8447779800, Low rate Call girls in Shivaji Enclave Delhi NCR
2008 apics conference_stanly_thelen_ sep 14
1. The Dollars and Sense of
Socially Responsible Purchasing
Assessment, Strategic Prioritization,
and Case Study
2. Summary
As procurement managers we often struggle to “do the right thing” while at the same time “do the right
thing” to reduce costs. But, through socially-responsible procurement (SRP) we are afforded that very
opportunity. Furthermore, our customers, investors, and the communities in which we work are
demanding it. The Institute for Supply Management defines socially responsible procurement (SRP) as "a
framework of measurable corporate policies and procedures and resulting behavior designed to benefit
the workplace and, by extensions, the individual, the organization, and the community."
This is a hot-button issue with investor activists, communities, employees, and special interest groups that
must not be ignored. More importantly, it's the right thing to do. Besides, effective application of SRP will
save a company money through their procurement efforts.
Pursuing this objective requires focused efforts along the dimensions of community involvement; diversity
and inclusion; environmental protection; ethics and financial stewardship; human rights respect; and,
health and safety.
Among our basic beliefs of socially responsible procurement are that it can confer a very real competitive
advantage to your company; aspirations must be set high because customers and investors expectations
are high; and, the time to get started is now, as your customers and investors are expecting it.
Importantly, to demonstrate that it’s the right thing to do financially, some consideration of cost, benefit,
and risk relationships must be taken into account. Doing so will definitely make SRP “the right thing to do”
from everyone’s perspective.
Research materials from the Committee on Social Responsibility of the Institute for Supply Management—whose 2007-08 Chair
is from IBM—played a key role in the supporting content of this assessment guide.
3. The Dollars and Sense of SRP
Getting Started
Questions
Issues to Avoid
Principles
Getting Started
Constructs
Cost : Benefit
Risks
Diagnostic
Strategic Options
Prioritization
Assessment Plan
Infrastructure
Organization and Roles
Case Study: The IBM story
4. What are CPO’s asking about socially-
responsible procurement (SRP)? Getting Started
Most CPO’s have a common set of questions and desire a
common set of deliverables around socially-responsible
procurement
Core questions Diagnostic deliverables
Just what are SRP practices? Compilation of management’s SRP
How do we know what’s right for our objectives
business on socially-responsible procurement
(SRP) initiatives?
Catalog of SRP options
What are credible strategic objectives in Map of SRP initiatives to overall
SRP for a company such as ours, and what strategy
are the elements of such an infrastructure? Preliminary workplan for
What are the cost : benefit considerations for implementation phase
our business? Decision on implementation of rapid
How do we manage individual SRP efforts?
assessment recommendations
5. What are stakeholders’ views of SRP?
Many companies lack true agreement as to SRP’s role Getting Started
in the business CONCEPTUAL
There are typically many
perceptions . . .
Improve the Increase
community safety
. . . and an
opportunity
In f
lu ll Include may exist to
eth ence
dwi
de ica new ideas clarify and set
Goo
cis l
ion
s an SRP
ect Market strategy suited
Prot ment t to the
ro n advantage Cos -
envi ain
cont t company’s
men needs
Prevent
abuses
Pr ghts
ot
ri
ec
t
6. Do we have problems we are trying to
cure, or at least avoid? Getting Started
There are six dimensions of SRP
Prior infractions
Lack of trust by community stakeholders and key
Need for sustainability
publics
Lack of environmental responsibility
Pressure from advocacy groups or the media
Environment Inattention to opportunities for disassembly, reuse or Community Trade union issues
recycling
Compliance with OSHA or other legal or regulatory
Prior human rights abuses
requirements
Lack of provisions for the instrumental value of
People hurt or killed
creating the necessary conditions of human well-being
Dangerous conditions
Potential exposure of human rights compromises Safety and
Human Rights Health High insurance and medical costs
Boycotts due to sourcing activities
Past unethical actions
Lack of diversity in supplier base
Potential exposure of unethical actions
Lack of diversity within organization
Compliance with Sarbanes-Oxley (SOX) or other
Lack of diversity throughout the supply chain
Ethics and Financial
legal or regulatory requirements
Diversity Past discriminatory practices with suppliers,
Stewardship Substandard financial responsibility
employees or others
7. Why are such remedial actions
important? Getting Started
Checklist
Helps ensure that actions are lawful
Ensures that all individuals are treated with dignity and
Reduces risk
respect
Lowers total cost of operations Avoids complicity in human or employment rights
abuses
Facilitates strong public relations
Helps recruit and retain customers
Allows for equal opportunity and non-discriminatory
treatment
Guides managerial actions and commitments; Guides
Prohibits the existence of child labor and forced labor
employee actions; Guides supplier actions
Improves supplier competitiveness Fulfills legal responsibilities to ensure the health and
safety of employees, customers, suppliers and
Improves trust in both internal and external (suppliers, communicates in which we work
customers, and others) relationships
Ensures requirements to protect the environment
8. What is the single most important
issue to your company?
