How spend intelligence is shaping sustainable business futures

Spoiler alert: There’s a lot more at stake than savings

Supply chain awareness is no longer the responsibility of one business unit. Understanding all aspects of your procurement process and outcomes is now critical to business profitability — but it’s about far more than the dollar.

Find out how to shine a spotlight on the sustainability of your supply chain and be prepared with integrated and actionable insights for all your stakeholders.

What is sustainable spend intelligence?

As discussed in our recent whitepaper, spend intelligence can cover ethical and sustainability issues including:

• modern slavery including child labor and worker exploitation
• cargo theft
• food fraud
• cyber disruption
• drug trafficking
• human rights violations

It also encompasses socially and ethically-desirable principles like diversity, equity and inclusion. For RobobAI Executive, Dave Gardiner, sustainable spend intelligence can be distilled down to the simplest of terms.

“When you get a new bike or a new toy, do you know where it’s made, how it’s made and who made it?” he asks.

“Even children can understand that if it’s made by people who aren’t paid fairly, or it’s damaging the environment via production — that’s not a choice consumers want to support.”

Sustainable spend intelligence empowers companies to understand and interrogate their supply chain — for strengths and vulnerabilities. Data is the business-critical element that will help you not only understand the here and now, but the potential impacts of your procurement decisions.

Looking outwards: Touchstone issues

Procurement is no longer restricted to reporting on cost-cutting and savings targets.

“Traditionally, it was all spend reduction but it’s changing in the modern world,” says Dave.

“Companies are being held accountable for risks and issues from modern slavery to ensuring prompt payment terms for small businesses.”

Modern slavery

Anti-Slavery International defines modern slavery as ‘the severe exploitation of other people for personal or commercial gain’. It includes child labor, forced labor, debt bondage and human trafficking. Not things you want to align your business with.

Every business bears the risk of a vendor engaged in these human rights violations. It’s time to take a critical look at whether your supply chains are facilitating modern slavery. AI-based technology can produce audit-based insights to support proactive changes based on trusted data.

Payment times reporting

Slow payment times can be cashflow nightmares for small to medium businesses. In Australia, they have introduced the Payment Times Reporting Act 2020 - several US states are following suit. Aside from fines and compliance penalties, knowing and improving your organization’s payment times is an ethically sound practice. With hundreds or thousands of suppliers and payments, that’s a near impossible task without an intelligent platform.

The risks of not attending to these organizational and cultural touchstones are far-reaching and include legal, environmental, regulatory and human risk. As discussed in our whitepaper, investing in ethical procurement is not only a feel-good opportunity, but it can also mitigate critical business risk.

Looking inwards: Solving the puzzle

Improving the sustainability of your spend is far from a one-step process.

To start interrogating your supply chain, you need the right data collected, cleansed, and categorized. If you’re still fumbling with your data, the impact of your analysis will be limited.

If you don’t know your suppliers as well as you should (including their suppliers), or if your approval process depends on inconsistent or variable data points, extracting genuine spend intelligence to support sustainability may be a losing battle.

Even for small-medium sized businesses, it’s near impossible to collect this data manually - the best spreadsheets aren’t up to the sophisticated analysis this demands.

The puzzle pieces

• Digitizing agreements within a procurement platform designed to be searchable and integrated with other procurement procedures
• Vendor onboarding done systematically to identify and interrogate risk factors for concerns like modern slavery
• Risk identification and analysis relies on verifiable data to know what’s going on now and where change could have an impact
• Reports and dashboards that present real-time graphs and tables that minimize data overwhelm

Who should care?

Every business needs to consider their spend intelligence capabilities to keep up with the demands of sustainable, ethical supply chains.

Issues of sustainable and ethical supply are relevant to KPIs across the entire organization. The care factor extends from board members to those in senior leadership and managerial positions in finance, procurement, supply, transport, quality and operations.

This broad responsibility can make it difficult to achieve agreement on bringing procurement systems into the future. Financial dashboards might be crucial for a CFO, whereas the CPO might be focused on real-time savings and vendor rationalization, and a CRO might be focused on identifying risk exposures. But what they are all likely to agree on; the potential for positive impacts on profitability and brand value. For example, since 2008 global giant Unilever has saved  $1.5B through sustainable sourcing.

Emerging metrics to keep an eye on

When measuring what’s important for businesses, the only constant is change. Here are three metrics relevant to the 2020s and beyond.

Carbon offsets

With global shifts in climate change responses, measuring vendor carbon emissions and offsets will be key.
As global standards emerge, CO₂e may be a key system metric as part of supplier evaluation.

Customer happiness

Hear us out. Customer happiness is a real metric that makes real change to your bottom line.
Think of it in terms of Customer Lifetime Value (CLV). Keeping customers satisfied in a way you can measure can lock in a lifetime of brand loyalty.

Where the spending power really lies

Customers being interested in the sustainability of their purchases is not new; the idea of a ‘Green Consumer’ was first identified in the 1970s. Research shows that 66% of customers worldwide were willing to pay more for sustainable offerings^[1] and is on the rise thanks to the pandemic pushing increased awareness of supply chains and issues like modern slavery.

Your marketing department should also care about the sustainability of your spend.

Consumers are noticing, and they’re ready to vote with their wallets. There’s no room for passing the buck – if it’s part of your supply chain, you’re responsible. 

^[1] https://journals.sagepub.com/doi/full/10.1177/0022242919825649