Sustainable? Profitable? RESPONSIBLE procurement!

Paul Teague, ex Editor of Purchasing magazine in the US, is a welcome addition to the procurement blogosphere.  He's writing regularly now for Procurement Leaders.  His piece this week is all about 'sustainability' and makes the interesting suggestion that we should stop using the word in a procurement context and talk instead about 'profitability', which gets the attention of Boards and senior colleagues more readily.

I think he’s half right.  I do agree that sustainability has become overused and actually, in some areas, I'm not even sure it means anything.  It may be quite 'sustainable' for a firm to buy from suppliers who pay lousy wages in Bangladesh, year after year. It doesn't make it right.

But talking about 'profitability' is I'm afraid equally meaningless.  Everything the Board hears is about profitability.  And while it is good that many 'sustainability' actions actually also drive profit, and much of what we should be talking to the Board about should be branded as 'profitability', I think we still need another word that sums up the factors that do go beyond short-term and measurable financial impact.  If the CPO calls the CEO and just says “I’d like to come and talk to the Board about profitability’ I think the response would be a confused, “yes….and….?”

So how about we talk about "responsibility" in the supply chain and “responsible” procurement?   It strikes me that being a 'responsible' organisation resonates better and is immediately comprehensible. Of course we can and should link it back to profitability; consumers and clients want to work with / buy from 'responsible' firms.  But paying a living wage, not exploiting workers (anywhere in the world), respecting the environment, treating suppliers with respect, reducing carbon use and emissions, supporting minority owned businesses...  isn't this all about responsibility?

So the  Campaign for Responsible Procurement starts here.... (we are however going to have to look for a suitable acronym..bit of an issue there !)

Voices (3)

  1. Jaye Cook:

    Interesting comments from both Paul and Christine, but wouldn’t it be fair to say that the Procurement strategy, and the department’s resultant values, need to be packaged / branded differently, to exact the appropriate reaction from the various audiences – Suppliers, Procurement Staff, CEO / FD?

    To suppliers – Sustainable, partnership and mutually beneficial activities.
    To staff – Continuous improvement, reduced total cost of acquisition, life-cycle costing, best-value.
    To the board – Bottom line impact and return on investment.

    Or should we / our CPOs be aiming for a ‘one size fits all’ message?

    Comments appreciated….

  2. Christine Morton:

    Personally I think there needs to be a link to reputation management, which is ‘hot’ and getting hotter. For example, who even heard of Trafigura’s procurement decision to buy toxic waste ‘processing services’ cheaply and disastrously before Twitter?

    Another is H&M, who were found out almost a year ago exactly intentionally destroying and throwing out perfectly good clothes in NY that were unsold. [See http://www.guardian.co.uk/world/2010/jan/07/h-m-wal-mart-clothes-found .] That was a supply chain decision gone wrong that had global reputational management issues.

    In labour markets, the London Borough of Haringey has had to resort to recruiting social workers from abroad due to its reputational management issues.

    Poor reputation management costs more, as in Trafigura’s expenses in lawyers alone, not counting the increased cleanup costs; H&M in lost sales; and Haringey in increased costs for staff. Reputational issues can happen quickly and spread like wildfire today. And I think that message might resonate with board members as a result.

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