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The Importance of Corporate Social Responsibility within Procurement

With customer experience now driving brand loyalty, organizations are beginning to focus heavily on corporate social responsibility within procurement.

Robert Lynch, P2P Insights Analyst
Published on June 26, 2019

With customer experience now driving brand loyalty, organizations are beginning to focus heavily on corporate social responsibility within procurement. A company’s ethics are becoming critical differentiators in the global market. As organizations seek to strengthen their social value, they are building capital on traits like fairness, honesty, sustainability, and community. Companies are also searching for innovative ways to turn profits using socially and environmentally responsible methods.

Promising to run a business with a higher purpose means that you always have to walk the talk. Your public identity, market placement, and growth potential depend on your ability to consistently follow ethical standards for buying, partnering, and staffing. For instance, if your mission contains an environmentally conscious charge to lower your carbon footprint, then your procurement team should focus on exclusively sourcing sustainable, non-toxic materials from suppliers who share similar values.

In order to integrate corporate social responsibility within procurement processes, you need to have a clear outline for how to match your policies to your philosophies. You must equally prioritize social, economic and environmental impacts alongside price and quality. As Forbes reports, companies that do this well are outperforming their competitors with significantly higher financial rewards, reduced employee turnover, more transparent supply chains, and deeper brand connections.


Perceived Pitfalls of Corporate Social Responsibility within Procurement

Despite the many benefits of developing a formal plan, only one-third of industry leaders are strongly prioritizing the management of corporate social responsibility within procurement over the next year, according to Deloitte’s Global Chief Procurement Officer Survey 2018.

Corporate Social Responsibility within Procurement

This widespread neglect is likely linked to the practical challenges of purchasing goods and contracting services that align with honorable corporate goals.

The fact is, procurement is already a complicated beast. It not only entails careful vendor vetting, talent acquisition, material selection, and contract negotiation, but strategies also radically change with supply, demand, and regulations. Many organizations also shy away from running purposeful businesses because leaders believe it escalates costs, complicates processes and intensifies stress.

The job is large, and it requires unique solutions for building buy-in, enforcing standards, changing buying behaviors and tracking progress on your procurement initiatives. This journey toward corporate social responsibility within procurement practices will become overwhelming if you take on too much too quickly. Instead, start with small changes that easily fit within your company culture.


Developing Sensible Sustainability Procurement Programs

There is a global revolution toward integrating sustainable procurement programs into corporate social responsibility missions. Many companies have begun by launching projects to comply with regulatory changes in the U.S., Canada, Europe, and Asia. Most often, these efforts focus on addressing environmental concerns. Companies evaluate their strategies for engaging in ethical sourcing and clean emissions practices. Green procurement policies generally include buying recycled paper products, upgrading to energy efficient lighting and shrinking product packaging. Companies also become more purposeful in choosing their vendors for office supplies, furnishings, and equipment.

Corporate Social Responsibility within Procurement

Others are finding creative ways to leverage the associated social benefits to strengthen brand recognition and inspire innovation while reducing costs and managing risks. Another element of corporate social responsibility within procurement is seeing leaders focus on nurturing a sustainable economy to stabilize incomes and promote local development. These socio-economic policies are often concerned with fair trade practices, diversity purchasing, screening suppliers, measuring sustainability impacts, streamlining processes and promoting healthy work-life balance.

Many companies are tackling significant pain points, such as poverty and diversity, along the supply chain journey. By investing in e-procurement technology, businesses can easily embed corporate social responsibility within procurement efforts every day, in a seamless, frictionless manner. The software empowers buyers to increase their savings while making real contributions to a world problem through the products and suppliers that they choose.


Achieving the Benefits of Being Socially Responsible in Procurement

Companies that are able to combine all three approaches have the best opportunity to meaningfully impact people and the planet. This holistic approach to corporate social responsibility within procurement means that you fully accept responsibility for the services that you provide and the products that you sell. This accountability extends to all phases of sourcing, production, distribution and waste management, and it requires an unwavering commitment to upholding your ethical standards.

It is critical to figure out how to gain buy-in from company decision-makers, buyers, vendors, and customers since resistance to changing behaviors is common. The most effective programs are set up with clear standards that are widely shared across the supply chain. Reward programs that incentivize participation may be necessary to get momentum moving, and they are especially helpful in motivating continued commitment. You will also need to create processes for onboarding new suppliers and develop technology systems for tracking progress and mitigating risks.

As purpose-driven companies are discovering, the efforts are well worth the rewards. Procurious reports that “it pays to care in procurement” with socially responsible organizations outperforming their competitors by nearly 5 percent. This is largely due to an improved image with all audiences, including employees, customers, stakeholders, and outsourced vendors. Companies who are socially aware are also more likely to attract top talent, which infuses the workplace with greater innovation.

Additionally, clearer transparency in the supply chain not only brings everyone on board with expectations but also nurtures stronger collaborations. Yet less than one-third of Deloitte survey respondents said they have visibility beyond their Tier 1 suppliers.

Corporate Social Responsibility within Procurement

E-procurement software will drastically improve your ability to monitor suppliers and manage relationships with them. In recent blogs, we have discussed both how to improve your supplier relationship management and supplier compliance.

Continually reinforcing the message that digital tools are driving the future of procurement, Deloitte also urges the adoption of technology that promotes proactive, predictive, smarter and automatic procurement transactions in order to achieve their socially responsible goals.

There are many reasons for organizations to strongly prioritize corporate social responsibility within procurement. It may be in order to comply with regulatory changes, strengthen brand recognition, reduce costs, manage risks or promote local development. With many benefits to be achieved from being more socially responsible, corporate social responsibility in procurement will undoubtedly become a stronger priority for more organizations this year.


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