The Real Value of Ethical Procurement

The issue of ethics in supply chains and procurement is a rapidly trending topic.

However, much of what is written about this topic is based more around compliance activities, such as auditing suppliers or creating policies to monitor potential issues or breaches. This implies that improving ethics within supply chains is more of an afterthought than a priority.

Ethics in supply chains doesn’t have to be a burden. In fact, value can be extracted from doing the right thing. So how can we determine the real value of ethics in your supply chain? Lets have a look at four pieces of value that your company is likely to receive.

Procurement Marketing Dream 

Let me refer you to Patagonia, the outdoor clothing brand. As a certified B Corp, they meet very stringent social and environmental criteria. One of Patagonia’s biggest selling points is the ethics of their supply chain. Everything they do regarding their procurement is a marketing story ready to be told, from what raw materials they source, to the ethics of the factory where its made.

By contrast, conventional procurement is focused on optimising costs and driving down prices. Lets be honest, this doesn’t excite you or your customers. With conventional procurement, there is no story to tell (in some cases only stories your company wants to hide). With ethical procurement it can be utilised as a marketing weapon.

Greenwashing is not what you are going for here, it has to be legitimate changes within your supply chain. Done right, it can be very powerful. Producing a video about the process or result is an effective marketing resource, and can be used over and over. A good example can be seen here. Remember, it is not advertising, it is a blend between emotionally engaging marketing and a documentary. 

Skyrocketing Staff Engagement and Retention

Millennials expect more from the companies they work for. As seen here in the 2015 Deloitte Millennial Survey, 7,800 millennials were surveyed from 29 countries and the results were clear. 

“Millennials overwhelmingly believe that business needs a reset in terms of paying as much attention to people and purpose as it does product and profit”

The report also states that an overwhelming 75 per cent believe businesses are focused on their own agendas, rather than helping to improve society. 

If the company you run or are working for is not making a difference in a positive way, you may have disengaged employees. Ethical procurement can inspire that engagement, not just for current employees, but also new employees who expect more from the company they work for.

It starts in the procurement department but is shared company wide. Staff crave an emotional connection with their workplace, ethical procurement is a good driver for that connection. Engaged staff also leads to increased productivity, but that’s another story for another time. 

Longevity of your Brand

It’s future planning. As the world is more focused than ever on issues such as resource scarcity and inequality, companies that are not doing their part are at risk of being left behind. They will lose market share against brands that focus on improving the positive lasting impact of their company.

Unilever under the care of Paul Polman, has done just this. Paul Polman (who is also a member of the B-Team, along with Sir Richard Branson) has differentiated a multi national company from its competitors by considering the future and longevity of its brand and by investing in sustainability and innovation.

Meanwhile its main rivals are falling behind in terms of brand value. Supply chains play a big part in this, with an average 65 per cent of total company expenditure being put in to the supply chain. Such money can go be redirected towards suppliers that have embedded social and environmental missions into their DNA.

Which means that your company’s impact spreads beyond your internal operations and creates value in the far corners of your supply chain. This leads us to the last point. 

Creating Intrinsic Value

When Marc Benioff created the 1+1+1 model of philanthropy for his company Salesforce, other companies thought he was crazy. The model requires donation of 1 per cent of profits, time and product towards communities. Not only was Marc Benioff doing this but he was doing it as a start up which seemed crazy at the time.

Fast forward to current day, this model is not seen as charity but a shift in the way a company operates. Even Google took on a similar model, but Marc Benioff will forever be the pioneer.

There’s no doubt about it – looking at the positive impact that your supply chain can make is cutting edge innovation. It means your company is forward thinking, even visionary. You realise that spending your procurement dollar with ethical suppliers is actually better value for the money spent.

It’s clear that not only are you getting the required goods or services, but your company is also creating value for society or the natural environment, which is priceless. You are like a startup again, finding new ways to stand out from your competition. Except this is a moral imperative and you have the power to make a difference. 

These are just a few insights into the value that your procurement can create.

Jordan J Holzmann is the CEO of Cruxcee, an online platform that connects buyers with ethical suppliers.