a strategic approach to responsible procurement

Written by Alis Sindbjerg Hemmingsen

BUILDING A STRATEGIC APPROACH TO

Responsible

Procurement

MANAGEMENT

BUILDING A STRATEGIC APPROACH TO RESPONSIBLE PROCUREMENT

WELCOME TO THE WORLD OF RESPONSIBLE PROCUREMENT MANAGEMENTMy name is Alis Sindbjerg Hemmingsen. I am the owner of the company: Responsible Procurement Excellence.

Thank you for downloading this e-book and wel-come to the world of Responsible Procurement If you have already started or are in the process of starting your own programme, then this e-book is for you.

I know you’ve downloaded this e-book because you want to get inspired. And that is exactly what I can do: inspire you to build your own strategic approach, which will enable you to create a more sustainable supply chain, supplier base and deliver tangible and lasting benefits for your business, the environment and society in general. You know it’s important - for your career, your business and not least the planet.

By reading this e-book, I will give you a basic under

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standing of how you can create your own strategic approach to Responsible Procurement. I will guide you through creating your commitment to how to put together the detailed action plan.

If you have read my other e-book, Understanding Responsible Procurement and creating value, you should by now have a basic understanding of what Responsible Procurement is all about, as well as how you can create value. If you haven’t read it, I recom-mend that you go to my website and purchase it today.

If you are in doubt about how many of the best practices you should implement, don’t worry. Simply choose those that best fit your particular company, culture and ambitions.

Prepare to be inspired.

© Responsible Procurement I/S · www.responsibleprocurement.dk 01

TABLE OF CONTENTS

1. Don’t end up being part of someone else’s strategy

2. Strategic means creating a plan of action

3. What can we achieve by being strategic?

4. Get the commitment you need – 6 “must do’s”

5. Show the world your commitment

6. Make a detailed action plan

7. Identify the changes

8. Put words to the vision

9. Need more inspiration?

YOUR CHALLENGES ARE MY PASSIONIt can be challenging for large organizations like yours to implement

Responsible Procurement on a large or global scale. That’s why I have

created a methodology I call ‘The Responsible Procurement Wheel’.

What I often experience is that Procurement executives become over-

whelmed by the amount of change that a Responsible Procurement

Programme typically entails. The Responsible Procurement Wheel acts

as your guide when setting up your Programme, giving you an overview

of the areas in which you need to take action.

You can find out everything you need to know about The Responsible

Procurement Wheel on my website, www.responsibleprocurement.dk.


1. DON’T END UP BEING PART OF SOMEONE ELSE’S STRATEGY

You are reading this e-book because you want to reduce your company’s impact on the world and you would like to plan it well. Being responsible is not the only important aspect of running the procurement function, right? Price, delivery time and quality are also important. So your approach has to be balanced.

You might already be working with a Code of Con-duct or have even signed up for the Global Compact. No matter where you are on the Responsible Pro-curement agenda, if you want to create bottom-line impact, it’s critical for you to have a structured and strategic approach.

Alvin Toffler (American writer and futurist) once said:

“If you do not have a strategy, you end up being part of someone else’s strategy.”

Setting the standards is one of the benefits of implementing a Responsible Procurement strategy. Today, a growing list of global trends are signaling the need for more responsible business. The pres-sure to increase responsible capabilities is impacting companies from all sides. The bottom line is that

these trends are moving faster than ever, driving an increasingly uncertain world for business. I am firmly of the view that if you do not lead the way, your competitors are likely to set the standards. So by developing and implementing a Responsible Pro-curement strategy now, you have the opportunity to stay ahead of the curve and lead the way for others to follow.

I often meet companies who haven’t taken the time to sit down and formulate what they want to achieve with their programme or how they want to achieve it. Employees and suppliers seem to be quite frustrated by the fact that they have no idea of what the com-pany wants to achieve with a Responsible Procure-ment Programme. They run around in all directions

trying to do their best, but don’t really succeed in changing anything.

As with everything in business, having a direction and a goal ensures that you reach the results you are aiming for. Since you have downloaded this e-book, I imagine that you already know that.

