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Procurement In 2025: Transparency.

RiskCorporate social responsibilityCSR PoliciesGlobal RiskLow Cost Country Sourcing+-

In this latest in a series of posts, Procurement Leaders once again invites Ernst & Young's Carlos Alvarenga to evaluate what might be some of the key levers for the function, a decade in the future.

 

The last 10 years have seen the rise of two seriously disruptive, and deeply related, social phenomena. The first is the arrival of social technologies, such as Twitter, Facebook and the iPhone. The second is the decreasing importance that most people (but especially the under-20s) are placing on personal and institutional privacy. With the arrival of Google Glass and its "always on" social interaction capabilities, corporations are about to enter a new and unknown stage of social transparency where all information is shareable and personal privacy is a largely alien concept to specific emerging demographic groups and even entire nations.

 

As one consumer CPO put it: "Today's youngest kids in China and the U.S. will grow up with no hang-ups about sharing their life stories with the outside the world, and they will expect the outside world to return the favor."

 

In this new society, the corporation, which to outsiders in the past was often thought of as a 'black box', will find that the box suddenly has several windows and that outside those windows is a curious world looking in.

 

Questions about supply source location and pricing, which today are often troubling and disruptive to many procurement organizations, will become a normal part of the conversation with consumers, regulators and activists. Moreover, the idea of a 'corporate secret' may itself seem increasingly archaic.

 

If people will be willing to 'live life out loud', then corporations will be expected to do the same. For example, Google Glass will enable supplier inspections and negotiations to be seen in real time by outsiders. Is it that hard to imagine a world in which regulators force procurement teams to broadcast specific activities in real time to ensure compliance?

 

Another social trend that has started — the idea of preemptive action ahead of unwanted activity — has already entered the regulatory lexicon, and suddenly procurement organizations could find themselves having to show that their bidding and sourcing activities are transparent even where no suspicion of wrong-doing existed in the past. Indeed, where and when social transparency becomes the norm, any form of opaqueness may come to be seen as possibly suspicious.

 

Along the same lines, the concept of governmental nudging, which has taken hold most famously in the Scandinavian countries and most recently in the UK, will cross into the US. In this concept, the government does not legislate many social changes; rather, it 'nudges' them along via economic stimuli and penalties. As with people, corporations will find themselves 'nudged' in certain directions by government and social agents, and procurement will once again find itself the recipient of many of these mandates.

 

The social evolutions noted above will also have significant changes in the role played by the CPO at the most famous (and infamous) corporations, since transparency pressures will increasingly make the CPO role a visible one in the social landscape. Historically, the role of the procurement executive was an internal one, and few CPOs were public faces of the corporation. That model began to change in the 2000s and will continue to change in the coming decade.

 

By 2025 the best CPOs will be well-known corporate figures, able to lead discussions with consumers, regulators and the press an all aspects of procurement activities in the firm. For the teams that support these leaders, life and work will be very different, and they should expect that many processes and events that today are internal will, in the future, take place on a real-time social stage with millions, even billions, of people watching.

 

Carlos Alvarenga is a principal in Ernst & Young LLP's Advisory practice, a senior research fellow at the Robert H. Smith School of Business at the University of Maryland, and the author of a blog on economics and risk (reconnomics.com). He is based in Washington, DC.

The views expressed herein are those of the author and do not necessarily reflect the views of Ernst & Young LLP.

Carlos Alvarenga
Posted by Carlos Alvarenga