Environment and being ‘green’
Human rights around the world
Diversity and minority business
development
Community involvement
Health and safety of workers and
customers
Ethics and financial stewardship
9. Principles of socially-responsible
procurement (SRP) Getting Started
Environment Ethics and Financial Stewardship
Encourage your own organization and others to be proactive in Be aware of ISM's Principles and Standards of Ethical Supply Management Conduct.
examining opportunities to be environmentally responsible within Abide by your organization's code of conduct.
their supply chains either "upstream" or "downstream."
Become knowledgeable of, and follow, applicable financial standards and
Encourage the environmental responsibility of your suppliers. requirements.
Encourage the development and diffusion of environmentally Apply sound financial practices and ensure transparency in financial dealings.
friendly practices and products throughout your organization.
Actively promote and practice responsible financial behavior throughout the supply
chain.
Environment
Community Diversity
Provide support and add value to your communities and those Proactively promote procurement from, and the
of your supply chain. development of, socially diverse suppliers.
Human Rights
Encourage members of your supply chain to add value in their Encourage diversity within your own organization.
communities. Community
Proactively promote diverse employment practices
throughout the supply chain.
Health and Safety
Promote a safe environment for each employee in your
organization and supply chain. (Each organization is responsible
for defining "safe" within its organization.) Human Rights
Support the continuous development and diffusion of safety Treat people with dignity and respect.
practices throughout your organization and the supply chain.
Support and respect the protection of international human rights
within the organization's sphere of influence.
Encourage your organization and its supply chains to avoid
complicity in human or employment rights abuses.
Source: Committee on Social Responsibility of the Institute for Supply Management; IBM
10. The Dollars and Sense of SRP
Getting Started
Questions
Issues to Avoid
Principles
Constructs
Cost : Benefit
Risks Constructs
Diagnostic
Strategic Options
Prioritization
Assessment Plan
Infrastructure
Organization and Roles
Case Study: The IBM story
11. What is the business case for SRP?
In economic and socio-economic terms, benefits
outweigh the costs and risks
Constructs
Costs Benefits Risks
Internal Benefits External Benefits
Innovation from new sources of supply such as new minority Trust and support of community groups and key public figures
suppliers or new origin countries (facilitating physical plant expansion or local tax benefits)
Increased opportunities for disassembly, reuse, and recycling Enhanced reputation with suppliers and customers
Consistent treatment of suppliers and customers Improve union relationships
Improved fiscal management Positively influence the community
Allow for equal opportunity and non-discriminatory treatment Earn respect from suppliers, customers, employees and
Reduce insurance costs other stakeholders
Prevention of injuries Improve public image
Enhance market share, business volume and revenue Counteract negative press
Become a favored supplier Reduce legal costs
Improve morale of employees Reduce risk uncertainties
Improve reputation to attract and retain customers and Lead supply chain partners by example; Influence supplier
employees actions
Strengthen the organization’s culture of trust
12. What is the business case for SRP?
In economic and socio-economic terms, benefits
outweigh the costs and risks
Constructs
Costs Benefits Risks
Cost of Action Cost of Inaction
Maintenance and updates of policy, codes, benchmarking, and Lost market share
other documentation
Loss of suppliers, customers, and investors
Program manager
Negative publicity
Legal counsel
Compromised employee and community morale
Membership fees
Increased legal, insurance or other costs
Training and certification
Boycott of business
Communications
Lost opportunity to pursue governmental or certain other
Hotline or help line new business
Evaluations and audits Negative attention by advocacy groups
Donations and matching donations programs Negative coverage in the media
Sponsorship funding for events Negative public relations events
Salary of staff when providing voluntary support to external groups Regulatory penalties