When looking at it from the supplier’s perspective, it’s extremely difficult to maintain a good customer/supplier relationship if you experience that acting responsible is a top priority. But at the end of the day, the price is the most important factor. It makes sense, doesn’t it? But of course you also need to be pragmatic; you need to get the journey started.


2. STRATEGIC MEANS CREATING A PLAN OF ACTION

Creating a strategic approach to Responsible Pro-curement Management means creating a plan of action that is designed to achieve your vision. It is a template for how you manage your stakeholders, suppliers, processes, communication and reporting.

Your vision is also your commitment. A commitment to create a more responsible world by reducing the impact your company has on the planet and shap-ing a sustainable and transparent supplier base. It’s a plan on which you can base your decisions and

track your progress. It’s about transforming your Responsible Procurement Business Case into real ac-tions and driving an effective change management process.

© Responsible Procurement I/S · www.responsibleprocurement.dk

BEING STRATEGIC IN RESPONSIBLE PROCUREMENT MANAGEMENT MEANS HAVING THE ANSWER TO THE FOLLOWING KEY QUESTIONS:

• What is your statement/vision (and at the end of the day your commitment)?

• What should the long-term outcome be and how will it support the overall company, CSR and Procurement strategy?

• What will motivate the company to invest in Responsible Procurement Management? What will it take for your management team to commit to the process?

• How will your organization create value? Which driver(s) will you choose?

• How will you involve the NGOs and other stakeholders, such as the suppliers in your strategy process?

• How will you engage with your suppliers?

• What would be the company-specific indica-tors for the programme? How are they linked with your success criteria?

• Which tools and processes needs to be revised?

• How will you incorporate your current busi-ness culture and values into the change process?

• What actions will you take to create aware-ness about your programme?

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Being strategic in relation to Responsible Procure-ment Management can have many advantages:

YOU CREATE A RESULT-ORIENTED AND VISIBLE COMMITMENT. You systematically identify the objectives that re-ally matter to your business and link them with a target. It’s not just something you say you want to achieve - it’s something you proactively work to achieve.

YOUR VISION IS BEING TRANSLATED INTO A PRACTICAL ACTION PLAN AND SET OF INITIATIVES. You follow up on the results you have achieved and communicate them to the entire organization. This strengthens your brand; you’re doing what you’re saying, even if it takes resources and hard work from everybody involved, including your suppliers.

YOU HAVE A STRUCTURED APPROACH TO YOUR ACTIONS. Having a structured approach first and foremost means acknowledging that implementing Responsi-ble Procurement Management is a long-term com-mitment. It is a strategy that requires you to involve and engage your stakeholders. Therefore, you need to ensure that the actions you have planned are

realistic, achievable within the available timeframe, and can deliver the bottom-line impact that you are looking for. You also need to ensure that you have the right people, skills and control mechanisms in place to realize your vision.

EXPECTATION MANAGEMENT. Your stakeholders, such as your suppliers and buyers, know exactly what you expect from them and what they can expect from you. You are able to explain to them why you want to achieve your strategy and

what pressures are necessitating the changes. They know what the changes will entail and they are moti-vated to take on this new approach.

3. WHAT CAN WE ACHIEVE BY BEING STRATEGIC?


4. GET THE COMMITMENT YOU NEED – 6 “MUST DO’S”

To get the right level of commitment for your pro-gramme, it’s essential to understand your vision, what the long-term outcome should be, and how it will support the overall Company, CSR and Procure-ment strategy. I typically arrange workshops and individual one-on-one sessions, to ensure that all stakeholders have a say in the development of the Responsible Procurement Programme. You could do the same.

HERE ARE 6 THINGS YOU NEED TO HAVE IN PLACE TO GET THE COMMITMENT YOU NEED:

1. GATHER A FACT PACKFind out what kind of information you need to gather, in order to develop your company’s strategic approach, e.g. spend data, current performance data, the workforce’s knowledge of responsibility, supplier knowledge and their willingness to undertake re-sponsible principles in their business processes. How can you prioritize your approach? Consider segment-ing your approach into expenditure, environmental risk, socioeconomic risk, scope for improvement in terms of sustainability, influence on the market, reputational risk.

