The Future of Procurement: Tech meets Sustainability

How data-driven SaaS will solve the issue of sustainable procurement

It is undeniable that sustainability has become a necessary topic in the B2B world. Publicly listed companies with more than 500 employees have been obligated to publish an annual non-financial report for years. New regulations like the EU taxonomy and the upcoming “Lieferkettengesetz”, along with rising stakeholder pressure, are incentivizing those corporations to expand their sustainability efforts further. Management boards are defining company goals oozing with buzzwords as if one day a chain mail with the following template was passed around:

“We *enter company name* commit ourselves to the Paris Climate Agreement and are aiming to become net CO2-neutral by *enter year*(2030/2050 depending on your ambition). As part of our *enter catchy name for initiative* we pledge to comply with international standards and to create a sustainable work environment along the whole value chain.”

(Excuse my short outbreak of well-meant cynicism.)

Of course, it is their responsibility to formulate a strategy that the line managers can implement. But without the proper budget, time — and human resources, managers are having a hard time to reach sustainability targets, next to their already demanding full-time job, that keeps the business running. As a result, they seek collaboration with external experts or (if the budget is really low) universities, to start projects that will educate their workforce to act more sustainable.

I’ve sat in those meetings multiple times and from my first-hand experience I can tell you, hanging up posters to remind the employees of separating the trash, switching off monitors, and replacing the copy paper with recycled ones won’t make a company “net-CO2 neutral”. It might not even make a noticeable difference, but what will?

In order to address your company’s struggle to operate more sustainably in 2020, we have to focus on the topic that will have by far the most impact: Your supply chain.

Status Quo

According to the Carbon Disclosure Project (CDP), an international NGO that deals with carbon disclosures of global players, scope 3 emissions are 5 times larger than those of scope 1 and 2 related operations like electricity & fuel. Right now, only 4 % of companies that operate in the DACH region are rudimentarily capable of calculating their scope 3 emissions, according to research by the leading sustainability consulting company Systain.

The main reason why Corporates struggle to calculate scope 3 emissions is the lack of comprehensive datasets that are available to them. In theory, companies are banking on the corporate version of the children’s game “Chinese whispers” (dt. “Stille Post”). If their first-tier suppliers comply with set sustainability standards and expect the same of their respective first-tier suppliers (and so on…), then eventually the whole supply chain will be sustainable.

At this moment I would like for you to remember the biggest fail in your childhood experience of playing this game…I think we all know why this concept works only in theory.

In reality, companies that decide to take on a project like this are faced with a process that is painfully inefficient for both them and their suppliers. This process involves manually sending out questionnaires to all first-tier suppliers, requesting audits and certificates, or spending hours researching public data. Suppliers are constantly pressured to provide the same data points to all of their customers over various channels (post, mail, phone) and in various form factors.

More often than not, the data is eventually collected in self-programmed excel sheets and supplemented with secondary data which is based on industry averages. The accuracy of the outcome is questionable at best. This leaves the supply chain/procurement manager, both of which rarely are sustainability experts, with a dataset that offers little to no strategic insights.

Best case scenario, this solution allows a basic assessment of the current supplier base along the lines of: “Supplier GOOD!” or “Supplier BAD!”

(I commend you if the last part was read in a caveman’s voice. You get me!)

In other words: we live in the digital age! We can do better!

Software-as-a-service or rather Software-as-a-lifeline

We cannot afford to wait! I won’t waste your time, explaining why sustainable procurement is not a luxury item, but a necessity right now.

And fortunately enough the solution to this problem is already in the making. Combining AI, robotic process automation (RPA), and analytics into accessible software tools will revolutionize the buying experience of procurement departments. This trend is illustrated by a recent Roland Berger survey: Out of 87 CPOs working at Global Fortune 500 companies, 67% have ranked AI as one of their top 3 priorities for the next 10 years.

But realizing an AI-driven procurement organization is no simple task. The transition from the existing excel-sheet “solution” to value-adding software tools that are intuitive and polished, requires a lot of talent and refined data pipelines. Combined with a lack of overall agility of organizations, it makes sense for companies to use SaaS products to accelerate the development of their procurement department into a high-tech decision-making team that drives your company into a sustainable future.

3 Key advantages of using Saas tools for your supply chain management!

  1. Source

Most procurement managers are no sustainability experts (yet). Having access to sustainability datasets right now is like wandering through a public library…After an earthquake…without having your reading glasses on. Saas can be the kind librarian that helps you to identify what you need and where to find it.

Data itself is a non-rivalrous good and its value increases with the processing skills. In order to gain actionable insights and minimize your operational risks, it is crucial to execute RFx efficiently. In other words: the company with the sharpest librarian will win.

2. Manage

Recent history has taught us to be prepared for the worst scenario. According to research by EcoVadis, the leading sustainability rating agency for global players, companies that engage in corporate sustainability have outperformed their peers in light of the recent pandemic. One of the main reasons for that is the resiliency of their supply chain. Companies that made employee health and safety, working conditions, and supply chain due diligence a key aspect of their business strategy were able to react faster and avoided fallouts in their operation. With the right SRM software, you can monitor and evaluate your suppliers and adapt your supplier base accordingly.

3. Collaborate

I went from earthquake to pandemic (thanks for sticking with me) so let me finish with the bane of our existence: Climate change!

An issue that affects all of us, yet most likely won’t be solved by giving our best efforts individually. The keyword here is: Synergy.

A great supply chain manager should be like an orchestra conductor. Making sure everyone is on the same page and knows exactly what to do. Being able to collaborate with your suppliers and plan/organize your logistics together will not only result in net cost savings and time efficiency but might also uncover synergies between suppliers. A triangle is an unimpressive and overlooked instrument on its own, but with the right timing and great composition, it might complete a masterpiece.

You can use SRM tools to find the triangle among your first-tier suppliers and create a masterpiece of a supply chain.

Final word

I am long convinced that Saas products are the answer to the question: “How do we integrate sustainability into our purchasing decisions and revolutionize our supply chain management?”

I hope that you, as a reader, are arriving at the same conclusion!

(If not you are probably an offended triangle enthusiast and I hereby offer my sincerest apologies.)

One way or another I would like to end this article with a quote:

“Your direction is more important than your speed.”

A quote, so wise that every grandmother must have given it as advice at least once in her lifetime.

But what happens if we found the right direction (Sustainability)?

Are we then allowed to pick up the pace? (Yes! Please!)

***

Are you struggling to become a great supply chain conductor? Or are you already there and want to share the secret of your craft? Maybe you just want to throw some colorful analogies back in my direction? Any feedback would be highly appreciated! I would love to hear from you! (erik.mueller@ecotrek.tech).

Sustainability Strategist at ecotrek | B2B solutions for sustainable supply chain management

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