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Supplier Strategies

Mon 22nd Jun 2020: The Case for a Values-Based Procurement Function

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What are your core values? How do you define what is of critical importance and how do you feel it guides what you do and how you do it? Maybe you know explicitly and have worked out your own personal values, maybe you know them tacitly although cannot express them, know instinctively what guides the decisions you make on a day to day basis.

What about your organisations’ values? I’m willing to bet that they are stated both publicly and on your company intranet in a way that makes them unavoidable. Maybe your company prizes “Integrity” or the “Environmental Sustainability” or “Equality of Opportunity” above all else. Having a set of core values is in my honest opinion is a must for any organisation. How can an organisation instil a sense of culture, connect each and every employee to the organisation and to each other, if they don’t know or don’t buy into a set of values by which they should conduct themselves while representing the company?

Supplier Strategies core values are set out on a separate web page and we live them daily. This page of the Supplier Strategies website is the most important to us not just because these values are important to us, not just because we see the world through these lenses, but because they are central to what we do. We ensure that our clients as well as anyone who works with us understand and at least respect, even if they not necessarily their own values, because these values instruct everything we do for our customers.

We argue that the application of an organisation’s values matter to a procurement function almost more than any other part of an organisation. If your company purpose is to sell its products based on their light ecological footprint that needs to be reflected not just in the way your company sells and markets its products. It must live that ecology-first based value through its supply chain, through the decisions its procurement team makes about how it engages with suppliers. If this value is not lived by your procurement team what is your company’s promise to its customers really worth?

I’m not talking here just about the bald application of a standard Corporate Social Responsibility statement – that kind of commitment is ground level zero. Its not just about ensuring the absence of child labour, slave labour, fraud or tax-avoidance measures in the supply chain – much of this is bound in legislation, not even a nice-to-have.

But let’s say for instance one of your organisation’s values is the “Equitable sharing of risk and reward” or maybe it might be written “Do unto others as you would have them do to you”. Can you really say that you are living your values if your sales teams issue invoices with 30 days payment terms and your Procurement teams KPI is predicated on as many payment rotation days you can negotiate with your suppliers? Yes, its great for your company’s cashflow but what about your suppliers cashflow? Is that equitable? You can make statements about the importance of cashflow – especially now, in this age of Covid19. You can make statements about how your suppliers know what your terms are before entering into business with you. And these may well be perfectly sound, business-led arguments. But can you really say that requiring 30 days payment terms from your customers and 120 days with your suppliers aligns with your values?

Here’s another currently relevant example.

Your company holds dear the creed that it ensures diversity at every level of the organisation. Diversity in terms of ethnic backgrounds, sexuality, physical ability – however you want to define it. One of your longest serving and star performer suppliers has been in the news recently because it was fined a large sum of money for being found to be systematically discriminate in its hiring process. Do you as a CPO let that slide or do you have your team work with the supplier so that it understands your corporate values and how its actions must change if it is continue being a supplier? What sanctions would you think are commensurate? Would you countenance dropping the supplier completely?  

These can be tough conversations to have, and tough decisions to take. But what are your values if you don’t live them? What do your organisations corporate values mean to your customers if they don’t apply to the way you do business with your suppliers?