2. UNDERSTAND THE COMPANY DRIVERSIt’s important that you understand your company’s business drivers. Consider asking questions like: Which industry sector standards does our company need to comply with? Which supply chain footprints are we leaving behind? How should the Responsible Procurement Programme be linked to the current business, CSR and procurement strategies?

You also need to recognize the expectations that your stakeholders have. It’s up to you to decide the extent to which you include your stakeholders. You might as well get it started. Understanding your stakeholders is key to your success – but it’s prob-ably also a new way of working. I recognize this.The motivation to take on a Responsible Procure-

ment Programme can be very different from one company to the next. For some, it’s driven by customer demands and concerns, NGO and activ-ist claims affecting their brand and reputation, or non-compliance. For others, the need for change is driven by regulations and standards, rising costs, pressure from industry peers, or simply that they have a strong culture of focusing on sustainability, and recognize the benefits that Responsible Procure-ment Management can bring. It’s important for you to understand what motivates your organization, before you’re in position to act upon them.

TIP! Read my e-book, Understanding Responsible Procurement and creating value, to refresh your mind about company drivers.

Practically speaking, I typically use my client’s Code of Conduct as the basis for discussion, which I trans-late into a Code of Practice. The difference is that the Code of Practice includes environmental, social and economic factors. A Code of Practice incorporates performance targets that will result in real actions and tangible results for your bottom line. Can you see the difference?


1+1 = 6

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4. GET THE COMMITMENT YOU NEED – 6 “MUST DO’S”

3. GET THE MANAGEMENT TEAM INVOLVEDI often meet companies who haven’t had the chance to discuss what responsibility means to the com-pany, what their commitment should be in the years ahead, and what outcome should be achieved in the long term. It’s essential to have these types of discussions at the highest level, in order to determine the right vision.

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what supplier responsibility is, and how they react to it. Your strategic approach will work best if it is aligned throughout the organization.

Tip! My game, the “Dilemma Chal-lenge”of helping your management team understand the context of Responsi-ble Procurement Management. In this game you will be challenged in your decision making via dilemmas. How will you actually act in a bribery situ-ation or when being met with social and environmental challenges.

4. UNDERSTAND THE MOTIVATION TO INVEST IN A RESPONSIBLE PROCUREMENT PROGRAMMEIn my e-book, Understanding Responsible Procure-ment and creating value, -ers that you can choose. I also recommend that you use a quantitative model to create your own financial case for investing in a Responsible Procurement Programme, and that you define the financial targets for your programme, all of which are a great way of selling the programme and the potential benefits to the management team.

5. FOLLOW IN THE FOOTSTEPS OF YOUR COMPETITORSIn my opinion, it is essential to understand what oth-ers are doing, especially your competitors. I’m sure you can learn from them, so I would start by looking at their approach to Responsible Procurement and analyze the internal structure they have set up for managing their programme.

Do you know how your customers suppliers use their Code of Conduct and how they engage with their suppliers? Do you also know which metrics they use to evaluate the success of their programme and what their reporting practices are?

As a minimum, you should examine their Code of Conduct to try and understand their approach to human rights, labor, and environmental and govern-ance risks and challenges.

6. SET UP SOME PROJECT GOVERNANCEBy this, I mean you need to agree the scope of the project, conduct stakeholder and risk analyses, decide how the project will be managed and com-municated, and lastly how you will involve your stakeholders.

Ask yourself questions like: How well will our cur-rent organizational structure be able to implement the proposed strategic approach? Will changes to the organizational structure be needed, in order to achieve our commitment?

Some companies nominate Responsible Procure-ment Champions (also called ambassadors), while others create cross-organizational steering commit-tees or place more emphasis on training.

TIP! Create a statement/vision that can be used to steer the project.


