How good can we be? - Also in this issue - Morality and ethics in companies and procurement - Drozak Consulting
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Your magazine for Procurement & Logistics
How good
can we be?
Morality and ethics in
companies and procurement
Also in
this issue
Deutsche Bahn’s engine of ethics
Sustainability in purchasing
Q4 / 2018 edition
Drozak on the spot
Drozak on the spot
Save the dates:
Event calendar for 2019
MAY
15 – 16 MAY 2019
World Procurement Congress in London
High velocity procurement: The competitive advantage
OCTOBER
23 – 25 OCTOBER 2019
BVL International Supply Chain Conference in Berlin
Industry convention for logistics and supply-chain management
professionals
NOVEMBER
13 – 15 NOVEMBER 2019
BME Symposium in Berlin
2
Editorial
“Does our behavior reflect
our ethical ideas?”
Dr. Jacek Drozak, founder and CEO of Drozak Consulting
The tranquil weeks of Advent and of ethics in purchasing because of the With the last article, we complete
Christmastime make us more amena- pre-Christmas mood. However, our the thematic triangle of ethics –
ble to taking an ethical view of the primary reason is because this topic is procurement – implementation. Here,
stressful societal and political dramas only rarely addressed, and its impor- Thomas Keitel offers additional inter-
currently playing out all around us. tance continues to grow for numerous esting examples of how companies
reasons. worldwide handle the issue of ethics,
If we bring this contemplative mood particularly in the sense of sustainable
into our daily business, it prompts us In our lead article, we begin with an procurement.
to raise questions that we sometimes ethical tour de force that ranges from
suppress in order to avoid ethical ar- the Bible to the Romans to codes of I hope you enjoy your reading, and I
guments. Are our actions always eth- conduct and the issue of compliance. wish you and your families a merry
ically and morally appropriate? More Swiss theologian, philosopher, and Christmas and a healthy new year.
specifically, do we not sometimes canon-law expert Daniel Schwenzer
place too much pressure on suppli- has tackled the humanistically chal-
ers, customers, partners, employees, lenging task of building these ethical
and colleagues? Does our behavior bridges.
reflect our own ethical ideas? Or do
we sometimes cross ethical lines, Afterward, remaining within the
and soothe our consciences with the purchasing sphere, we enjoy a deep
Dr. Jacek Drozak
balm of logical justifications such as, dive into this topic. I am very pleased
“It’s about the company’s continued that we have succeeded in obtaining a
existence,” “It’s a fight to the death comprehensive interview with the CPO
against the competition,” or “I have of the corporation that faces the most
to make sure of my own family’s fu- stringent requirements with regard to
ture.” I sometimes ask myself these transparency, traceability, and compli-
questions… ance. Deutsche Bahn’s Uwe Günther
provides an impressive demonstration
For this reason, we have selected this of how fundamental ethical values can
special topic to ring out the year. In part, be practically implemented in a de-
we want to focus on the perspective manding environment.
3
Ethics in procurement
Do we need new commandments?
Ethics in companies and in purchasing
have done, a satisfactory response? absence of regulations, and accepts
What rules should we be following?
And particularly for purchasing de- that many people will simply fall by the
partments, how should an essential wayside. One compromise is the so-
In 1912, Russian economist and the-
interface be established between ex- cial market economy, which – based
ologian Sergei Bulgakov wrote, “The
ternal relationships and cash flows on on the encyclical Rerum Novarum
fact of economy always aroused phil-
the one hand, and the issue of ethics (1891) by Pope Leo III, and subse-
osophical ‘surprise’ in me, and the
on the other? quently adapted and developed by
problem of the philosophy of econo-
economist and later Federal Chancel-
my ... has in fact never left my spiritual
The blindness of economists lor Ludwig E rhardt – served as the ba-
horizon.”
sis of the market economy of the Fed-
Just as there are many questions, eral Republic of Germany (particularly
Bulgakov’s “surprise” and his question
there are also many theories about the “Bonn Republic”), and with certain
regarding the philosophy of economy
economics. Every thinker has “their” exceptions, retains this role today.
is a topic that remains as important
theory or dogma. For this reason, one
and current today as it was then. This
can also speak of economic dogmat- Of course, there are many critics.
is true not only from the viewpoint of
ics. Every economic dogmatics bases For example, in 2010, economist Ka-
a theologian and ethicist, but also
its theory on regulatory mechanisms ren Horn lamented the “devastating
for businesspeople, executives, and
employees.
