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Data & Socially Responsible Procurement
CSR is No Longer an Option . . .
In an evolving landscape of regulations, social values, and consumer preferences, the Triple Bottom Line has become an essential framework of business design. The concept underpins Corporate Social Responsibility (CSR) by asserting that growth and profitability should not have negative social and environmental impacts. CSR is becoming an imperative for success, one that procurement plays a central role in. Socially responsible procurement aims to ensure that suppliers are adhering to quality practices in key areas such as diversity and inclusion, environmental protection, health and safety, and human rights.
Adherence to the Triple Bottom Line is more than just the right thing to do; it also comes with a number of competitive business advantages. In particular, it reduces the risk of both supply chain disruption and negative publicity.
Brand value accounts for up to 22% of an organization’s net value. In other words, consumer perception of a business has a significant impact on its bottom line. By committing to socially responsible procurement practices, businesses can also avoid the risks associated with engaging socially and environmentally irresponsible suppliers. Protection from negative publicity reduces risk to their brand while assurances of ethical and legal compliance can reduce the risk of supply chain disruption.
A recent whitepaper published by IBM underscores the impact of embedding CSR goals in a procurement organization. 97% of high-performing procurement organizations practice socially responsible sourcing. Furthermore, procurement organizations often have much more influence company-wide if they have fully aligned themselves with CSR goals. Given that, on average, half of a company’s risk is contained in their supplier base, a strong program for managing supplier relationships is often the key to both reducing risks and delivering on CSR objectives.
. . . Neither is Data Analytics
In procurement, access to supplier-level data can significantly improve a team’s approach to supplier relationship management. It’s no surprise, then, that high-performing procurement organizations list supplier information management solutions as a priority. These solutions gather supplier level data from multiple sources, process and store it for easy access, and streamline it for analysis and reporting. Taking a more socially responsible approach to procurement means leveraging this supplier intelligence to track and assesses risk, ensure compliance, and measure sustainability. Effective deployment of supplier information technologies, such as lifecycle management software, is highly correlated with both the success and sustainability of a procurement team.
Accessing CSR Data
Supplier-level sustainability data can come from a variety of different sources. The primary method of data collection includes independent audits and scorecards distributed by a procurement organization to each of their suppliers. With CSR in mind, scorecards and audits should assess ethical practices along the following axes: labor, health, safety, the environment, ethics, and management. Sharp Corporation, for example, uses an excellent list of CSR standards to maintain an ethical and sustainable supply base. While these methods are meticulous, expensive, and time consuming, they can vastly improve visibility into the business practices of a company’s supply chain.
When audits are too resource-intensive or do not yield sufficient information, procurement teams can turn to supplementary supplier-level data. Unfortunately, little work has been done to collect, aggregate and make easily accessible supplier-level CSR metrics, though CSRhub.com has begun work in this area. For the most part, however, this data must be collected manually from disparate sources. Examples include, chemical usage data from epa.gov, emissions data from the Carbon Data Project, or country-level child labor metrics from unicef.org. These sources help procurement organizations aggregate supplier-level CSR data to better monitor supplier compliance, track the impact of their supply chain and identify unethical suppliers in their supplier-base.
Unfortunately, the data that is required to assess the ethical and social accountability of firms around the world is lacking. One solution to improve the quantity of data available uses information partnerships. When organizations monitor their suppliers and collect data, they should adhere to international standards of measurement and make the information that they collect openly available. This type of cooperative practice can be mutually beneficial, allowing procurement organizations across industries to protect their Triple Bottom Line by giving them greater visibility into their supply base.
Applying CSR Data
CSR data has the potential to inform supply chain management through a variety of analytical applications. The best example is the role that data plays in risk assessment. For example, by collecting demographic data from sub-tier suppliers in a supply chain, as well as country level labor data, procurement firms can identify what sourcing categories and suppliers are at risk of using forced labor, while simultaneously reducing the risk of boycotts, sanctions, and other associated supply chain disruptions. Furthermore, by collecting supplier level information at the outset, procurement organizations can reach a pair of valuable conclusions. In addition to learning whether or not the firm adheres to CSR requirements, they’ll also gain a sense of how much maintenance will prove necessary.
The use of data in CSR-driven procurement is still a relatively new practice. Already, though, a number of theoretical models exist that data analysts can leverage to optimize their sustainability initiatives. For the most part, these models describe supply chains as complex networks of interdependent actors in which factors such as resource dependence, business norms, and collective goals have a large impact on decision making. This type of academic framework can be extremely valuable in advancing industry-standard knowledge of how to ensure sustainable business practices across the supply chain. You can read more about these theoretical models here. Before these knowledge-gains are made, however, the quantity, quality and accessibility of supplier-level CSR data must improve.