Transparency: The new imperative for procurement

April 20th, 2021
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As the concept of CSR (Corporate Social Responsibility) gains momentum, it's crucial for procurement departments to start focusing on transparency. Whether it's ensuring compliance or meeting customer expectations, procurement departments have a major role to play in increasing supply-chain visibility and sharing this vital information. A whole area of risk management for their company now hinges on this transparency.

Tougher regulations

In recent years, regulations have been tightened to encourage organisations to behave transparently and responsibly on an environmental, social and societal level. With this in mind, procurement departments have a crucial responsibility when it comes to the supply chain.

In Europe alone, for example, we've seen an increasing number of landmark texts, such as:

  • Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 (amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups).

This so-called "CSR directive" requires large public-interest companies (both listed and unlisted) to publish a non-financial statement each year as part of their annual report. The statement must include a description of the company's business model, risks, policies and performance in relation to environmental, social and personal issues, human rights and anti-corruption matters, based on key non-financial performance indicators. The report must also mention the diversity policies in place for governing bodies. It's also worth noting that this directive is currently undergoing a review, with plans for it to go even further in terms of its CSR approach. For example, by establishing a benchmark for non-financial indicators and widening its scope to include more companies.

  • The UK's Modern Slavery Act

Enacted in 2015, the Modern Slavery Act requires any organisation that fully or partially operates in the UK with a turnover above a specified amount to indicate the measures they've adopted to ensure that slavery and human trafficking are not taking place across their business or supply chain.

  • France's Sapin II law

The French law on transparency, anti-corruption and the modernisation of economic life, also known as "Sapin II", was adopted in 2016 and aims to help detect, prevent and punish corruption and attacks on integrity. Among the many measures put in place, large companies are required to publish an annual report containing information on the amount of corporation tax due and paid, as well as retained earnings.

By having to report on their activity and CSR actions, companies—and procurement departments in particular—are encouraged to increase their level of vigilance and adopt more ethical and sustainable practices.

Growing customer demand

Beyond legislation, companies are also having to pay close attention to the transparency of their purchases in order to meet the expectations of employees and consumers alike. In fact, according to a survey conducted by Visual GPS, 79% of French people want to know what's happening behind the scenes during product manufacture. Customers are calling for real transparency from companies as they start to think more and more about the environmental impact, composition and origin of the goods they are purchasing. Especially as, nowadays, the slightest mistake can quickly be picked up on the Internet and have a lasting impact on a brand's image.

As well as transparency, customers also need support. This goes for both customers needing to purchase office supplies and consumers wanting to buy new furniture for their homes. They need guidance with their purchases so that they can determine the most suitable product based on their own criteria. Procurement departments must therefore choose suppliers who can meet these needs and also provide the required information. For example, as well as technical product data, this information may also include ecolabels, such as the European Ecolabel, Ecocert, the Forest Stewardship Council label, Oeko-Tex and so on.

Companies are fully aware of the benefits of adopting such an approach. Being perceived as transparent, reliable and genuine helps build trust and strong emotional ties with customers. It is therefore essential for procurement departments to implement some best practices to help support the company's CSR.

As guarantors of the relationships with their partners, procurement departments must ensure compliance with regulations concerning ethics, professional conduct and transparency in order to ultimately contribute towards the company's CSR strategy and, above all, boost its competitive advantage.