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Business strategy: The compass for sustainable procurement

Last week, Sarah Downie, CEO Shared Value Project ANZ, kicked off PASA’s Sustainable Procurement Today Conference by highlighting the momentum behind sustainable procurement.

Today, we unpack some of the key outtakes from Procurement on Purpose: Harnessing Procurement as a powerful tool for shared value creation covering the emergence of Gen-Z to the “turning point” procurement is facing and the mandate on big business.

No turning back

Sarah said the momentum behind sustainability is firmly on the radar with expectations being fielded from all angles.

“We can’t look back now. Sustainability agendas are on the radar, we are seeing expectations being raised and demand coming from all corners – employees, from customers and investors,” Sarah says.

Sarah says the conversations involving ESG are firmly becoming “forthright ones.”

“If you want some extra proof that we are absolutely past the turning point and not looking back, if you haven’t heard that Deloitte’s Retail Trends Report found that purpose-driven companies had 40% higher levels of workforce retention than their competitors.”

Employers were warned to mindful of growing expectations of Gen-Z in the workforce. “Gen-Z  are the first generation to prioritize purpose over salary,” Sarah says.

“According to Coldwell Banker – The Great Wealth Transfer we will see $68 trillion passed from baby boomers over the next 30 years to millennials and they will hold five times the wealth that they hold today.”

Consumers influencing ESG

Sarah said it’s not only the emerging workforce which is embracing the ESG agenda, but consumers are also voting through their purchasing preferences.

In quoting the findings of The 2020 Zeno Strength of Purpose research, Sarah said: “The study found consumers were four times more likely to purchase from a brand with a strong purpose. That’s only really happened in the last few years where consumers are really voting with their feet in terms of the brands that they wish to support.”

“This is absolutely the mainstream view. We now believe that the businesses that we buy from – that we choose – absolutely play a role in in the big social and environmental issues that affect us all.”

“We no longer believe that it should be the mandate of government, we are asking the business sector to step in and step up. And that a really big additional mandate on business.”

Historic predictions now being lived

It is 10 years since the publication of Michael E. Porter and Mark R. Kramer’s Harvard Business Review Article ‘Creating Shared Value: How to reinvent capitalism—and unleash a wave of innovation and growth’. The Article highlighted the need for business to reinvent itself to meet sociey’s needs.

“Ten years ago, we didn’t have all of this momentum and it was kind of ‘out there’,” Sarah says reflecting on the commentary from Porter and Kramer.

“Their idea was that we should no longer consider societal issues to be a cost to business that in fact, if we thought differently about societal issues, be it social or environmental issues, we might actually find growth and opportunity.”

“So what is happening in your community and in your ecosystem is absolutely is critical to your business’ success.”

Shared value: Strategic value and unlocking wealth

Sarah says if business can create shared value, it can solve social issues whilst creating business value and more opportunities.

“Shared value asks businesses to think about the social and environmental needs that intersect with business,” Sarah said.

“And rather than think about those issues as cost of business or things that should be complied with and dealt with, but rather to see those societal issues as opportunities for the business. If we can understand and find those areas of opportunity, we can create shared value. And if we can create shared value, then we’ll actually be solving social issues whilst creating business value. And that’s a great to unlock growth, economic value and social value.”

Three levels of shared value

Sarah suggests there are three areas to look for shared value:

  1. Reconceiving products and markets
  2. Redefining productivity in the value chain
  3. Local cluster development

Sarah highlighted No Lawyers as a case study in a product being reinvented for family negotiations to be completed without lawyers; reducing financial toil on families otherwise impacted by legal fees.

“All of a sudden people who’ve never been able to access lawyers before can suddenly get access through an online platform, get the support they need and not dissolve family’s money be left out of pocket,” Sarah said.

Sarah says business can be part of the shared value solution to support the efforts of the NGO sector and government.

“What is the social or environmental issues that you just sit with your business? How can you use your business, the tools of your business Itself to help support or improve that social or environmental issue?,” Sarah said.

Highlighting the efforts of insurance company AIA Australia, Sarah said the business took steps to positively impact their clients’ physical and mental wellbeing. AIA Australia offers a range of products for more than 2.5 million Australians. The AIA Vitality Program embedded a health promotion methodology in insurance systems to help customers learn about their health, improve it and stay motivated with rewards.

“So when you’re thinking about, um, your opportunities from a shared value perspective, we really ask that you think about what is the direct business benefit that your activities will deliver and what is the social outcome?”, Sarah said. “And we really want those two things to be connected.”

Sarah encouraged procurement professionals to think within their supply chain or within the value chain as places to tap into indirect benefits:

“What if we thought about the health of those suppliers or farmers, what if we thought to work alongside them to increase their yield, increase the quality and transparency?”

Key takeaway: Put strategic outputs at the centre

Sarah said shared value should prompt procurement professionals to think about what are the things that are strategic to their business?

“What relationships are strategic to your business, what social or environmental issues are going to either be a risk to your business long term?” Sarah says.

“Really be clear about the things that you’re doing, because it’s strategic to your business. By thinking about what strategic to your business, you’ll make sure that you don’t apply a generic, box-ticking approach to social procurement.”

Sarah highlighted Nestle’s reusable packaging program as an example of working with multiple stakeholders and suppliers to redesign the recycling process.

“This is an example I would say about a combined level two and three shared value, partly value chain and partner cluster development, because this is a systems change piece,” Sarah said.

“They couldn’t do this on their own, they needed to work with all of their partners in their value chain.”

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