Social value is fast becoming a cornerstone for modern businesses.
Beyond maximising profits, they are focusing greater attention on the positive value they can create in the areas of economic inequality, climate change, equal opportunity, and the health and wellbeing of all people.
While most businesses genuinely embrace these activities, other factors are also driving their efforts. Increasingly, they are being held accountable not only for their own policies and operations, but for those of their suppliers and partners.
Nowhere is this more evident than in new legislation proposed by the European Commission. The Due Diligence Law proposes to hold businesses responsible for environmental violations or human rights abuses committed by businesses within their supply chain.
Of course, ensuring social value across the supply chain can also be a strong competitive advantage. According to a recent Opinium survey of 450 business leaders in the UK, half said that improving their ESG credentials is the top reason for their search when looking for a new supplier. Like many governments worldwide, the UK government uses ESG principles as a metric to evaluate bids. In accordance with Procurement Policy Note (PPN) 06/20, at least 10% of every procurement decision must be based on the scoring of a social value proposal attached to a procurement bid – often enough to make the difference between winning and losing.
Wherever you do business in the world, gaining visibility into your supply chain to understand how suppliers’ ESG and social value credentials stack up can be a challenge. In this article, we’ll look at four ways to tackle this.
Set a code of conduct for vendors
Just as it is for the organisation, suppliers should be held accountable for their actions and expected to uphold the same values and principles whilst acting with integrity and treating people and the environment with respect. By establishing a supplier code of conduct (SCOC) that includes requirements for compliance with laws and regulations, ethics, human rights and working conditions, and the environment, among other factors, organisations can more effectively onboard and manage suppliers.
All new suppliers must acknowledge the code of conduct, commit to the measures, and agree to be continually audited against these key metrics. The supplier base is now regarded as a critical and necessary extension of business operations and success. Therefore, they must be committed to creating a positive impact throughout the supply chain. Acceptable conduct, as detailed in the SCOC, should therefore be expected from all contractors, consultants, suppliers, vendors and all other third-party companies that make up the supply chain.
Gaining ongoing supply chain transparency
Not only must suppliers be selected based upon their ESG commitments. There must also be ongoing visibility to monitor their activities and confirm that they are delivering upon their promises. In instances where this is not happening, businesses must mobilise quickly to remove these suppliers from their ecosystems and identify replacements.
Implementing intelligent sourcing solutions allows enterprises to manage and optimise their entire sourcing and contracting on an ongoing basis. When integrated into business’s procurement processes, these solutions can provide visibility and reduce risk by identifying more ethically and environmentally driven suppliers and innovation partners.
Partner with like-minded organisations
Collaborating for systemic sustainable solutions and forging alliances with like-minded organisations can drive a positive effect far greater than if companies acted alone. However, delivering against common goals demands a joint commitment to making collaboration work. This means sharing tough problems, choosing like-minded collaborators and building trust between all parties.
For example, along with Accenture, and in partnership with the United Nations Global Compact, we launched the Sustainable Development Goals Ambition Guidance. The initiative provides business leaders and their technology partners with directional support on measuring and managing sustainability performance through business technology systems and enterprise software solutions. Another example is the COVID Response Alliance for Social Entrepreneurs, launched in 2020 by 60 leading social-sector organisations. It supports over 50,000 social entrepreneurs who, in turn, have an impact on the lives of nearly one billion people, providing access to employment, food, affordable energy and other critical services.
These organisations also exist at a regional level. For example, the Euclid Network works with members and partners across Europe to create connections between civil society and social enterprise leaders, influence European policy and funding, and raise the visibility and understanding of social enterprise in business, government and the wider society.
Procure products and services in an ethical way
Lastly, businesses should implement policies that encourage increased spending with social enterprises and diverse suppliers. In doing so, entire global industries can be inspired to buy more goods and services from purposeful suppliers, making a positive collective impact on the societies where they operate. By directing just a small fraction of global procurement spend to these socially driven businesses, organisations have the power to tackle some of the world’s most pressing social and environmental problems. Together with social enterprise intermediaries, customers, partners, and social enterprises themselves, companies can expand social procurement where infrastructure exists, and to establish the infrastructure and build capacity where it does not.
By ensuring that social value is at the heart of the business’s ecosystem – from onboarding and throughout the engagement – they can significantly reduce the risk of falling victim to the practices of partners who do not share their values. Whether by leveraging technologies, or by partnering with industry associations, there is no reason for an organisation not to address this urgent requirement.
About the Author
Tony Harris is SVP & Chief Marketing & Solutions Officer at SAP Business Network. At SAP, our purpose is to help the world run better and improve people’s lives. Our promise is to innovate to help our customers run at their best. SAP is committed to helping every customer become a best-run business. We engineer solutions to fuel innovation, foster equality, and spread opportunity across borders and cultures. Together, with our customers and partners, we can transform industries, grow economies, lift up societies, and sustain our environment
Featured image: ©SASITHORN
