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In this guest post, Achilles' Adrian Chamberlain looks at the impact of a recent ruling in the UK designed to enhance social value in the supply chain and outlines how procurement organisations around the world should respond.
The threat of a potential jail sentence or hefty fine has rightly made compliance and adhering to regulations the number one priority for CPOs across the globe. But even without the same hard-hitting penalties, a raft of new guidelines on 'social value' could carry an equally high reputational cost for corporations that fail to take the issue seriously.
Once seen as 'fluffy' or 'nice-to-have', social value – delivering benefits to communities as well as shareholders - is now required under legislation by governments around the world, including Australia, the United Arab Emirates, the UK and USA.
In a landmark move, the UK Government has asked 50 of its primary suppliers to report back on not only their own social value efforts, but also on the efforts of their suppliers. For any buyer who might have viewed the original request as a 'tick-box exercise', this is a wake-up call that social value is now a strategic part of the procurement process.
Where one Government leads, others follow. Global firms should act now, by setting up a proper system for managing information about their suppliers, adopting a collaborative approach to gathering information and map supply chains and finding out the identity of all their suppliers so they can be quizzed about social value.
In response to a request from the Department for Transport (DfT), First Great Western - a major train operating company - recently worked with us to contact more than 1,400 suppliers, asking them to reveal details about their own internal apprenticeships schemes.
That was only possible because First Great Western had an accurate and up-to-date supplier database. Without that basic data, it would be difficult to know where to start.
Of course it's positive if any company increases its social value. But if whole industries came together and agreed a shared goal, they could make a massive difference to people's lives across the world. Imagine if all corporations worked to the same goals on SMEs or training disadvantaged people.
Collaboration reduces costs by a half and makes life much easier for suppliers. If most corporations' requirements are broadly the same, then why not pull together social value questions into a single form to reduce the administrative burden? In our experience this works best in industry pre-qualification communities – which already have streamlined requirements in business critical areas, such as health and safety.
With a growing requirement to report on suppliers' social value efforts, businesses must 'map' their supply chains to gain visibility of providers through all the tiers. The easiest way to do this is by sending automated invitations requesting information to suppliers in the lower tiers. Once this is complete, buying organisations can then easily question suppliers about social value activity.
SOCIAL VALUE AROUND THE WORLD
Charitable donations - In India, there is already a 2% CSR law requiring corporates to deliver this proportion of their gross profit back to worthwhile causes.
Diversity - In South Africa, the Broad Based Black Economic Empowerment (BBBEE) scorecard exists to encourage the use of black and ethnic minority suppliers. In recent weeks, there has been a particular focus on championing enterprises and SMEs owned by black women.
Education – Various initiatives in the United Arab Emirates are designed to promote further education opportunities, including the Emiratisation policy which aims to increase graduate opportunities and apprenticeships.
SMEs – The EU recently unveiled a raft of new procurement rules which are designed to create a level playing field for suppliers of all sizes.
Using local firms – Global oil and gas firms, particularly in Nigeria and the UAE, are often required to prove they have used local suppliers, so that economic benefit remains within the country where oil is found.
Adrian Chamberlain is CEO of Achilles, a company which creates and manages a global network of collaborative industry communities, allowing trading partners to share high quality, structured, real-time data.