All of these individuals, conscious-
A short-sighted laissez-faire, or “we can do this,”
ly or unconsciously, ask themselves relinquishes any ambition of looking creatively
questions such as the following: What
rules, norms and guidelines – beyond
ahead, and avoids confronting consequences
those that are legally prescribed – are
binding for our activities in the busi-
that must either be implemented or philosophical and social-scientific
ness world? Are we in conflict with the
rejected. This ranges from the social- blindness” of modern economists,
precepts of charity, mercy, and be-
ist planned economy that looked to along with a lack of “logical rigor …
nevolence to our fellow humans when
Germany’s war economy during World [in] coupling theory to reality.” This
we try to act upon our employer’s
War I as a model, to the modern so- criticism can also be aptly applied to
economic interests? Is implementing
cial state that was first developed in current policies on both the German
a corporate governance policy and a
the 19th century, to so-called pred- and European level. A short-sight-
code of conduct, as most companies
atory capitalism, which idealizes an ed laissez-faire, or “we can do this,”
4
Ethics in procurement
relinquishes any ambition of looking responsibility and freedom of individ- – apparently because he was already
creatively ahead, and avoids confront- ual employees, detached from their the least capable – has earned nothing
ing future consequences. positions in the function and hier- in addition. Out of fear of loss, he had
archy of the company in the context simply buried his talent. The parable
The responsibility of their tasks. Corporate guidelines, also casts a glance at our own tasks
of the individual corporate responsibility policies, and and personalities. “Talents” are origi-
employers’ codes of conduct should nally an ancient unit of currency, but in
Back to Bulgakov. His philosophi- be observed. However, these do not everyday speech, they have become
cal insight is that the category of the replace the urgent necessity to make what we still understand by the con-
freedom of action and of reflection decisions in each situation that do cept today: abilities or skills. It is thus
applies not only in the realm of the justice to one’s own aspirations as an ethical to employ your skills to increase
spirit, but also in the material realm individual and a human being. Such the goods entrusted to you. This in turn
(thus, in economic relationships). This decisions may even be contrary to the appears to work to the good of all: The
is true not only at an individual level, directives of superiors, thus requiring rich man in the parable is pleased that
but also with respect to the entire so- great courage (and legal protection for his wealth has been enhanced by his
ciety. We see this insofar as the per- such whistleblowers). employees, and the successful serv-
son, according to Aristotle, is in truth ants are also pleased at receiving their
a zoon politikon – that is, a being that Corporate responsibility personal share in their success. It has
lives in the polis, or literally in a com- in the Bible therefore been beneficial to put the
munity of many. A ccording to Aristotle, talents to work. Only the servant that
the aim of the zoon politikon is to at- We return now to the topic of pro- did nothing is punished. In this regard,
tain the “good life.” For this reason, it curement! Corporate responsibility, the Bible and its parables are based
is a part of man’s nature to organize integrity, and individual responsibil- on human experience. They certainly
into communities and states. This in ity and freedom are of course topics reflect the society of the time, but can
turn requires rules, along with regu- relevant to purchasing as well. Due also be instructive in our society. Work
lated markets and economies. Life is to their mandate to use a company’s in accordance with one’s own talents
thus an economic process, and world resources efficiently and effectively, is and should be profitable. Or, ex-
events can be interpreted as econom- buyers face varied ethical demands, pressed in the context of modern so-
ic events. and sometimes challenges as well. ciety and its division of labor, property
Fortunately, since Adam Smith and (and one’s function within a company)
The Romans had a legal axiom that David Ricardo’s time, there has been entails obligation.
