Firms are at a "fork in the road" when it comes to thinking about the impact of their spend on sustainability, a webinar was told.
Vishal Patel, VP of product marketing at Ivalua, told attendees of the Art of Procurement's webinar on post-crisis procurement that some firms may have put sustainability investment on the backburner as Covid-19 led to changing priorities.
He said: “Maybe you had some sustainability initiatives before and now priorities have changed so you give up on those and go back to the basics like focus on savings, focus on categories, focus on the things that procurement is doing.
“Or, you could take this opportunity to really think about the impact of your spend and how it can impact not only your business but the entire ecosystem around you. Every company does have their own spend and the way they choose to navigate it and orchestrate it is going to have ramifications and one of those is sustainability,” he said.
Patel added that many European organisations are more advanced in their sustainability agenda due to country based regulations, whereas in the US, sustainability depends on company policies.
He said: “Apple is doing a huge amount on sustainability, but many other billion dollar manufacturers are not. I think for those guys it would take a regulatory change to actually make a big investment in improving on this sustainability agenda. For others, I think the pandemic has taken them back to the reason of being in some ways.
“There's the balance between economy, society and environment, and the balance has always been more on the economy and less on society and environment. There are businesses that will take this opportunity now to rebalance.”
Also speaking as part of the webinar, Chris Sawchuk, principal and global procurement advisory practice leader at The Hackett Group, said there was a trade off between investment and risk as the benefits can be hard to quantify.
“It's like buying insurance. You buy insurance and then one of the decisions you have to make is how much deductible [excess] you want. If I knew that nothing was going to happen, I'd have the highest deductible. But I don't know that so I pick a lower one and nothing happens for five years,” he explained.
This challenge can also be applied to supply chain risk and firms can sometimes forget the reason they’ve invested in risk capabilities, he said.
“I've seen organisations go and build very robust risk capabilities, only to dismantle them five years later because as they get farther and farther from the event that caused them to go build those capabilities. We have short term memories, and then people start questioning 'why are we investing in this and why are all these resources tied up in this?'”
However, Sawchuk said he believed the Covid-19 pandemic was different as it has impacted firms around the world, and investing in risk management will no longer be a cost that must be justified to the wider business.
“What we will see is much more momentum behind building these capabilities and less reliance on the fact that we have to justify the cost and then we'll get in the mindset that we have to add this regardless of the cost of doing business. and that we'll see more investment going forward.”
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