“Procurement with Purpose” - how SAP Ariba guides supply chain and procurement transformation
Social, economic, and environmental sustainability should be at the heart of supply chain and procurement transformation. SAP Ariba is perfectly positioned to guide companies in this noble direction.
“Purpose is no longer something that’s nice to have; it’s become a must-have strategic imperative that is high on every organisation’s agenda if they want to be perceived as relevant, admired, and innovative by their customers, employees, investors, partners, communities, and public entities,” advises SAP Ariba in its latest white paper which outlines its commitment to supporting its customers in their “mission to create a more purpose-based, equal, and nondiscriminatory world through partnerships with organisations such as a Made In A Free World, ConnXus, EcoVadis, Maplecroft, and UN Global Compact”.
Increased awareness of the negative effects of supply chains which fail to conform to modern ethical and sustainability standards has been a wake-up call for organisations around the world. Due to the rise of social media the pressure on brands to be seen to be operating ethically has risen exponentially as public opinion, both positive and negative, can go viral in an instant.
SAP Ariba identifies the challenge for businesses as confronting how to “use their influence to improve the human, economic, and environmental impact of every organisation that their supply chain touches”. Defining this as “procurement with purpose” SAP Ariba believes purpose-led businesses can redefine the value chain by designing models that create value for all stakeholders, supply chains, communities, and the planet. “SAP Ariba is a purpose-driven business and we fundamentally believe it is our role to find like-minded companies and provide a platform on which they can work together to build ethical, sustainable supply chains and make the world a better place,” maintains the software giant’s President Barry Padgett.
An historic focus on the most cost-effective solutions has built harmful trends in communities which are open to exploitation, including forced labour, dangerous working conditions, impoverishing wage structures, and damage to the environment. For example, the whitepaper makes note of charity Amnesty’s accusation against tech behemoths Apple, Sony, and Samsung for their failure to ensure their suppliers in Africa are not making use of child labour.
The white paper warns that, in 2018, 48.5mn people around the world are living in slavery, and they are often “working at the very bottom of the supply chain”, therefore focusing on ethical practices that cut slavery out of the equation is paramount to eradicating this human tragedy: “In the old days, a CPO may have said, ‘I can save us three percent on our annual purchases and streamline our supply base.’ But times have changed. Today, it’s the CPO who says, ‘I can lift a man, woman, or child out of forced labour,’ who ultimately moves forward.”
The white paper highlights examples of major global brands leading the way to proactively drive purpose. 3M integrates sustainability into its innovation pipeline through its ‘Pollution Prevention Pays’ program, which aims to proactively minimise waste and avoid pollution. Apple, though criticised for its child labour lapses by the report, has diverted 625K metric tons of waste from landfills since 2015 - enough to cover 2,545 soccer fields about one metre deep. Elsewhere, Adidas sold one million shoes made out of Ocean plastic in 2017 and The Coca-Cola Company, the 24th biggest industrial consumer of water, has invested $2bn to reduce water use and improve water quality in the communities in which it operates.
SAP Ariba is a signatory of the UN Global Compact and supports the 17 United Nations Sustainable Development Goals (SDGs) and Guiding Principles on Business and Human Rights. It serves as the Patron Sponsor for the Decent Work in Global Supply Chains Action Platform for the UN Global Compact and believes that, to achieve these goals, organisations need an integrated approach implemented through partnerships and involving the private sector.
SAP Ariba wants to lead the charge against unethical and unsustainable supply chain and procurement practices by “making procurement awesome”. Its three pillars of Social Sustainability (to champion human and workplace rights), Environmental Sustainability (to aid the delivery of energy and climate change), and Economic Sustainability (to support decent work and fair employment) form a focused framework for best practice.
These pillars support the definition of what SAP Ariba calls a “triple bottom line” which the white paper recognises as being in tune with the desires of the modern consumer: “Not long ago most consumers bought products with little thought to questions like, ‘Where are these products made? What is the carbon footprint involved in manufacturing them? Who made them, and are these people being paid properly?’ Today, many consumers want organisations to be transparent about their practices and considerate of all stakeholders. The triple bottom line concept accounts for this full cost of doing business. Adding the ‘people’ element of social responsibility to corporate bottom lines shifts the focus to the fair treatment of employees and favourable practices in the communities where organisations operate.”
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- Brown-Forman leverages data analytics to spark digital transformation
- AccorHotels: transforming procurement for a unique guest experience
By driving responsible sourcing that focuses on ethical operations, safe workplaces, fair wages, and mitigation of emissions and plastic pollution, companies can have a significant, meaningful, and deeply positive impact on communities and environments around the world. To that end, SAP Ariba is continuing to develop and supply cutting-edge solutions that focus on supply chain transparency and sustainable development goals. Supplier Risk and Lifecycle Management, Strategic Sourcing and Spend Analysis, and Commerce Automation (for touchless processing to remove paper and reduce carbon footprint) are just a small selection of the firm’s solutions enabling companies to zero-in on the most vital data to help build sustainable and ethical supply chains. Its E-Procurement software can mitigate risk while reducing buying cycles by 50%, cutting supply costs by 10% and lowering processing costs by 25-60% with market-leading innovations in guided buying and spot buy. Its solutions support the purpose-driven organisation by empowering them across industries to achieve corporate objectives around purpose. SAP Ariba can help companies utilise spend analytics to optimise purpose-related spend and diversity in the overall supply base, deliver source-to-contract tools that support supplier qualification and compliance verification based on inherent risk factors for each specific engagement. Offering supplier management with a risk and sustainability lens, they enable sustainability evaluation by third parties for environmental, forced labour, and other human rights violations.
“What truly makes procurement awesome, and the power we hold so important, is the collective purpose of our profession – to build a community and figure out ways that we can work together to create more ethical supply chains, eradicate slave labor, and level the playing field for everyone,” reasons SAP Hybris president Alex Atzberger.
With its suite of supply chain and procurement solutions, SAP Ariba offers firms the opportunity to identify and choose suppliers which can simultaneously boost profits and make a positive difference. In quantifying the value of sustainability, the whitepaper notes a positive correlation between it and stock market performance. In reviewing 200 academic studies on sustainability and corporate performance, researchers at the Harvard Business Review found that of those 200 studies, 90% conclude that ESG standards lower the cost of capital, 88% show that good ESG practices result in improved operational performance and 80% show stock price performance positively correlated with good sustainability practices. This results in brands with ‘purpose’ in the market outperforming those without by three times.
By focusing on ethics and sustainability via total transparency, companies can leverage the positivity of this image to build their brands as powers for good, encourage investment, mitigate risk both in terms of supply chain stability and public relations, and boost value for shareholders.
To find out more visit https://www.ariba.com/about/procure-with-purpose to download the white paper
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”