ran “ubi societas, ibi ius” – that is, a political, economic, and ethical real-
where there is society, there is law. ization that trade – and thus also the Walk the talk
This presents us with additional ques- economic activities carried out by a
tions. Where there is a society, and company – fundamentally increases The fact that nearly a billion people
where there are people, there are mar- the welfare of all participants. still live under conditions of absolute
kets that require regulation. Markets poverty provides a strong justification
as such are surely as old as humanity This in turn is quite biblical, and is re- for work in a company. The biggest
itself. The question is, how does one flected in the New Testament parable decline in poverty has taken place
act within these markets, and how of the talents. In this story, a rich man in countries that have opened them-
does one interact with the partners goes on a journey, and distributes his selves to trade. And are not purchas-
that also populate them? How can all wealth among his servants so that ers often on the leading edge of trade,
participants derive advantage or ben-
efit from this system, so as to to create
a situation of universal inclusion? Purchasing and business processes must be
What does this mean for each one
oriented toward a comprehensive sustainability,
of us? It is here that responsibility is and thus an ethical concept of the future
called for. This makes demands on
our personal outlook, our personal
ethics, and our personal willingness they, each according to their ability, as the first in countries both near and
to engage. Fundamental concepts can work with and increase the money. far to open the door of the global
involved in this process include sol- After his return, he holds an account- economy to economic agents? How-
idarity, integrity, the public welfare, ing. The servant who had received five ever, it is important that buyers, and
and sustainability. These principles talents has earned another five, while salespeople too, follow ethical princi-
apply within spheres both large and the one who had received two talents ples, so that they genuinely provide
small. They involve the responsibili- has also gained two more. Only the a share in happiness and success to
ty shown by companies, but also the servant who received just one talent everyone. Adam Smith’s invisible hand
5
Ethics in procurement
creates wealth, but does not neces- company and as a purchaser consider If these points are heeded and lived, it
sarily distribute it equitably. Thus, buy- something to be both proper and im- is possible to contribute successfully
ers must always ask themselves: Is my portant, I must demonstrate this and to making our world a little fairer and
purchasing both honest and proper? set an example with my own ethical more reasonable by working as part of
Am I following the right values as an action. This responsibility for the self a company. In so doing, one may even
individual person, and are we doing so applies both from above and below, enable our children and the children
as a company? Here, the “right” val- from within and from without. of our partners (and so on) to live in a
ues are those that create a win-win sit- more just world. Fair and sustainable.
uation for all participants, rather than Only in this way can markets genuinely Forward-looking. Honest.
leaving one party behind while all oth- work toward ending poverty and free-
ers profit. Or, asked differently: Are the ing people from its grasp. Population Daniel Schwenzer,
company’s purchasing activities and figures around the globe are rising. To theologian, philosopher, canon-law expert,
business processes oriented toward keep the world from falling regularly and organizational consultant
a comprehensive sustainability, and into conditions of disaster (such as
thus an ethical conception of the wars, famines, and epidemics – the
future? one of which is often a factor in the
next), each link in the human chain
It’s about the relationships of individuals
to and with each other
In this regard, each society must take must promote and demand sustain-
itself by its own entrepreneurial nose, ability. This is about the relationships
and continually ask itself the hard of individuals to and with one another.
