Coupa: Procurement’s role in sustainable supply chains
The world is changing. In the last 10 years, corporate social responsibility (CSR) was a ‘nice to have’, ‘supplementary’, or even ‘window dressing’ for many. However, today the pressure is ramping up for companies to contribute in a sustainable way to the future.
“Solid strategies and actions are now a must in order to stay aligned to today’s increasingly ethical consumers, employees, and investors. Not to mention regulators. More importantly, perhaps, being a good corporate citizen is a moral imperative,” said Coupa.
The reason for this is clear. Staggering facts outlined by global organisations demand actions to be taken:
- IMS and UNICEF reported that 160mn children were exploited through child labour in 2020 (equal to one in 10 children worldwide).
- The Intergovernmental Panel on Climate Change has highlighted that many environmental changes such as rising sea levels and changing rainfall patterns are irreversible.
- According to NASA, CO2 is at its highest levels in two million years. (prior to the industrial revolution the levels were around 280 parts per million (ppm). Today, it's closer to 420 ppm).
- The European Geosciences Union released a report identifying that the planet is losing more than 1.2 trillion tons per year of ice.
How can organisations make sustainable procurement a catalyst for change?
When it comes to responsible and sustainable sourcing, Coupa identifies four key areas to think about:
- The drive to net zero emissions
- Circular economy
- Becoming a trusted producer and reducing social risks in supply chains
- Understanding partners
“Today, sustainability is a clear call to action for the procurement function to embrace responsible sourcing. This can be done relatively simply by engaging in developing suppliers’ safety and labour standards, and by requesting that suppliers calculate, declare, and reduce their carbon emissions,” said Coupa.
Net zero emissions
Breaking down the three areas Coupa explains that becoming net zero is one challenge that companies place at the top of their strategy, and is tied to Scope 1, 2, and 3 emissions.
For industries such as retail and consumer goods, Scope 3, in particular, can account for seven or eight times the emissions a company directly emits itself with 40% being found in the purchasing of goods and services.
Covering emissions that are not associated with the company itself, throughout its value chain, Scope 3 emissions present the greatest challenge for companies and the procurement function.
With the right technology, this challenge can become easier to tackle, providing a baseline that allows organisations to assess the impact of different elements of their operations.
When it comes to developing a circular economy procurement will be key to unlocking new business models. Driven to be resource-efficient, the entrant of products-or-machinery-as-a-service is starting to replace buying in bulk.
If there are recycled or reused products available in a category, Coupa is also seeing proactive procurement teams reach out to design teams ni other companies to influence what those businesses ultimately produce.
“Sources of recycled or reused material are, by definition, more variable than traditional materials, so procurement teams need dynamism and agility to adapt to these new ways of sourcing. They need visibility of what's available so they can harness circular waste flows and create new revenue,” commented Coupa.
Becoming a trusted producer
“Today’s consumers and partners are looking for trust — not just in the delivery of a solution, product, or service, but in terms of their ethical, social and environmental credentials,” stated Coupa.
As a result, many companies are looking to create more local sourcing options, drive supplier inclusion, and increase diversity in order to remove social risks. This is a high priority task for any company wanting to remain competitive, trusted brands are growing faster than low trust ones. “The key is understanding which elements of social risk and social impacts customers are really interested in,” added Coupa.
Ultimately, Coupa emphasises: “to a large degree becoming truly sustainable and/or responsible comes down to what you know about your partners. What structures are being applied to assess how ethical the companies that you choose to do business with are? Similarly, how easy are you making it to expose them, and what is the framework for when you should stop doing business with them?”
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