A new Gartner Report on Responsible Sourcing provides some interesting views from procurement leaders on investments in sustainable supply chains. More than ever they see the need for non-traditional activities and technologies in procurement – and their benefits for responsible sourcing
Over the past decade, the role of the Chief Procurement Officer (CPO) has seen increasing time spent on implementing sustainable practices into the procurement function. Sustainability is no longer ‘nice to have’, it’s a business imperative. Sustainability performance must be given the same weight as traditional parameters, requiring a change in thinking from a do-no-harm approach (suppliers comply with existing policies) to driving and rewarding environmental and sustainability credentials.
Today, sustainable procurement involves improving internal and external standards, building a sustainable and more efficient supply chain, meeting the demands of increasingly conscientious consumers and investors, screening suppliers that pose a potential risk and facing up to intense focus on brand reputation. Therefore, investments in sustainable supply chains and non-traditional procurement technologies are highly needed.
Biggest driver of responsible sourcing programs for procurement
CPOs must focus on the right responsible sourcing goals and the best sourcing initiatives and tactics to achieve these. In it’s “Peer Insights on Sustainable Sourcing” report, Gartner asked their clients what they see as the biggest driver of responsible sourcing programs for procurement:
According to Gartner, 45 percent of CPOs think that meeting legal obligations, as defined by local and global entities, such as the International Labor Organization (e.g ethics and health/safety) is the main driver. For 35 percent it´s “Exceeding legal obligations”, as defined by shareholders, customers and NGOs (e.g., living wages). “Achieving market differentiation”, as defined by company values and market strategy (e.g., GHG emissions and water stewardship), was named by 14 percent as the main driver. Only 7 percent report that “Driving long-term business viability”, as defined by company values and long-term risk strategy (e.g., soil quality, and biodiversity) is the main reason.
Customers, investors and employees are key to success
Procurement leaders today will note that investment beyond compliance is gradually picking up as public interest in ethical sustainability increases. Beyond that, customers, investors and employees are now the key drivers of responsible sourcing. Companies and shareholders share a responsibility to prioritize investments in sustainable procurement. However, according to Gartner today “traditional methods dominate most responsible sourcing programmes, limiting program effectiveness for the majority” of companies.
There are still many traditional activities supporting the responsible sourcing process. For 84 percent of procurement leaders, it is still a Supplier code of conduct (84 percent), followed by Supplier assessments (63 percent) and Supplier audits (62 percent). Activities like Responsible Sourcing Risk Prioritization and supplier remediation are also on the list, but with significantly lower uptake percentages.
When it comes to non-traditional activities, survey ratings from procurement leaders remain low: Only 39 per cent of respondents are using a dedicated responsible sourcing technology or a worker Hotline. Even less use responsible sourcing Certification standards (35 percent) or have a responsible sourcing organization (23 percent).
However, it appears that procurement leaders surveyed are aware that the traditional way of working has limitations on their success – only ten percent agree that their programs excel at driving suppliers’ adherence to responsible sourcing goals, while 39 percent disagree. Indeed, they doubt that their programs are resourced for long term success and/ or fully embedded into their company culture, with one third reporting negatively on these.
For now, companies rely on third party service providers to compute their sustainability maturity ratings. Metrics such as percentage of strategic spend covered and target spend dominate sustainability scorecards. Only a few companies also measure aspirational metrics such as number of suppliers’ employees benefited by sustainable sourcing.
Limited data and staff are the biggest barriers
But what are the barriers to effective execution of responsible sourcing programs? Where do procurement leaders struggle with sustainable sourcing? “With increasing expectations for meeting sustainability targets, procurement leaders are finding it incredibly hard to drive sustainable sourcing goals without additional investment in resources.“, the Gartner report finds.
“Lack of access to baseline data for issues such as emissions management makes it harder for companies to identify and set organizational goals for sustainable sourcing.”
Procurement leaders have understood the urgent need to invest in modern, non-traditional activities and technologies to make procurement fit for the future and to reap the benefits that data-driven AI-based procurement can bring. The more transparency in supply chains, the more responsible procurement can become, for example, with a platform like Streamline from scoutbee.
Streamline uses terabytes of supply chain data to fast-track your supplier scouting to only a few hours. Want to see scoutbee in action? Explore our product tour and see how Streamline can transform your supplier discovery and insights, here.
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