How Procurement Professionals can Forward Sustainability

  • Jens Hentschel
  • December 03, 2020

I was traveling for leisure in India a few years back and happened to get in touch with a local business owner in the south of the country. He had a small factory that produced doormats out of coconut fibers. We started talking about his business and he ended up showing me his small factory.

I was intrigued to see that his doormats were actually produced for an American retailer. The designs clearly showed some winter motives and the labels indicated a US based wholesaler. What struck me immediately were the poor working conditions. No protective gear, no face masks for the workers, despite the toxic and incredibly acidic smell of the paint and the fine dust coming from cutting the coconut fibers. Workers were barefoot and had their lunches directly next to the spray-painting area. A proper cleaning system for waste and waste water was not in place.

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Looking at the pictures you might say that you have seen worse conditions on TV and maybe for local standards this operation was fairly acceptable. And I am quite sure that my Indian friend did abide by all applicable local laws.
But is it true that sustainability is just about meeting local laws? Local laws which, by the way, vary around the world? I don’t think so.

I am certain that all customers who opened their doors to family members over Christmas that year and that stood on those very doormats would have not approved of the conditions in which this item was produced. They obviously did not know that their doormat was putting workers’ health at risk and harming the environment. What would their reaction have been if they had known? What impact would their reaction have had on the retailer?

The Era of a New Customer

The attitude of the end consumer towards the product they buy has completely changed over the past 5 years. Let’s just take our own personal shopping behaviors for instance, how you and I buy and consume products and services today.
First, we are very well informed and make decisions not merely on price and brand reputation, but predominantly on other people’s feedback, e.g. through Trustpilot, TripAdvisor, etc. Second, we are no longer that customer that companies can keep at an arm’s length waiting on a customer care line for 30 minutes. We speak up. We want replies to our answers fast.

Third, we value true sustainability, are more aware of public procurement regulations, and challenge companies on their current practices. Ultimately, we look for sustainable and transparent supply chains. A service or product that is produced and delivered in the right way. No harm to the environment, in line with the public procurement regulations of the area, produced under decent working conditions, equitable, and fair. We are no longer looking for the cheapest price, but for the most sustainable product.

So, what has procurement got to do with all of that?
Any company that is not through and through customer-centric will become obsolete and go under. Firms need to adapt their procurement strategy, starting with managing their supply chains with excellence. It is the aforementioned new end customer and their requirements, that firms’ procurement strategy needs to address by appropriately selecting their supply base.

What Modern Procurement Teams Must do to Succeed

As procurement professionals, we are best positioned to take the lead on sustainability and center our procurement strategy around it. We can cater to this important need articulated by the end consumer. A need that, if addressed appropriately, will drive sales and enable growth for the organization.

Any company that is not customer centric will become obsolete and go under. 

This will require the buying function to step up, become more aware of public procurement regulations, to balance risks and rewards, and to challenge the internal stakeholders on their decisions: Is a doormat that is sustainably sourced and produced, that keeps local workers safe worth it to pay a higher price for, resulting in a reduction in profit margin for the company? Could this even be a success story that can be marketed accordingly? Is every stakeholder aware of the potential risks if working conditions in the supply chain for a certain product and service were exposed to the public? Is the process in line with public procurement regulations? Would not a significant portion of customers start boycotting the respective American retailer after becoming aware of the production conditions in India? Just one exposed issue in the supply chain is enough to ruin the company’s reputation overnight thanks to social media.

Why Should Procurement Drive the Sustainability Agenda?

Procurement professionals are uniquely positioned within their organizations. They own the commercial relationship with the supplier. They overlook the supply chains and have access to supplier production sites. They know where the underlying issues are in the supply base and they possess the skills, the commercial acumen, and the connections to make a difference by asking the right questions, by leveraging their commercial power, and by demanding change.
How can you get started with your procurement team to become a sustainability champion?
First, create an environment of customer-centricity within your team. Your procurement strategy and buying actions need to focus on allowing the business to win with the end consumer.

Move away from an all-encompassing savings target philosophy and towards an attitude of rewarding initiatives that truly drive sales and enable growth sustainably. Instill the mindset of business ownership and drive accountability for all supplier relationships. Empower your team to challenge the status quo and allow them to ask ‘why’. E.g. “Why are we buying from this supplier? Why have we never visited the production site?”

Second, create a customer-centric vision with your internal stakeholders. Understand them and help them understand your strategy and mission and how those two link in with the overall strategy of the company.
Third, spend time with your suppliers and build external business partnerships. Procurement possesses the power to develop and change whole industries for the better.

Move away froman all-encompassing savings target philosophy and towards an attitude of rewarding initiatives that truly drive sales and enable growth sustainably.

Don’t shy away from pointing fingers at issues and outages in the supply chain that you manage. Change starts always with a customer’s request. And this request has to come from you, the professional buyer.

Where was procurement in India? Quite frankly, I do not know. There must have been a procurement person buying these doormats, potentially even visiting the production site and turning a blind eye to what I had seen. This procurement professional was merely buying a product at the cheapest price possible.

Health and safety standards? Ignored–so American dollar shop where the doormats ended up in did not care and neither did their customers? Wrong! The customer’s mindset has changed. Sustainability and ethical sourcing are on the top of people’s minds and rightfully so. Let’s embrace sustainable sourcing as an opportunity and drive the agenda as procurement professionals! A unique opportunity for each of us to make a difference!

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