Responsible procurement

What is responsible procurement?

In simple words, this is a process within the business to ensure that the company has transparent supply chain. In details it it all about checking the supplier (before or during the contract) for their attitude and demonstrated actions in areas of business ethics, environment, labor, and trade.

How to set tone at the top?

Having a clear policy and procedures is a minimum. However this has to come with the real business actions taken by individual buyer. Responsible procurement is also about some level of investment. Audits can be costly, as well as contact validation. From time to time decision makers have to stand for good instead of profit, and either reject or discontinue business if the 3rd party is not meeting the code of conduct requirement.

What is the goal of responsible procurement?

The aim is to purchase goods and services at best value, commensurate with business needs, while minimizing risk and financial exposure. Relationships with suppliers has to be conducted in an impartial, transparent and ethical manner and in full compliance with all law and regulations.

What are the key requirements set by responsible procurement?

The key requirements for all employees involved in procurement activities with third parties are:

• To document rationale for purchase need, selecting a supplier and keep the selection process transparent internally.
• To obtain the best value for the Group or Operating Company.
• To use centrally negotiated terms and conditions, where available. These terms and conditions will need to be continuously tested by users and Group Procurement to ensure they remain competitive.
• To segregate purchasing duties.
• To use Purchase Orders (PO) in the system to capture commitments to suppliers.
• To obtain approval of the senior management or committees for significant/strategic contracts.
• To ensure supplier risks are proactively identified and mitigated.
• How to ensure that requirements are met?

Responsible procurement requires a strong governance around the process. It has to work on both sides: internally for business who needs goods and services and procurement department who executes that needs, as well as for 3rd parties who supply us.

First and foremost is to introduce Supplier Code of Conduct, which is applicable to all 3rd parties the company is doing business with. It should be mandatory element to sign off even before offers are presented. Supplier Code of Conduct should be published on company’s website as a public and easy to find document.

The aim of this document is to confirm by both sides that neither of them shall use any form of slave, bonded, forced, involuntary prison labour or engage in human trafficking or exploitation, and also will follow business ethics in terms of how they produce, distribute and sell their goods and services, including no engagement in money laundering or tax evasion,or unfair competition.

Moreover, the company can conduct a risk assessment analysis, using eg. TRACEsort platform (LINK) before starting any cooperation with a potential supplier, ensuring that they are of a good name and have a solid market reputation.

Responsible procurement is also about continued education of the suppliers and market in terms social responsibility and fair trade. Top class companies proactively manage their 3rd parties by undertaking targeted CSR / Social audits at factories and final assembly locations. It is practically done by continuously identifying supply categories where goods / services are potentially sourced in high-risk areas and asking suppliers to provide visibility of their supply chains.

This advanced 3rd party risk management brings continued progress in the important area of health, safety and environment. It can be done in two ways, either by procurement personnel - by executing audits and work on mitigation actions together with our suppliers through a focus on safety leadership, training and local programs; or through association with specialized auditors (eg. Sedex) adopting the ‘four pillar’ auditor methodology.