or causes
Travel and expenses for site visits, conferences, and trade events
13. What is the business case for SRP?
In economic and socio-economic terms, benefits
outweigh the costs and risks
Constructs
Costs Benefits Risks
Risks of Action Risks of Inaction
Negative reaction from some shareholders, customers, Unsafe conditions or situations
or community members to specific SRP initiatives
Injury or death
Recipient communities or organization may suffer if a
Damage to environment
change in support or support level is made
Inconsistent treatment of suppliers, customers, or
Socio-political disfavor by some interest groups
communities
Complacency with current suppliers or sources resulting
in lack of competition, compromised quality and/or
increased costs
Lack of sustainability
Substandard level of financial compliance or fiscal
management
Potential exposure to human rights compromises
14. What do most companies today
think of SRP?
It’s too costly an activity to undertake
Benefits do far outweigh costs and risks
There’s too much risk associated with
these activities
Companies don’t know what to make of
SRP
15. The Dollars and Sense of SRP
Getting Started
Questions
Issues to Avoid
Principles
Constructs
Cost : Benefit
Risks
Diagnostic
Strategic Options
Prioritization
Diagnostic
Assessment Plan
Infrastructure
Organization and Roles
Case Study: The IBM story
16. What are our strategic choices in SRP? Diagnostic
There are 3 ‘levels’ of SRP strategy with different objectives and CONCEPTUAL
necessary underlying commitment
Business Business leadership
Business protection enhancement
Objective Protect financial objectives by Enhance earnings by mitigating Differentiate the company
meeting all legal and regulatory risk exposures and contributing competitively and create a market
requirements to society advantage via innovative
commitments and activities
Key elements Minimize costs and risk Balance SRP commitments with desired Create and promote new SRP initiatives
exposures, even if foregoing some returns from SRP initiatives which address specific needs of employees,
SRP opportunities Invest in programs that reduce risks suppliers, communities, origin countries for
Limit SRP activity to what is while garnering benefits and favorables materials, et al
required to operate the business for the company Manage risks and costs associated with new,
innovative programs and initiatives
Set expectations and risk limits Fund initiatives Build appropriate organization and
Senior
Review performance and Review programs and risk exposures capabilities to administer the SRP initiatives
management
compliance reports regularly frequently Create and champion SRP within company
role
Actively participate in ongoing decision and among investors
making Develop altogether new SRP programs as a
Ensure integration of SRP programs means of competitive differentiation
with company strategy
17. Rapid assessment workplan* for
SRP strategic direction Diagnostic
Collect Synthesize
findings findings Conduct
Prepare Diagnose
over two over one workshop
weeks week
Timing 3 days 5 to 7 days 3 to 5 days 2 to 4 days 1 day
Activities Draft and submit Conduct interviews Map SRP initiatives Syndicate initial Review and discuss
data and document Review strategy, source to overall strategy recommendations with findings with procurement
requests documents, and data Seek-out industry key members of client [and senior management]
Prepare interview Research annual reports peers and procurement team team
schedule and benchmarking organizations for Prepare workshop
Tailor question materials to establish thought-partnering materials
series to individual SRP leading practices in Assess client
stakeholders industry sector aspirations
Update SRP Define client-specific compared to
standard and leading costs, benefits, and key stakeholder
practice criteria vis- risk exposures for the expectations
à-vis the client’s company in light of
industry sector emerging SRP objectives
End Interview plan Compilation of Map of SRP Preliminary workplan for Decision on
products Final data request management’s SRP initiatives to overall implementation phase implementation of rapid
objectives strategy assessment
Catalog of SRP options recommendations
Resources Full-time work for 1 to 2 persons for 14 to 20 days, plus 3-4 hours of others’ time each day
* The assessment may require 14 to 20 days of work spread over 3 or even 4 weeks
18. How should we allocate our resources
for SRP initiatives?
