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In this report, Accenture looks at the drivers behind this trend and outlines the major influences that sustainability is having on the chief procurement officer’s role.
This report is part of a year-long program of research on the sustainable organization, which seeks to open up a debate about the role of each major C-suite or executive function and what contribution they need to make to the implementation of sustainability.
Learn more about The Sustainable Organization: Lessons from Leaders Series
Chief procurement officers play a crucial role in the implementation of sustainability. Most fundamentally, they need to work out how to translate the organization’s high-level goals on sustainability into concrete buying decisions without losing their competitive edge on cost.
However, leading chief procurement officers are discovering that a deeper engagement on this unlocks other benefits too, such as the ability to work more closely with both old and new partners to innovate and discover new efficiencies. In turn, this is opening up opportunities for the procurement role to take on surprising new guises, such as that of venture capitalist.
Some of the specific questions this report seeks to answer include:
Once the basics of sustainable procurement are in place, what are the next steps for leading chief procurement officers, in terms of core systems and processes?
What scope is there to use the buying power of an organization to drive social and economic development, and to do so to the direct advantage of the business?
What new kinds of collaborations, both internal and external, are emerging for the procurement function, as they strive to achieve specific sustainability goals?
What new approaches to risk and opportunity management, supplier auditing and verification are emerging?
The increasing importance of sustainability in procurement is being driven, at a high level, by risk management. Organizations are seeking to screen out suppliers that may pose a reputational risk.
Five other factors play a key role:
Regulation and public policy. From energy utilities facing mandates on what energy sources they use, through to consumer goods companies having to implement traceability or carbon labeling.
Changing consumer preferences. Retailers, for example, respond to growing consumer interest in ethical sourcing.
Customer activity. What new requirements might a customer’s usage demand? This could include a resources firm needing to meet new demand for biofuels blends, for example.
Competitor activity. A travel and tourism operator may need to respond to rivals promoting a more eco-friendly brand by ensuring they procure more offerings in this line.
Stakeholder groups. For example, high-tech companies have long faced growing demands for safe disposal of electronic goods, which in turn has affected their procurement.
In addition, a growing proportion of global investment funds are including specific sustainability-related metrics in their portfolio allocations.
Based on research and its experience with leading companies around the world, Accenture has identified the following lessons for chief procurement officers when it comes to building a sustainable procurement function:
Before setting any new sustainable procurement policy, procurement leaders need to consult with all key suppliers and stakeholders, to get a clear understanding of what this means, and how it will affect supply.
Ensure that the policy goals and direction being set within the procurement team is aligned with the overall corporate strategy and direction on sustainability.
Advise the rest of the business on the procurement implications of any new sustainability vision or code of conduct.
Formalize a supplier engagement strategy with specific performance methods, such as scorecards, targets and contractual obligations.
Set out goals for both sustainability criteria and costs, and hold the procurement team accountable to these.
Be clear on the value of any new sustainability-driven procurement initiative, so that a trade-off can be made against other cost reduction considerations.
Look to streamline the requirements for vendors for similar regulatory/ business drivers and have an integrated information management platform.
May 23, 2012
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