Supply chain is one of the most critical areas of CSR. So why aren’t more procurement teams taking greater ownership when it comes to establishing policy?
CSR, ethics and sustainability – three topics that it’s hard to get away from in procurement. The greater focus enabled by the Internet and social media means there’s no hiding place for organisations. And there’s certainly no acceptance of organisations burying their heads in the sand.
Organisations are now including these activities in strategic objectives. And as procurement’s strategic influence grows, the profession has greater responsibility for its role in CSR objectives as a whole. In light of this, it’s hard to understand why procurement and supply chain aren’t taking ownership of CSR activities in their organisation.
The Expert View
Gaining better insights into the current situation means speaking to the people on the ground. And that’s exactly what has been done by the ISM Committee for Sustainability and Social Responsibility. The Committee surveyed its members exclusively for Procurious on three questions relating to current CSR practices.
While the responses highlighted a wealth of knowledge in the profession, they also showed that there’s still plenty of work for procurement to do to take more ownership. Happily, there were also some practical suggestions on how procurement can help their organisations improve their CSR efforts.
Here’s what the members had to say:
To what extent do you think that Procurement and Supply Chain professionals “own” CSR?
The responses highlighted that procurement’s ownership was very much dependent on the organisation in question. However, there was a consensus that, in all cases, procurement and supply chain professionals needed to play an active role in the development and execution of CSR policies and initiatives.
While some aspects of CSR strategy are not supply-chain related, the majority of risks and opportunities are. Both social and environmental ‘hotspots’ exist within the extended supply chain, leaving it exposed in the event of any issues. Members stated that most organisations started with a materiality assessment. This assessment was usually focused on mitigating, or improving, financial and reputational loss. Importantly, supply chain was frequently seen as a critical area.
As a result, it was felt that procurement and supply chain professionals needed to be engaged in the process.
What is the real damage of a CSR breach?
The general consensus was that a CSR breach caused major damage in three key areas:
- Shareholder Value
- Human Cost
Consequences of a major or public CSR breach include:
- An inability to recruit and retain top talent.
- Losing the ability to differentiate the firm by its products, services and values in the marketplace.
- Losing the opportunity to create an internal culture of commitment founded on ethics and a broader view of the firm’s role in the marketplace.
- Financial loss through litigation, high cost of supplier replacement, brand, disruptions from labour disputes, etc.
Brands can be quickly damaged. A firm’s exposure can be quickly played out on social networks, within hours and minutes. However, one member of the Committee made an interesting observation on where the impact fell. “If the supplier has brand recognition, the buyer gets off the hook more for a CSR breach in the supply chain. If the supplier is unknown, (e.g. the contractor running the BP Deepwater Horizon rig), then the big brand takes the full brunt.”
This highlights the importance of strong policies, regardless of the size of the organisation.
What are your tips for professionals looking to improve CSR in their organisation?
Each member was asked to give three tips on how professionals can help make improvements in their organisation. There were so many good ones that we’ve been able to come up with a list of 8!
- Understand the premise of sustainability – it’s not just being good, but meeting the needs of stakeholders impacted by decision. Any resulting actions by investors, business partners, employees, regulators and civil society will be of consequence. Top-down support is key.
- Establish “rules to live” by and measure compliance across the entire organisation.
- Create internal incentives for professionals to engage in sustainable purchasing. It’s important to use carrots as well as sticks.
- A supplier code of conduct – with teeth – is considered best practice.
- Collaborate with other parts of the organisation – procurement shouldn’t operate in a vacuum.
- Use data to build the business case for sustainable supply chains.
- Develop processes to identify risks in the supply chain and teach your suppliers these tools, so that they may employ them in sub-tiers.
- Use publicly available tools such as the ISM Principles for Sustainability and Social Responsibility (with guidance), ISM Principles and Standards of Ethical Supply Management, UN Global Contact and the soon-to-be-available, ISO 20400 Guidance for Sustainable Procurement to educate stakeholders and suppliers.
Take Ownership Now
With CSR being such a critical activity for organisations, procurement can’t afford to be left behind. It’s time to step up to the plate, put procurement in the spotlight and take greater ownership of policies, processes and outcomes. With a wealth of supporting knowledge out there and so many professionals willing to help shape a robust CSR program, there’s really no excuse any more!