questions. In terms of the ethical as- It is about how we deal with poverty,
pirations of economic entities, free because there can be no freedom
markets, and free economies, it is of choice in the context of involun-
best that this originates from within, tary poverty. However, the freedom
in a process of self-illumination, rather of choice (education, the free choice
from the outside, for instance through of profession, horizontal and vertical
Daniel Schwenzer,
laws. We are thus talking about cor- mobility) is itself a requirement for the
theologian, philosopher, canon-law expert,
porate responsibility. However, this free development of states and their
and organizational consultant
always concerns the entire compa- residents. If, as suggested above, the
ny as a corporate body, not simply human being is a zoon politikon, then
Schwenzer researches, works, and
the executive level, the headquarters the polis – the city on a small scale,
lives where the clerical, spiritual,
or the sales department. All of these the state on a larger scale, and the
and secular spheres intersect.
might offer good ideas and ideals, international community in the larg-
Along with being a superviso-
but in many cases such goals are not est sense – is the place where busi-
ry-board member, a head of refu-
afterward pursued or observed. ness and politics are done. All those
gee shelters, a canon-law expert,
that abide by ethical rules are already
an ecclesiastical judge, and an
“Do unto others...” making policy. This is because they
expert witness, he carries out his
are contributing to the well-being and
own academic research activities.
The lived aspiration to corporate re- welfare of all, and of course to their
With more than 50 publications to
sponsibility within a company should own in the process.
his name, he is widely read and fre-
be subjected to regular monitoring,
quently cited. Alongside his family,
screening, oversight, and logging by What good is it to make a large profit
his passion is the question of “what
purchasers and suppliers. This places today at a partners’ expense, cata-
holds the world together in its inner-
demands on individual company em- pulting sales and turnover figures up-
most being.”
ployees. Ultimately, many biblical pre- ward, while in the long term destroy-
cepts can be summarized in the fol- ing and rationalizing away the sales
He studied theology, philosophy,
lowing saying: Do unto others as you territories and markets that you want
history, and canon law in Tübingen,
would have them do unto you. (Or, as to keep serving? In doing so, one ulti-
Vienna, Strasbourg, and Fribourg
the popular German maxim has it: Was mately rationalizes oneself away, or at
(Switzerland).
Du nicht willst, das man Dir tu, das füg’ least one’s own economic existence.
auch keinem andern zu.) Formulated
differently: If I as a member of my
6
Interview
Setting a moral course in the large corporation
An interview with
Deutsche Bahn Chief Procurement Officer
Uwe Günther on values and responsibility in
the company’s procurement operations
trend: Ethics in purchasing means that a the context of the Innotrans interna- purchasing guidelines, and for busi-
c ompany has fundamental principles and tional railway-sector convention, we ness partners with the Code of Con-
guidelines that must also be applied in the award supplier ratings to outstanding duct (CoC). I am in regular contact
procurement context. What aspirations or business partners that have imple- with our company’s board of directors
framework does Deutsche Bahn operate with in mented criteria such as environmental regarding these issues, and we agree
this regard? protection or high-quality production together on all documents and ac-
„„The concept of ethics is about norms conditions for their employees in an tions. The recognition of our CoC or
of activity, and thus rules, which we exemplary way. Behavior that follows an equivalent document is a precondi-
use to orient ourselves when deciding norms and legal standards is one of tion for the establishment of business
on actions. This encompasses moral, the most important basic conditions relationships. These documents not
ethical, and responsibil- only specify relevant
ity-oriented criteria and legal requirements,
values, and concerns all The recognition of our Code of Conduct is a but also formulate
employees. However, it precondition for the establishment of business voluntary commit-
is naturally above all a ments and values
leadership task – in pro- relationships that are important
curement departments, to us as Deutsche
too. The purchasing division typically for a functioning procurement organ- Bahn. Another part of this process is
has the company’s largest degree of ization. Within Deutsche Bahn, it has ensuring that all our interactions – with
direct interaction with market par- always been a primary requirement colleagues, suppliers, and customers,
ticipants, or suppliers. This is true of for employees, executives, processes, as well as with all business partners
Deutsche Bahn as well. From lead and systems. and other contacts – are fair and trust-
pencils to the high-speed ICE trains, based. We have built all of this into our
trend: How does Deutsche Bahn make sure that
we supply everything. Our business supplier-management system, and
this ambition is being operationally imple-
mission in this regard is to provide a potential providers must show they
mented in the course of daily business? What
secure supply for our internal clients are committed to these values. In this
instruments are used for this purpose?
