Learn more about the unique opportunity procurement has to use performance spending to enable a company’s ESG strategy and help create a more sustainable and inclusive world.
Why Procurement Has a Unique Opportunity to Enable a Company’s ESG Strategy
During his keynote session at DPW2021, Globality Co-Founder, Chairman and CEO Joel Hyatt discussed with HFS Research CEO and Founder Phil Fersht how CPOs can impact one of today’s top corporate priorities. Here we outline the key elements of this new vision for performance spending:
“Procurement has always been asked to deliver on the core value proposition of identifying high-quality suppliers at a good price, but CPOs and other procurement leaders are increasingly required to help advance a company's all-important ESG strategy. CEOs are not only talking about ESG – they've done that for a while – but they are now prioritizing company performance against stated goals.
And the reason they care so much about it is because it turns out that all their stakeholders – investors, shareholders, employees, and customers – care about it. So procurement is being asked to help, which makes a lot of sense because the biggest asset a company has to advance its ESG agenda is how it spends its money. As a result, procurement now has a second core value proposition that it needs to deliver on. How can it do this? The answer is very simple – by using sophisticated AI-powered technology.
DIGITAL TECHNOLOGY TO DRIVE TRANSFORMATION
Digitalization is the enabler, adding value to both procurement’s traditional focus on costs and supply, and the top new priority: ESG. In fact, we can put them together under a new framework termed ‘performance spending’. This means the impact that procurement can have today is far greater than it has traditionally enjoyed, making it a very exciting time to be in the sourcing industry. So how can procurement leaders lead the revolution and put this digital transformation into practice at their own companies?
For the most part, CPOs want to transform the way they source goods and services, even though change management is hard and transformational innovation is tough. CPOs want a seat at the table, and they want to have a meaningful impact on their company’s overall performance, but they don’t currently feel empowered to do it.
That’s why this framework of performance spending and understanding how AI-powered digitalization can lead the transformation is critical – it means CPOs now have the ability to deliver what nobody else in the company can.
IMMEDIATE IMPACT ON THE TOP AND BOTTOM LINE
With Globality’s AI-powered Platform, the CPO of a global enterprise with $6 billion a year services spend can walk into the CFO’s office and say I've got a billion dollars for you in immediate costs savings, which you can take to the bottom line or reinvest elsewhere. That sum is obtained by capturing enormous efficiencies, making OPEX savings, and delivering faster speed to market, all thanks to new digital technology.
They can then walk straight down the hall to the CEO, and say, “I can have a bigger impact on this company's ESG strategy than anybody”, because how a company spends its money drives performance on sustainability and creates more inclusive economies and better governance by building an ecosystem that's transparent, fair and open to all.
ENTERPRISE SPENDING FOR GOOD (ESG)
ESG used to be simple. The E rated a company's carbon footprint and its own environmental practices, the S referred to the diversity of its workforce and the G was simple compliance measures. Today it has a much broader impact – Enterprise Spending for Good.
The E refers not only to the environmental impact of the company itself but also that of its value chain – a complex, sophisticated network which digital technology simplifies and brings visibility to. The S communicates how a company is helping foster social inclusion and helping create more inclusive economies in the 100 plus countries in which most global enterprises operate today.
And the G refers to the ecosystem a company creates for its business globally. This ecosystem must be transparent, fair, inclusive for smaller and diverse companies, and judged solely on the merits of price, quality, proven performance, and passion.
SEIZING THE MOMENT
ESG has overtaken geopolitical risk and uncertainty as the most pressing consideration for global business over the next two years, according to new research from Oxford University and Globespan Insights, offering procurement an unprecedented opportunity to demonstrate the value it brings to an organization.
Previously many CPOs believed they lacked the ability to be game-changers, but procurement leaders now have the tools to become the key drivers of overall company performance. The result of this is that CPOs are not only going to have that seat at the table but their teams will become a very exciting place for employees to work because it's within procurement that they can actually help create a better world with greater environmental sustainability, more inclusive economies, increased transparency, and better corporate governance.
Procurement can lead a company’s performance on each of these key deliverables, but its leaders must act now and adopt the digital technologies required to enable this transformation before the moment passes.”
