Procurement with Purpose — Make it local, make it SDG-conscious, make it real

Henrik Smedberg is the Head of Intelligent Spend Management UK&I at SAP. A 20-year veteran in this space, with experience working and living within diverse cultures and proficiency in a quite a few languages, he has some personal views on environmental, social and governance (ESG), sustainability and UN Sustainable Development Goals (SDG) — among other things.

We spoke with him primarily about his thoughts on procurement with purpose, but not just related to his role at SAP, because in his view: “it is important to everyone, not just organizations.”

Of course that doesn’t deter from the fact that doing good is great for business.

What does procurement with purpose mean to him?

“Procurement with purpose is not just about an ethical supply chain, worker rights, conditions, provenance and all the things that feed into it,” he said. “It’s also about social enterprise, making sure we use the different skills that are out there from a wide variety of people with fantastic skillsets.

“As we’ve seen here in the UK (and it’s relevant elsewhere too) it’s also about local sourcing — making sure we evaluate from a carbon-neutral standpoint. Of course this feeds into sustainability: how we support the shorter supply chain, which might even be in the town right next to us. If we want to grow a strong economy, we really have to look at how we also support those small local suppliers to build their businesses.

“So, what we are seeing is a shift in supply chain focus. The three traditional procurement C’s of cost, control and compliance, are shifting over to another three C’s:

• Conscience — that’s the big one! In many ways, that’s what procurement with purpose is all about.
• Convenience — the fact that Monday at work should be just like Sunday at home in terms of supply made simple, where the traditional cost, control, compliance are just embedded.
• Connectivity – utilizing a network of peer-to-peer reviews, like we do in our personal lives, from people who have already onboarded suppliers and have started transacting with them.

“A lot of this, for procurement, comes down to being a buyer of choice.

“More and more, suppliers are picking their buyers very carefully. When it comes to crunch time, they will favor the buyers who have been ‘good’ to them, and by that we mean we pay them on time, understand their needs and treat them well. This is another shift, since the power has historically rested with the buyer, but scarcity of supply has changed that.”

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The role of networks and relationships

“Procuring with purpose is all about relationships,” he told us. “I call this the ‘digital dialog’ between trading partners, and to achieve this, it means paper must be removed from our supply chains. That goes not just for the basics of invoicing and payments. Proper forecasting over a network means the buyer can inform its trading partners downstream to supply the right goods at the right time at the right location.

“It means we have to switch the dialog, not just asking solution providers what they are going to do to help us — which in our case might be opening up the SAP Business Network, adding more APIs and data, bringing in more partners, and bringing in more suppliers to support it — but really listening to suppliers and understanding and supporting their needs.

“We might learn that a supplier needs €XK to invest in another factory but can’t possibly get that loan. For the buyer that means there’s a better chance they can have their needs fulfilled, more quickly, and probably more sustainably. So there might be a case for investing in that factory, and getting paid back over an agreed method and time.

“The point is — we need to be listening more than telling.”

Corporate citizenship goals and Procurement with Purpose

“This goes for corporate citizen goals too, those of the buying and supplying organizations, and the local communities,” he said.

“From a carbon neutrality standpoint, does that mean we don’t fly as much, for example? That might be one way of reducing our footprint, but for the local economy and jobs, is it beneficial? One of the questions we try to ask our customers is what their views are on this, and what their corporate sustainability and citizenship goals are. Because depending on their answer they might want to support the airport and buy more services from them.

“And if we want to eradicate the use of child labor in our supply chain, as another example, clearly that might not be beneficial for the local community. Once the auditor leaves, those children will be back, because they have to survive. If we really want to make a positive change, we have to consider how to get them into schools. Do we as corporations fund those schools? That’s not what’s in most procurement organizations’ minds.

“Corporations certainly do need to handle modern slavery in our supply chains in a practical way by going outside our normal sourcing behavior, but no organization can do it alone. We should consider joining efforts and investing together in our mutual sources of supply, perhaps through an NGO. That’s a very different proposition from someone who just wants to ‘do good,’ but these are important for the CEO to consider and for procurement to think much more widely about.

“If we really want to start that ‘different’ conversation then procurement has to really open up its books and show its proposition, obtain feedback and work with that innovation to get it into the supply chain, where it can be a win-win for everyone.

“As an example, here at SAP, we are partnered with Social Enterprise UK to encourage corporations to direct more of their procurement spend to social enterprises in the UK.

“Again — the point is, we need to bring procuring with purpose to the bigger stage and look at everything that feeds into it — then we begin a different conversation.”

What a new procurement or supply chain leader needs to be thinking about

“In my opinion, becoming a buyer of choice needs to be high on the agenda of any head of procurement and supply,” he said. “That means having a relationship with your suppliers like you would have with someone you care about. So rather than keeping suppliers in the dark, you share information with them because they matter to you.

“The two C’s of conscience and convenience should be top of mind. We need to aim for a balance of the traditional compliance with convenience, where we actually serve the business need but make it simple, so that we don’t have to think about all the controls because they are baked in. Then we can focus on the conscience.

“This means that getting innovation into the supply chain is critical. And it’s not about changing internally, it’s about extending the ‘intelligent enterprise,’ as we call it, and bringing others into our circle of intelligence. That way everyone is party to information, like bringing back the old-school values of treating people with kindness.”

“That means, for example, that we understand that an invoice floating around for 30 days is one thing, but when its 180 days, it’s another and we understand the consequences. We need to consider how that small supplier is going to pay its bills. So we have to find another way – part of that might be ditching paper and shortcutting the payments process. Having that digital dialog means we can find that ‘care’ and not have to be concerned about our SMEs.

“Consumer behavior is changing our approach, and a duty of care is becoming the new normal. We see this especially in our younger generations, and they will be our consumers in ten years’ time. They will vote with their money and buy only what meets their requirements to the benefit of the wider world. So, we must think about procurement with purpose on a greater scale and remember that it doesn’t have the same meaning for everyone.”