in all product groups according to „„One prerequisite is clear positioning regard, we want full transparency. This
the criteria of quality, logistics, and is one of the foundations for a stable
on the part of management – that is, long-term supplier relationship. Our
cost-effectiveness. Our ambition here
the “tone from the top” must be clear. supplier-management system begins
is to act internationally, innovatively,
Then, the necessary rules must be with a suitability test for potential sup-
and sustainably. Thus, ethical prin-
defined in specifications and agree- pliers. Here, we examine ethical and
ciples are integrated very clearly into
ments, and an oversight system must social qualifications, as well as quali-
the procurement division’s operational
be established. For procurement ac- tative and economic factors. No factor
rules and values. Every two years, in
tivities, this begins with the internal
7
Interview
Prevention of cartel-related
damage and bans on future
contract bids: Each s upplier
is regularly subject to an
assessment process. Any
irregularities or violations are
detected and penalized.
is addressed in isolation; it is the en- trend: To many people, ethical claims and The existing set of rules at Deutsche
tire package that matters. The suppli- corporate interests seem to be in tension with Bahn has been intensively developed
er qualification process is required in one another. That is, the corporation’s financial over the course of recent years. In my
order to participate in our competitive goal is to make the greatest possible profit, opinion, it today represents a model
bidding processes, thus keeping the and so other interests such as those of the framework for compliance-oriented
focus on prevention. environment or of suppliers appear to be given corporate-level procurement. We can
As a part of our daily business, we a secondary importance. Does Deutsche Bahn also confirm this through the regular
succeed in balancing interests here? use of external benchmarks. In our
work in various committees – for
example, the steering committee for
„„Deutsche Bahn aims to make a product-group strategies and employ-
cartel-damage prevention, or the sustainable profit. This goal is firmly ee-target agreements, sustainability
committee responsible for deciding rooted in the company’s strategy. The and environmental goals are regarded
to exclude certain participants from strategy sets equal priority on profit- as being equally importantas contri-
future bids. Here, we also assess how ability, factors relating to the environ- butions to earnings and value-added
well our suppliers have fulfilled their ment and sustainability, and the goal targets.
contracts in these areas. Any irregu- of being a top employer.
larities or violations are detected and
penalized. Every supplier is regularly
subject to an assessment process, My core belief is that morality in business is
the criteria for which are made clear at possible. And it is more important than achieving
the point the contract is signed.
the lowest possible costs.
trend: That has both breadth and depth.
But given the complexity of this topic, how do
Executives today find their challeng- trend: We know this from the media: In recent
you make sure that buyers are always up to date
es in the overlapping spaces of the years, Deutsche Bahn has fallen victim to the
with changes in the law?
„„Within the purchasing division, we
market, power, and morality. My core unethical (and criminal) behavior of suppliers in
belief is that morality in business is a number of cases. How does Deutsche Bahn try
hold a regular training program on possible. Moreover, it is more impor- to protect itself from such dangers?
supplier management and the issue tant than achieving the lowest possi- „„Yes, there were a few cases like this,
of compliance. Today, of course, we ble costs. No matter what the focus
also have e-learning programs that unfortunately. The most serious case
on success and money, morality and
address the code of conduct and cor- was definitely the rail cartel, in which
ethics cannot be allowed to fall by the
ruption prevention. In this regard, we a number of producers engaged in
wayside. The fundamental ethical ori-
include all employees who are a part price-fixing, damaging Deutsche Bahn
entation cannot be torpedoed by false
of the procurement process, even and our customers. We were able to
goals, overvalued results, a creeping
our technical staff, quality engineers, uncover these cases, penalize the be-
immorality, or a tacit acquiescence.
