Right now is a unique window of opportunity for procurement leaders as they are tasked with addressing a multitude of challenges, ranging from ensuring the continuity of supply to pioneering sustainable innovation within the supplier network.
Over the last few years, one truth has become clear: the need for procurement teams to strengthen their abilities is more important than ever before. The success of businesses increasingly depends on their procurement strategies going beyond the conventional, including embracing sustainable innovation, supporting close collaboration with suppliers, and proactively preparing for the many complexities of the upcoming ESG legislation.
In my last blog, I wrote about how the sustainability agenda has divided companies into frontrunners and late-adopters. That is also very true for procurement – and now is the time to get ahead. Using digital transformation, many procurement teams have already spent the last few years trying to release themselves from at least some of the time-consuming operational work. Many have also spent considerable time standardising processes, policies, systems and data.
However, procurement in 2024 is much more than automation and scalability – or merely ensuring the availability of materials at the right price. Transitioning to a green economy requires Procurement teams to pioneer sustainable innovation throughout the supplier network. In other words: if you are a large company it might be time to HELP your suppliers and take a multifunctional responsibility for building innovative partnerships, because what you do today will shape your future!
A collaborative effort led by the CPO
Of course, no one does it alone when it comes to making a long-term impact for a company. Internally, procurement teams must be able to engage and interact with many colleagues across sales, supply chain, manufacturing, IT, HR, marketing, engineering/design and customer support. Leadership commitment is equally important. Top-performing procurement teams are already working closely with stakeholders to become trusted ESG advisors to the entire C-suite and essentially become “orchestrators of sustainable value” within the organisation.
The internal collaboration around ESG is a huge task in itself, but even more so if you look towards suppliers and partners. The shift from competing firms to competing supply chains becomes even more important in the context of a sustainable economy. Paving the way for sustainable transformation requires fundamental changes to the way materials are sourced and products are designed, produced, sold, used and disposed of – which again requires great amounts of planning and coordination that reach far beyond organisational boundaries. Procurement’s role as an interface to actors in the upstream supply network therefore needs to become much more strategic, collaborative and proactive.
Is it easy? Absolutely not! But it is most often worth the effort! Collaboration with strategic suppliers can not only be a powerful source of innovation; relationships between firms whose connections have a higher purpose (as opposed to purely transactional) can often be much harder to imitate for others and thus represent a sustained competitive advantage.
In fact, strong supplier-buyer relationships might be exactly the kind of ‘collaborative surplus’ that you need to win in the green economy. This surplus can take the form of relationship-specific assets, knowledge exchange and joint learning, as well as the combination of complementary resources and capabilities.
Build your procurement competences for success
Needless to say, capability and talent transformation are paramount in preparing for procurement transformation journeys. Top talent requires leadership and enthusiastic stakeholder engagement, allowing Procurement to operate as a peer rather than just in a service role.
We already know that organisations with a skills-based approach to procurement are more than twice as likely to place talent effectively – and also twice as likely to retain high performers. Although the digital skill gap is often top of mind among CPOs and supply chain executives these days, companies will also need to train for soft skills (leadership, business partnering, change management, etc.), as well as at least baseline knowledge of how to manage procurement risks and opportunities in the green economy all the way through Scope 1, 2 and 3.
Even if you currently have the talent that you think you need, your next challenge is retaining it. Employee burnout is becoming better understood, and many organisations are now implementing long-term solutions to overcome the challenges of high pressure and retain top employees.
If the recent years showed us anything, they shined a light on the need to accelerate our rethinking of what work is, where we do it, and how we do it, with a particular focus on finding a balance between work and home life that works for wider, arguably more diverse workforce needs than has traditionally been considered.
Preparing for the green and collaborative future
The conclusion: we are living in exciting times for procurement teams – and I really do believe that CPOs now have a unique window of opportunity to drive cross-value chain innovation. Most likely, the global business environment will continue to be volatile, uncertain and complex. The increasing complexity of supply networks makes the pursuit of sustainability an increasingly complex task wherein the growing number of tiers in the supply chains blurs the visibility of what the tier furthest from you is doing. Combined with the multiplicity of suppliers on each tier, the issue calls for attention as it exposes your organisation to a multitude of ESG risks (and ESG opportunities!) across the supply chain that are best handled at the procurement stage.
A collaborative environment allows buyers and suppliers to open up about their respective sustainability challenges, exchange ideas and combine complementary expertise. At the same time, a joint effort means that no single organisation needs to ‘do it all’ in regards to sustainability: each value chain actor can focus on addressing environmental and social challenges at their stage of the value chain, helping respective upstream and downstream actors to do the same. Ultimately, a supply chain of this kind can outperform competitors as it can satisfy market needs better – more transparently, more reliably, more sustainably, and potentially faster.
Who knows, in 2030, CXOs might look at Procurement not as a group that focuses on sourcing raw materials, goods and services, but rather as one that sources great ideas and innovation. That would be a game changer.
Forfatter spotlight
Tore Christian Jensen
As a part of the Strategy & Operations practice Tore has worked with analysis, development and implementation of operational strategies. Tore has deep experience with aligning business models to changing market demands through optimisation of business processes and aligning systems, organisation and governance accordingly. He has industry experience from manufacturing, transportation, consumer products and energy. His main focus is on on the operational core processes but he also covers administrative support processes. As a program manager Tore has been leading transformation projects for international clients heading multiple parallel projects and reporting directly to executive committee members. His responsibilities cover everything from initiating assessments, identifying opportunities for improvement to building business cases and following up by designing solutions and driving teams through implementation.