Diagnostic
EXAMPLE
x’s = Stakeholder groups
Environment
Relevance to our strategy
Relevance to our strategy
Safety and
Relevance to our strategy
HI Diversity HI
HI Health
ea
x x
x ea x x
x x
ar x ar
is si
s x x
as ha xx
ph p
Em Em
LO HI LO LO HI
HI
Our ability to make a difference Our ability to make a difference Our ability to make a difference
Community Ethics and Financial
Relevance to our strategy
Relevance to our strategy
Relevance to our strategy
Human Rights
HI HI Stewardship HI
x
x xx
xx
x xx
x xx
LO HI LO HI LO HI
Our ability to make a difference Our ability to make a difference Our ability to make a difference
19. The Dollars and Sense of SRP
Getting Started
Questions
Issues to Avoid
Principles
Constructs
Cost : Benefit
Risks
Diagnostic
Strategic Options
Prioritization
Assessment Plan
Infrastructure
Organization and Roles
Infrastructure
Case Study: The IBM story
20. What are the SRP management roles
and responsibilities? Infrastructure
SRP succeeds when there is leadership and ownership
Procurement managers
Senior management SRP leadership committee and buyers
Strategy Understand the SRP needs of the Identify all initiatives undertaken by the Report on the SRP initiative
company company progress of company
Develops clear definitions of Execute/implement SRP initiatives
company expectations for SRP in concert with strategy
Support strategy for SRP initiatives
Policy and Adopt policies and procedures Develop policies and procedures to Implement processes and
governing SRP expectations and support SRP tracking systems to ensure
Process processes Plans and executes internal and adherence to plans and to policy
external communications to
stakeholders, including employees,
investors, suppliers, and activist groups
Approve overall organization Develop organization capable of Engage with SRP committee on
Governance resource support and funding addressing the company’s SRP existing and proposed initiatives
and Requires tangible or measurable strategy and expectations Develop supplier capabilities and
organization benefits to be recognized from SRP Ensures that training is secured, where sourcing strategies that support
efforts needed SRP strategy
Conducts audit of SRP initiatives
Approves overall Develops strategy and Implements programs
strategy, policy, and performance tracking and reports regularly on
resource commitment for initiatives progress
21. How can SRP initiatives best be
managed?
Within the supply chain or procurement
department
By cross-department, cross-company
involvement
Through the office of the CEO
By volunteer committee
22. How do we manage the priorities
among potential SRP initiatives?
Infrastructure
An SRP management committee can address this
issue
Clear definition Link business strategy with all initiatives along the six dimensions of SRP
of mission Allocate funds to each initiative while monitoring risks
Define success and track performance (i.e. business returns) of the initiatives
CPO and senior procurement staff
Leadership May involve leadership in finance, investor relations, and public relations
Operations may need to be engaged, depending upon the SRP initiative
Quarterly briefing (more often, when needed)
Clear guidance Detailed reporting on all initiatives
Concrete discussion on strategic positions and SRP intent
Detailed definition of objectives
Involvement of all stakeholders in decision-making
23. The Dollars and Sense of SRP
Getting Started
Questions
Issues to Avoid
Principles
Constructs
Cost : Benefit
Risks
Diagnostic
Strategic Options
Prioritization
Assessment Plan
Infrastructure
Organization and Roles
Case Study: The IBM story
24. IBM: Case Study
Supply Chain Social Responsibility
Chief Procurement Officer
Procurement Procurement Procurement Global Supply Global Procurement
Policy & Services Operations Sourcing Assurance Logistics Engineering
Practices
Indirect (General) Direct (Production)
Sourcing Councils Sourcing Councils
Supply Chain
Social
Responsibility Suppliers
(“SCSR”)
SCSR resides in Global Procurement, but separate
from the sourcing and operations groups in order to
remain focused and impartial
25. External drivers of Corporate Citizenship
(“CC”) are shifting society’s expectations of
companies
External Drivers Shifting Expectations
Reduced role of government Increased expectation for companies
Impact of globalized production and to fill the void left from a reduced
service delivery governmental role
Growth of individualism as the
social norm Economic strategies
Rise of consumer activism Establish standards
Growth of non-governmental Promote environmental protection
organizations (NGOs)
Loss of trust following corporate scandals Be accountable and transparent for
financial, ethical, social and
environmental performance to wider
stakeholder groups
26. Who is pressuring your company
toward social responsibility?