and users from the various business havior, and make up for the damage
segments. This results in cross-de- I act on this core belief in my dai- thanks both to our focused suppli-
partmental coordination. Of course, ly work, and also expect it from my er-management system and the op-
Deutsche Bahn also has a whistle- organization. This requires clear portunities the legal system provides
blower management system, which communication both internally and for the parties involved to turn state’s
can be used by external partners. externally, along with continuous re- evidence. In this process, the procure-
flection on current market conditions. ment division worked closely with the
8
Interview
legal and audit departments. Because trend: You have been CPO at Deutsche Bahn for
individual misconduct by suppliers’ em- a number of years now. With regard to ethics,
ployees is often the problem, we first of what successes in the corporate purchasing
all expect firms to get their own houses sphere make you particularly proud?
in order, and to participate actively in „„I am extremely pleased with the over-
the investigation of such cases. Then, all development of our procurement
of course, we also assume there will organization and its partners over the
be compensation for damages and a last few years, particularly with re-
change in processes. Afterward, we gard to the compliance-management
carry out appropriate compliance au- system, the cartel-related damage
dits, and also offer training programs prevention system, and the supplier-
for the suppliers. All of this must be management tools. Here, we are cer-
reviewed in an environment of open tainly on the right path. The results
communication. We regularly discuss of our recent external benchmarks
these topics at association meetings regarding progress toward being a Uwe Günther,
and industry conferences. The German world-class procurement organization Chief Procurement Officer,
Association for Supply Chain Man- also show this. In these assessments, Deutsche Bahn
agement, Procurement, and Logistics we were placed in the “professional
(BME) also offers training programs. procurement” category. This is only In his function as chief procure-
With regard to prevention and aware- possible if you apply and implement ment officer, Günther is respon-
ness, we must always be vigilant. We fundamental ethical principles in your sible for a purchasing volume of
especially have to provide young man- procurement processes. €20 billion for the main corpora-
agers with operational security in this tion, DB Schenker, and DB Arri-
trend: I would also like to ask you if you have va. Previously, he served as head
regard.
tips for the manufacturing industry. What could of infrastructure procurement
trend: One question certainly interests us all as other companies learn from Deutsche Bahn with and head of building works for
regard to ethics in purchasing?
DB customers: Does Deutsche Bahn see ethical
behavior as a competitive advantage from a
„„My recommendation is always the
Deutsche Bahn. Before his time
with Deutsche Bahn, Günther
rational point of view? Or do the company’s same. First, let’s engage in dialogue. was active as an engineer-
goals in this area simply produce additional Let’s discuss all the requirements economist in management-lev-
costs and expenses? associated with the mobility market, el procurement positions with
„„Behind our code of conduct are val- and look together for the most inno- Siemens Rail Automation, Rolls-
ues to which we are committed. The vative and sustainable solutions! But Royce Deutschland, and Elektro
question of whether we can afford it let’s also talk about potential or ac- Apparate Werke Berlin.
doesn’t come into the equation. These tual problems and their causes. Fair-
values allow us to derive internal rules er and more transparent world trade Since 2018, Günther has also
and obligations that must in turn be is particularly necessary today, when been an active member of the
observed. In sum, this leads to trans- policymakers are threatening and ar- German Association for Supply
parent and fair competition. For exam- guing about punitive tariffs and trade Chain Management, Procure-
ple, the criteria for suitability and the sanctions. ment, and Logistics (BME), the
acceptance of bids are applied in an In our daily work, we must be trade association for buyers, sup-
open and easily understood manner, collectively aware of the small tempta- ply-chain managers, and logistics
and every supplier has a chance to tions to weaken our ethical principles. specialists in Germany and across
compete. This is then an advantage This helps us immunize one another continental Europe.
for Deutsche Bahn, its customers, and against such temptations. Of course,
all of its business partners. They can we must also avoid losing our healthy Until spring 2018, he was also
rely on the fact that we abide by eth- sense of proportion. chairman of the Railsponsible In-
ical principles rather than operating in itiative, which focuses on sustain-
The purchasing department plays able procurement in the railway
a purely profit-oriented way. There is
an important role here. By selecting industry.
today a societal consensus that this is
high-performance suppliers, we want
the correct way to act. We agree com-
to gain customers on a sustainable Günther is married, and has three
pletely, and try to lead by example. In
basis, and make Deutsche Bahn the adult children.
this regard, we as buyers represent
top choice in the mobility market.
