Dec
6
Is corporate social responsibility being taken seriously?
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There is an increasing importance being attributed to corporate social responsibility. However for a great majority of businesses the focus on it, particularly on the specific activities by individual staff, are still not imbedded within their routine activities and the initiatives are just that – initiatives that fulfill a strategic goal. Is the impact of such deployment that corporate responsibility takes a back seat against more common and core tasks?.
Many companies will incorporate mission statements relating to corporate responsibility (for example sustainable procurement) in their published objectives. However there are still a significant number that cannot present KPI performance or action for these targets – they remain merely mission statements on this matter and many will not have an answer detractors will also argue that CSR is a melting pot of numerous concerns which can provide the company the flexibility to switch swiftly from one customer’s CSR requirement to another without ever completing one.
However, it is not surprising that CSR is gaining importance as customers and the marketplace become more aware and competitors begin to see the commercial advantages. Strategies in establishing appropriate targets as part of corporate objectives are being implemented by the majority of enterprises. These goals are usually deployed across the entirety of the company, are typically the case. It covers the various disciplines which includes operations sales and their supply chain. Slowly but surely CSR is becoming a responsibility of everyone in the company with both SME’s and large companies taking this responsibility seriously.
Implementation of CSR requires key facilitators (leadership, tools, processes etc). What’s in it for the companies themselves? perhaps two key result areas – complying with legislation and maintaining competitiveness.
This is true for the large companies but what about the small and medium enterprises (SME). Are the SMEs doing their part by developing strategies to address this concern? Customers and compliance will play a very great role in creating momentum. SMEs will most likely be affected by the following:
• Buying Power – Those who are supplying markets where customers demands requires environmentally friendly products and processes.
• Revenues – Customers that have sustainability criteria will typically expect its supply chain to flow down the requirement. Therefore non-compliance will mean less revenue.
• Legislative Control – Those that supply products which are covered by law to uphold these practices.
The question is whether sustainability is a serious business objective or perhaps merely an approach to pursue improvements (e.g. cost reductions whereby sustainability compliancy is a by-product). This may act as the rational for companies upholding social consciousness.
Whilst CSR can be considered synonymous to good business practices (especially true when CSR compliance is a requirement on a particular industry or a market. )Sustainability of the supply chain is not always easily measured. (for example how to measure the impact on bio-diversity.)
When it comes to legislation, true corporate responsibility must not offer get out clauses or opportunities for business as usual – for example the often discussed EEC cap & trade targeted reductions in CO2 emissions but it is commonly argued that it merely rewarded the heavy polluter with better carbon credits compared to their historic production.
Surely in the future, CSR will be implemented in the majority of businesses and industries. Therefore there is a need for those who are in the supply chain to build strategies, tools and techniques that will address this concern and they will eventually support these initiatives to get a better performance evaluation.
Nov
27
When to claim procurement savings.
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Imagine the scenario your faced with a really complicated contract situation – annual spend is c$100,000 you’ve negotiated a 10% reduction on last years piece price cost and your pretty pleased with yourself, you think you’ve generated a pretty great saving.
But is it? You speak to the finance manager and he says “at this point you’ve saved nothing!”
Buyers and commodity managers work savings projects all the time but how do you calculate savings and when should they be reported – the key issue here is “you have to think like a finance manager.”
Consider the example above do you have a saving when.
• You’ve signed the contract
• When PO’s are sent out for the part
• At the end of the next financial year when you can compare spend on the commodity
Most businesses work by comparing financial spend from one year to the next and most organizations will not view anything as a saving, not simply following a contract negotiation, until it is recorded in their financial ledger
Consider, also how you calculate your cost saving. Your savings that have been negotiated will typically only be quotable in the first year (you won’t be able to claim the same saving for many years running.) this is because the revised costs will be baked in to the next years budget and if you achieve no further reductions the following years costs will be identical.
Also consider the scenario where consumption goes up and any saving is dwarfed by increased expenditure. Such situations can be commonplace when demand is variable or there are poor controls over purchasing. Is your saving still a saving?
Understanding when to “bank” savings can cause much concern for procurement staff. Calculating cost savings concerns many purchasing professionals with many being unfamiliar with the accounting rules. Within your own organization take the time to understand how the financial systems work – learn what your finance team consider a saving and develop a process whereby savings are officially ratified (many companies track officially recognized savings through a savings certificate which is reviewed by cross functional stakeholders.
Whatever the process, savings initiatives will always relevant in business. The key issue is having suitable processes behind it that are clear in what the business considers a saving to be and how it is realized.