Turning duty of care into a driver of growth for procurement

duty of care
July 27th, 2021
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Social and environmental concerns have a growing influence on the business world. Many companies see this as an opportunity to transform their business and their organisation at all levels. These developments are also accompanied by stricter requirements in terms of communication, especially when legislative texts demand greater transparency.

Duty of care is an example of one of these legal obligations, which companies must comply with in order to demonstrate the honesty of their business practices. They may also see this challenge as an opportunity to go even further in meeting the expectations and interests of consumers, customers, partners and investors. This makes duty of care an integral part of a company's CSR (Corporate Social Responsibility) initiatives. It stimulates the transformation of fields such as procurement or the development of cross-cutting projects such as digital transformation.

What is duty of care?

Duty of care is a legal obligation that applies to companies. It requires them to limit the social, environmental and governance risks arising from their operations. This requirement may be extended to their activities with their subsidiaries or trading partners.

In France, duty of care is a law aimed at safeguarding the rights of women and men in multinationals. As such, it applies to large companies (those with 5000 employees or more in France). More specifically, these companies must draw up and publish a duty-of-care plan. These plans pre-empt and address environmental risks, human-rights risks, or ethical issues such as anti-corruption matters.

Duty of care is a perfect illustration of the exacting standards of French law. When it comes to legislation, France's strict and ambitious regulations put it at the forefront. That said, it would be wrong to think that these stringent rules put French companies at a disadvantage. In fact, the UN may actually establish international regulations that are largely based on French law. Consequently, companies that currently meet these compliance regulations in France will soon have a significant advantage over other global players.

Cross-functionality and innovation requirements for procurement

The prevention of environmental, social or governance risks has repercussions for businesses as a whole. Procurement is therefore impacted by duty of care. Departments must ensure that their procurement processes are correct, but they are also responsible for ensuring duty of care is upheld elsewhere, by providing the right information internally when their activities or suppliers do not comply with the company's duty-of-care plan.

With duty of care, procurement departments strengthen their position as key players in delivering a company's CSR initiatives. They act as safeguards for environmental, social and governance best practices. For example, they can modify their billing processes to include steps to control or prevent risks.

This means that procurement is making a centralised contribution to support the duty of care. However, this is relatively unusual in organisations with a pyramid structure, where a culture of verticality prevails and information silos and compartmentalisation make upper management solely responsible for overall regulation and control. Duty of care gives procurement a major transversal role to play, which strengthens its involvement in the company and drives its development.

Duty of care is also an indirect driver of growth for procurement. A company's need for a more transversal organisational structure encourages it to find the appropriate means of meeting this requirement. Nowadays, we can draw on digital solutions to do this. Procurement can use digital solutions to create a successful transversal organisation. More generally, it can incorporate new technologies (such as blockchain or artificial intelligence) that will soon be able to improve data mining and task optimisation even further. This will help procurement departments be more proactive when it comes to duty of care and maximise their contribution.

Drawing up a duty-of-care plan for procurement channels and supplier relationships

To comply with duty of care, companies must first make it as clear as possible why they make the decisions they do regarding their activities. For procurement, this may mean formalising the documents that underpin the running of operations. This would provide companies with comprehensive, reliable and regularly updated data on the evaluation of their suppliers.

Procurement departments must also be able to create favourable conditions for the collection, dissemination and processing of data to maximise organisational performance at all levels of the company. Without this, they cannot meet duty-of-care requirements on a long-term basis, especially given that this legislation heightens the role of procurement in its compliance. Procurement channels and supplier relationships need an information system that allows the control of all processes and the entire validation chain, while involving employees in the generation of and operations associated with this data. Teams are then proactive in making a duty-of-care plan a reality on a daily basis.

The law on duty of care pushes French companies to excel in creating a more positive impact on the environment and society, by requiring them to be transparent about the risks associated with their activities. It can mean real challenges for organisations in terms of communication, but it is also an opportunity to drive transformation, by giving procurement departments a more strategic role, harnessing digital solutions as a driver of growth, and encouraging companies to get their employees involved in a shared project for progress.