Procurement Intelligence Unit

As I was working on our latest executive research, The Measures that Matter: Procurement and the Business Aligned, I came across two data points that have been preoccupying my mind ever since.

One of the questions in our survey asked CPOs whether they had company-wide CSR (corporate social responsibility) processes in place, and the majority (62%) confirmed this to be the case. An encouraging sign, I thought, until I came across the results of a related question that we asked much later in the survey: "What percentage of your suppliers has active CSR policies?" Here, a whopping 71% admitted that they didn't know.

How is this possible, I asked myself, that despite such a big proportion of companies claiming to practise CSR, most of them have no clue what their supply base is up to? Could this mean that procurement has no visibility over its supplier network when it comes to CSR-related initiatives? If so, wouldn't that represent a major business risk and threat to companies' share prices?

Another explanation that I came up with is that companies do, and then publicise, what THEY think CSR is, irrespective of their suppliers' processes. Whatever the right answer may be, the reality is that there is a shocking disconnect between buyers and suppliers as far as CSR initiatives are concerned. But it doesn't have to be like that.

Consider retail giant Wal-Mart, a company that is taking some serious measures/leaps towards anchoring its sustainability programme and making it high-impact in the entire supply chain. Last week, the US company published a document providing guidance to its 100,000 suppliers on how to quantify carbon in the lifecycles of their products and how to submit proposals for sustainability projects, as reported by the Guardian. This follows an announcement in February to cut 20 million tonnes of carbon emissions from its supply chain by 2015.

To qualify for the scheme, suppliers are required to demonstrate a potential carbon reduction at any stage of their product's lifecycle, which could include raw materials sourcing, manufacturing, packaging, distribution, customer use and end-of-life disposal. A central goal of the scheme is to prioritise the biggest opportunities for carbon reduction and as such, the initial steps will focus on a list of 20 high impact product categories, including frozen food, vegetables, fruit and meat. Wal-Mart has already been investigating its supply base through its Supplier Sustainability Assessment, a questionnaire it sends out to all suppliers. Further to this, it collaborates with the Sustainability Consortium on a Sustainable Product Index.

The Wal-Mart example demonstrates how important it is for procurement organisations to build a platform that enables the seeking and monitoring of compliance. Change is possible, but it doesn't simply happen without forcing suppliers to change, too.

Meanwhile, as far as our survey population is concerned, procurement is far from where it should or could be on the subject of CSR. And with respect thereof to resulting business risk, here is another question that has struck my mind: Is it the CPO's responsibility to flag "it" as a business risk to senior management? Or, in other words, how far does procurement's responsibility truly stretch?