between suppliers. This is where technology solutions can be used to implement company CSR policy in a powerful way. By assigning a weighting to CSR criteria or a specific cost metric to awarding to a supplier with low CSR ratings, companies can actively deter buyers from pursuing unethical sourcing and encourage them to prefer ethical sourcing decisions on a global level. They can also use bonus-penalty systems with suppliers to put pressure on them to improve their CSR ratings and apply a supplier’s responsiveness as a criterion when making future sourcing decisions.
Supply chains are complex – and we are certainly a long way from 100% transparency – but there is no doubt that expectations and capabilities will move towards this point in the coming years. Procurement solutions will need to enable these developments by providing seamless, well thought-out integrations with a real understanding of how buyers use their technologies – and the Procurement organizations should start to expect a lot more from the future of the technology built to serve them.
This article original appeared in the Pool4Tool blog. POOL4TOOL AG is the global market leader for electronic process optimization of “direct procurement”. Their All-in-One Supply Collaboration Platform brings together all process from product development through sourcing, SRM, indirect procurement and Quality Management in one workflow-based solution, which can also integrate EcoVadis ratings and scorecards at each step. Learn more at www.pool4tool.com.