Deutsche Bahn as a whole, and must
be very conscious of this responsibility.
This interview was conducted by
Jacek Drozak,
CEO of Drozak Consulting
9
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“Sustainability” is a buzzword many of By consciously adhering to sustainable ever-increasing volatility in supply mar-
us do not associate with our current procurement standards, corporations kets. They strengthen and enhance
businesses. However, it has become make an ethical decision – without partnerships within a company‘s sup-
an important and integral element in being driven by external requirements ply universe by requiring and enabling
the operations of leading internation- such as legislation, international law, closer collaboration. And lastly, they
al corporations, and particularly with- or supranational conventions. In so further development and innovation
in their procurement departments. doing, they demonstrate responsibility by enhancing existing products and
Moreover, sustainable procurement toward the environment, human rights, processes and prompting the crea-
will certainly become a mainstream and the fight against corruption. tion of new ones, in part because the
purchasing topic in the future. principle of sustainable procurement
Ethical and good for business too… demands carbon-footprint reductions.
But what is sustainable procurement? Logically, this in turn requires that a
Broadly speaking, it is carrying out But is an ethical attitude the only factor given amount of output be produced
procurement processes in a way that driving corporations to develop sus- with less waste, using less raw materi-
minimizes waste and the use of energy tainable procurement processes? Do al and energy as inputs.
and raw materials, while also requiring they make the effort to implement a
minimum corporate-governance, envi- new and challenging procedure simply Capital markets like sustainability
ronmental, safety, and social standards because they want to take the moral
from your suppliers. These standards high ground? Obviously, there are oth- One particularly important advantage
can also be required along your sup- er reasons too. In additional to purely associated with sustainable action is
ply chain, poten tially including even ethical motivations, companies also the prospect of improved access to
sub-suppliers and their suppliers. In see tangible benefits associated with equity capital and credit. Investors
practical terms, this will prevent your such activity. today are placing increasing empha-
organization from the embarrassment sis on sustainability in their investment
of discovering that child labor is em- Actions of this kind can mitigate rep- decisions. Some large institutional in-
ployed in your supply chain, as hap- utational risks and create a reputa- vestors are investing only in compa-
pened to a well-known a pparel compa- tional competitive advantage. This is nies with sustainable business models
ny, for example. Similarly, it can reduce in large part because customers are and operations. With regard to cred-
the risk of litigation – for example, from becoming more aware of corporate it, large lenders (e.g., supranational
the NGOs that right fully pointed out behavior, particularly within end-cus- institutions such as the World Bank,
that a global consumer brand was pro- tomer markets. Such actions may also EBRD, or KfW) are more willing to fund
viding indirect support to corrupt gov- anticipate future regulations, while en- sustainable businesses, often with
ernments that were clearing rain forests hancing the resilience of the supply comparatively lower capital costs.
in distant countries. chain and its ability to deal with the
10Sustainable Procurement
procurement
A number of large-scale equity and one, with wide-ranging implications. In
credit programs feature very favorable general, board-level approval is neces-
conditions aimed exclusively at en- sary. Subsequently, the company will
couraging and enhancing sustainabili- act differently vis-à-vis its stakeholders.
