John Penrose MP Speaks at ValueX – Rebooting capitalism and how procurement can make a difference

Peter Smith comments on the keynote from the SAP Ariba and SAP Fieldglass ValueX event last week.

The event was held at the headquarters of the British Medical Association in Tavistock Square, near Euston in London. I’ve walked past the building hundreds of times without realising it contains a really impressive main hall – capacity 300 I guess – plus a whole range of conference facilities – all very impressive, as was the catering, I have to say!

Over 200 people registered for the varied agenda, with some technical break out sessions but a big focus on sustainable procurement in the morning plenary presentations. That started with chairman James Marland talking about his young son dictating the family’s choice of breakfast cereals based on the recyclability of the packaging. Our kids know which firms are polluting oceans, or paying their taxes, or putting non-sustainable palm oil in their products. But could procurement be the change agent to address these huge global issues, Marland asked?

The keynote came from John Penrose, a Westminster MP and the Prime Minister’s anti corruption champion. Penrose had a business career (McKinsey, JP Morgan, Pearson plc) prior to becoming an MP, and as anti-corruption champion his role includes pushing for tougher money laundering laws.  He is a really good speaker, fluent, enthusiastic and engaging – he didn’t come over like an MP at all!

Penrose wrote an interesting paper titled “A Shining City Upon A Hill – Rebooting Capitalism for the Many Not the Few.” About once a generation, capitalism goes “wrong,” he said, and has to be rebooted. That goes way back to the 19th century and earlier. We accept that regulation can help - we stopped thinking it was OK to send kids up chimneys, for instance, and more recently, we had debates about privatisation and nationalisation.

Now, the view is that capitalism needs another reboot post banking crash – the referendum was a cry of rage about broader issues than the EU. The debate now is about “stakeholder capitalism” – what are we doing this for? And what isn’t working for people? If we don’t do something, there will be a crisis of legitimacy, those who say that the entire system is wrong and want to sweep away capitalism as being fundamentally unfair will win the argument.

Environmental issues are part of this. We must deliver a capitalist economy that isn’t trashing the planet.  Then there are issues of inter-generational inequality – we can’t go on with young people feeling society is stacked against them in terms of wealth, housing, jobs and so on.

Procurement can make an enormous difference through the money we spend. But we shouldn’t feel it is a case of supporting shareholders OR supporting wider stakeholders. If you listen to your customers, and respond to what they are demanding, that will ultimately help shareholders too. There is no inherent or automatic tension between addressing both shareholders and stakeholders.

Another role for government is designing competition rules properly, otherwise larger and larger firms will dominate. We need to support the consumer, or there’ll be a consumer revolt; the system must work in favour of the consumer.

One of the essentials is to deal with corruption. One of the biggest criticisms from those who want to sweep away capitalism is the number of people with private jets and huge London houses who have stolen money from their countries; addressing that is part of rebooting capitalism. Procurement can play a major role in keeping supply chains clean, and procurement people in the private sector can teach public sector people how to do this well.  (I’m not so sure about that – I think the public sector is ahead of the private sector in some areas around compliance and anti-fraud measures!)

In terms of his contribution within government, I got the sense he was a little frustrated at this lack of influence in terms of procurement.  He gets told that “transparency is everything” he said and that having all contracts on Contracts Finder was the answer. But that isn’t enough. Doing buying properly and avoiding corruption starts when you define the specification, and goes all the way through to managing the contract and making sure terms and conditions are upheld. So we have to develop a cadre of procurement professionals in government who know what good looks like throughout the process. (Agree with him on that!)

He is pushing for tougher money laundering laws, and suggested we are a bit smug about corruption in the UK because you don’t have to pay obvious bribes to get things done (like getting a driving licence). But there are many other issues and hidden problems – for instance, the Modern Slavery Act has highlighted the extent of slavery around the world, but has it been strong enough? We may need to go further. And this is another example of the issues that will lead people to say capitalism has failed.

So, we can demonstrate through our actions that this is not a fundamentally corrupt and unfair system, Penrose said. Capitalism in itself is not the problem. But we can’t pretend there aren’t issues, we have to change and win this battle of ideas – and procurement can contribute to this.

A thought provoking start to the day. Look out for more highlights of the ValueX event shortly.

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