Investor groups
Senior management
Governmental and regulatory bodies
Customers
Non-governmental organizations (NGOs)
or special interest groups
27. IBM research shows that companies pursue a
number of incremental and/or new initiatives to
stakeholder groups
Corporate Response Initiatives Stakeholder Groups
Growth Platform
5.
Initiatives
Consumers
Cost Savings
4.
Initiatives Community
rity
tu
Values-based Self
Ma
3. Employees
Regulation Initiatives
CC
Strategic Philanthropy Business Partners
2.
Initiatives
Investors
Legal and Compliance
1.
Initiatives
28. IBM Corporate Citizenship management
system
Corporate Citizenship Working Group
Representatives from each functional area meet monthly to manage IBM’s responsibility
reporting, stakeholder engagement and address cross-company citizenship issues.
Governance Corporate Environmental Employee Global Supply Chain Governmental
and Community Affairs and Well-Being Human Programs
Financial Relations Product Resources
Accountability Safety
29. IBM Supply Chain Social Responsibility
initiative
Create / deploy IBM Perform supplier Drive supply chain Dialog with Industry
Supplier Conduct audits / re-audits improvements external Collaboration
Principles stakeholders
30. IBM Supplier Conduct Principles
Forced or Involuntary Labor Health and Safety
Child Labor Protection of the Environment
Wages and Benefits Laws, Including Regulations and
Other Legal Requirements
Working Hours
Ethical Dealings
Nondiscrimination
Communications
Respect and Dignity
Record Keeping
Freedom of Association
31. IBM SCSR Education
SCSR education developed and deployed since 2004
PowerPoint
Audience Web Based Comments/Observations
Teleconference
Councils and Covered all councils by Mar 2005;
Staff presented grapevine session 2007.
Audited Country
Buying Teams
700 completed the course;
Individual Buyers available in English, Chinese and
Spanish.
Conducted pre-audit calls in EE.
Suppliers Marginally successful, did not
remedy all uncooperative barriers.
Overview with focus on H&S
Procurement
Engineering issues that Engineers may observe
while conducting quality audits
32. IBM’s Supplier Audit Process
Engage global and Assess a cross-section of
local buyers; Country- suppliers; target min 80%
level focus (risk-based) of spend in country
Supplier generates 3rd party audit
action plans; reviewed/ firm contracted
accepted by SCSR team for the
Supplier audit drives assessments
post-audit
improvement plans
Supplier Improvement Plans Results to
Map results to code provisions and local laws
supplier Audit
Share results with suppliers, provide global / country
from IBM report
comparisons
provided
Request supplier improvement plan w/names and dates
of responsible parties to IBM
Review improvement plans for consistent approach
Communicate and enforce the business imperative of
compliance
Re-audit to verify sustainability in 12-18 months
33. Supplier Initial Audit Results – Global
Cumulative (2004-2008)
Brazil, China, Czech Rep, Hungary, India, Mexico, Philippines, Poland, Romania,
Slovakia, Taiwan, and Thailand
(base = 449 suppliers)
Health & Safety
Working Hours
Wages & Benefits
Law s & Regs
Respect & Dignity
Com m unications
Record Keeping
Nondiscrim
Environm ental
Child Labor
Forced Labor
Freedom Assoc
Ethical Dealings
0 20 40 60 80 100
% Non Compliant to IBM code
Significant Minor
34. Supplier Audits: Observations /
Conclusions
A number of issues are seen in most emerging market countries:
Health & Safety (almost universal)
Management systems are weak relating to social responsibility and laws/regulatory
compliance
Corporate Citizenship remains a new concept to most emerging markets
Culture can not be overlooked as having a strong influence
Some issues are pervasive and country-specific:
China: working hours/wages/safety
Mexico: discrimination/freedom of association
India: wages/safety
Brazil: safety/respect & dignity
Supplier audit results are similar to those reported by others in the sector
35. Thank you!
Michael Stanly
mstanly@us.ibm.com
(320) 240-0235
Bruce Thelen
bdthelen@us.ibm.com
(312) 330-3225