ty within corporations. The ownership structure will be affect-
ed, as different kinds of investors will
Global corporations such as Nestlé, be attracted and current shareholders
BASF, Unilever, and Anglo American might chose to take their money else-
all practice sustainable procurement. where. Employees need to be made
Most major leading corporations have aware of the initiative. Some will have
a code of conduct (CoC) or a sustain- to be convinced, and all will have to be
ability charter. The trend is even more trained and enabled to operate effec-
pronounced within the public sector, tively in this new environment. Process-
where sustainable procurement has es and systems will need to be adjust-
Thomas Keitel,
often become a requirement. ed accordingly. Incentive systems will
MBA and lic.rer.pol, and a partner at
need to be aligned. Customers and
Drozak Consulting
Although many global corpora- markets will need to be informed of the
tions have implemented sustainable shift. But the procurement division will
works with his team to serve cli-
procurement processes in some form, feel the greatest impact, as it will be
ents in the telecommunications,
no universally accepted standard has tasked with driving the changes on the
aerospace and manufacturing
yet emerged. Rather, there is a large supply side, and making sure they are
industries, and helps drive digiti-
variety of different approaches. For well integrated with existing organiza-
zation efforts forward. As CPO at
example, the ISO 20400:2017 standard tional processes.
two leading global market-listed
is widely used in the United Kingdom
companies, he helped improve
and Australia. It provides guidance to Procurement in focus –
competitiveness through sus-
organizations independently of their people first, process second
tainable cost reductions, part-
area of activity, size, or owner ship
ner-based supplier management,
structure. The Government B uying Once the decision to become sustain-
and innovation scouting. As an
Standards (GBS) guideline provides a able has been made, the procurement
angel investor, he helps young
framework for public entities in the An- department needs to prepare for the
entrepreneurs in his home region,
glo-Saxon world. Beyond these, there transition. This means integrating prin-
the Palatinate. As a father of three
are product-based and supplier-based ciples such as accountability, trans-
young children, sustainability is an
approaches, as well as approaches parency, ethical behavior, respect for
issue close to his heart.
that cover specific industries. There are stakeholder interests, and respect for
also frameworks from the KfW and the human rights into its operations. This
United Nations that relate to public-pri- is quite a significant addition to the
vate activities. traditional focus on cost, quality, and evolution and in some cases a change
time. For this reason, it is critical to of vendors, as some incumbents will
How can a corporation successful- identify, attract, and retain staff able to be unable or unwilling to comply. Miti-
ly make the shift to sustainability in manage an initiative of this kind. A core gating supply shocks is critical. On the
its purchasing in an environment that team of change agents and evange- other hand, such a shift can facilitate
lacks one-size-fits-all sustainable lists with a strong mandate needs to a reset in supplier relations, enabling
procurement standards? The answer be built in order to derive a sustainable a company to strengthen old partner-
is simple: Each organization has to procurement roadmap from the cor- ships and create new ones. After a
assess its business from the point porate strategy. cautious beginning, the change-man-
of view of sustainability. This means agement team can increase its pace,
considering the company‘s business Start slowly but steadily, and a virtuous cycle will kick in.
model, operations, supply universe, and continuously improve
and market, a necessarily individual Be the change you want to see in the world
approach and process. But how can Integrating new dimensions such as
this be set in motion? labor and human rights, environmen- Sustainable procurement is ethical,
tal assessments, and fair operating good for business, and will ultimately
Impetus from the top is needed practices into the procurement de- be the standard. What are you waiting
partment‘s operations will take time. for?
As a universal rule, creating and im- Even if managed well, there will be a
plementing sustainable procurement learning curve. In particular, commu- Thomas Keitel,
practices requires action from the top nicating and implementing these new Drozak Consulting partner
of the organization. The decision to act requirements within the company’s
sustainably is by its nature a strategic supplier universe will lead to gradual
11Preview
In our next issue:
Cooperation reloaded –
Systematically maximizing the value of supplier relationships
ANUAR FEBRUAR MÄRZ APRIL
Strategic collaboration The buyer as
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