Now that you have created a clear vision of what you want to achieve, know what the long-term outcome should be and how it will support the overall Com-pany, CSR and Procurement strategy, you are ready to show the world your commitment.

Many companies don’t take this part of the process seriously, which is a big mistake. As the change pro-cess really starts now, your stakeholders should have a clear understanding of the following:

WHAT RESPONSIBLE PROCUREMENT MEANS WITHIN YOUR COMPANY

• How you intend to work with your suppliers

• What the responsible sourcing process will be

• What you expect from your suppliers

• What you expect from your buyers

• The drivers of your programme

You can document your commitment in a charter, guideline, strategy or policy.

Besides describing your commitment (discussed above), describing the actions that need to be taken in order to ensure smooth implementation of your programme is probably the single most important part of your journey. We all know that the figures count, and the chances of them hitting your bottom line are limited if you don’t complete your pro-gramme. That’s why defining a detailed action plan is so important. Your action plan should include where/when/whom and list the success criteria.

Lastly, your action plan should include a risk assess-ment. Based on my experiences from a variety of change projects, many organizations either partially or totally fail to achieve the benefits they wanted because they failed to properly identify and assess

the risks. In many cases, it isn’t the project itself that poses the most risk, but the stakeholders and the business impact that the project will bring about. It is important to assess risk early on in the process, and document it systematically throughout the entire implementation process.

You can document your action plan using a spread-sheet application or project management tool.

TIP! Group the actions into ‘Respon-sible Procurement Wheel’ categories. Read more about the wheel at www.responsibleprocurement.dk/thewheel.

5. SHOW THE WORLD YOUR COMMITMENT


6. MAKE A DETAILED ACTION PLAN

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7. IDENTIFY THE CHANGES

You have a vision of where you want to go, but you might not have an overview of the real changes that will come out of the process. You have to be able to explain to your stakeholders what it will take, in other words how they will be affected by the changes. The number of changes brought about by a new strategy quite often surprises people. Assignments, processes and systems, organizational structure, skills and abilities, cultural changes, goals and targets, and communication channels are typically all affected to some extent.

HERE IS AN EXAMPLE OF A CHANGE OVERVIEW RESULTING FROM A RESPONSIBLE PROCUREMENT PROGRAMME:

Processes will gradually include social and environ-mental aspects. Employees will gradually gain the skills and abilities to adopt lifecycle thinking and to incorporate it into day-to-day collaboration with suppliers. Software that registers supplier-specific responsible data will be introduced, in order to en-able employees to follow up and meet targets within the Responsible Procurement strategy. As part of the organizational structure, a Responsible Procure-ment champion will be introduced. An important part of the strategy is to conduct training sessions that raise sustainability awareness among suppliers and employees.

Now that you know which changes will be imple-mented, it’s time to explain to your stakeholders what they will get out of the programme. They may be asking questions, such as:

• why are we initiating the change process?

• what will be the consequences of not implementing change?

• what will drive the change?

• what values are important in the change process?

• are we ready for change?

• from where does the pressure for change come?

• what results will the change process bring about?

The answers to the questions above may differ sig-nificantly from one company to the next, but here’s an example:

We have chosen to make Responsible Procurement an integral part of our procurement strategy, as we would like to drive down cost and gain a competi-tive edge over our competitors. If we do not change, we will not have a competitive supply chain and our competitors will set the standards for how business is conducted within our industry. The change will be driven by customer demand for lower prices and innovative products. One of the goals of the change process is that the close strategic partnership that we have already established with our suppliers will be extended, resulting in a shorter time to market.


8. PUT WORDS TO THE VISION

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9. NEED MORE INSPIRATION?


Well you’ve almost reached the end of this e-book. Now that I hope your appetite has been whetted, why not check out the Responsible Procurement website for even more knowledge.

You can also contact me at:

Got any questions?

www.responsibleprocurement.dk/contact,

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Responsible Procurement 2013, Version 2.0

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a strategic approach to responsible procurement

Business

procurement executives

procurement function

plan of action

strategic means

detailed action plan

alis sindbjerg hemmingsen

important aspect

elses strategy