Procurement: Why Value For Money Is No Longer The Only Thing That Counts Today

For a long time, most companies were exclusively profit-driven – regardless of how the profit targets were achieved. Today this has changed: To be successful, organisations are increasingly focusing on aspects other than profit maximisation and profitability. What role does procurement play in this?

To this end, many companies integrate social and environmental concerns into their business activities and thus get involved beyond their business area. In the meantime, more and more companies are extending their self-commitment to responsible corporate management to their entire value chain. This article explains the advantages of a sustainable purchasing process for companies and why agility and transparency are crucial in procurement today.

It’s been a few years since the US economist Milton Friedman claimed that the only social responsibility of business was to maximise profits. Half a century later, his famous quote, “The business of business is business,” can be seen as quite a contradiction to current developments. The concept of Corporate Social Responsibility (CSR), i.e., the social responsibility of companies, is now on everyone’s lips.

Procurement: Trend Towards More Sustainability And Transparency

“Several companies have voluntarily decided to make their business activities more sustainable in recent months and years.” Partly in line with social pressure, the trend is clearly towards social responsibility: More and more companies are integrating sustainability and transparency into their entire value chain – including procurement by suppliers and subsidiaries. What may initially sound like a lot of effort for little profit has not only ecological advantages: the switch is usually also worthwhile from an economic point of view.

Numerous Advantages Of Sustainable Procurement

An utterly sustainable procurement process saves companies environmental risks, increases efficiency, conserves resources, and promotes public perception. One of the main reasons for resource-saving procurement complies with the increasing number of legal regulations and international principles. In some countries, there are already laws in place to comply with specific procurement regulations. And a responsible purchasing process can also be economically worthwhile.

“Many companies that originally decided to use sustainable procurement because of social expectations and fears of a loss of reputation are now also recognizing the switch’s economic, social, and ecological advantages.” Among other things, companies benefit from realising efficiency gains, promoting the company’s excellent reputation, and manufacturing innovative but, above all, sustainable products.

Agile And Transparent Supply Chain

However, the long-term conservation of resources and increased efficiency are not the only aspects that companies value in their supply chain. The agility of the supply chain is also becoming increasingly important. “An agile supply chain means that a company can react flexibly to changes to recognize innovations and trends on the market at an early stage, to identify innovation potential and to use it to our advantage.” To enable comprehensible communication and quick reactions from everyone involved, an agile supply chain should be digitised and designed to be as transparent as possible. “This enables detailed insights into the entire delivery process, which significantly increases effectiveness inside and outside the company.”

The new highly cloud-based technical functionalities enable data analysis and exchange throughout the supply chain. In this context, digitization supports the open communication culture within the company but, above all, to the outside of the network. This can only be transferred to the entire value chain if your company’s communication channels are targeted and efficient.

Purchasing Department As An Innovation Driver

On the way to more sustainability across the entire value chain, transparent cooperation with suppliers and other interest groups is particularly crucial. Purchasing departments increasingly act as central innovation drivers in companies, promoting sustainability and change. Collaboration with ethically acting and innovative providers is becoming more and more critical. “The introduction of corresponding guidelines and control mechanisms in procurement proved to be extremely beneficial for our customers to implement sustainable strategies within the organisation.” Questionnaires on the subject of sustainability are used in the selection of suppliers, or workflows are implemented that is comparable to a multiple-eyes principle when selecting sources of supply.

Also Read: Why Digital Transformation Is Essential For Companies