How can we deal with the various crises while meeting the ESG requirements of our customers? Responsible purchasing is a lever available to buyers to meet these major challenges. It also has the potential to create value for the company. But how do you go about it? Yann Le Coz, responsible purchasing expert and trainer, explains.
Responsible purchasing is a real performance driver for a company. On the one hand, it enables them to give concrete expression to their ESG (environmental, social and governance) commitments. On the other, it strengthens its identity and employer brand. At a time when companies are increasingly committed to sustainable development and claim to have a CSR approach, this is a real asset.
In addition, many companies are required to publish their annual declaration of extra-financial performance. This is why they encourage their suppliers to make a definite commitment to sustainable development, and even demand it. In this context, companies and their purchasing organisations need to be agile. And that starts with increase the skills of their teams in ESG issues. Investors scrutinise these indicators when they look at a company's non-financial performance. The responsible purchasing approach is fully in line with this dynamic. It can enable companies to better manage risks and create new business opportunities by differentiating themselves.
Another benefit is that this type of approach allows you to developing the company's intangible value. This is the difference between a company's book value and its 'market' value. And it's far from negligible! In fact, it is commonly accepted that this intangible value now represents the two thirds of the value of companies. Where the balance sheet now represents only a third...
A responsible purchasing approach to better manage purchasing risks
Managing purchasing risks is one of the best practices in a responsible purchasing approach. It enables the company to reduce, or even avoid, the loss of value associated with the occurrence of a risk. For example, the reputational risk. This can have serious consequences for companies. All the more so for the largest of them, under the duty of care.
First, imagine a company setting up a system to monitor the compliance of its suppliers. The aim is to ensure that Tier 1, or even Tier 2 or Tier 3, suppliers comply with the laws in force. We're thinking here of the fight against illegal employment or corruption and respect for human rights. Then imagine that this control system is insufficient...
Le textile sector is particularly exposed to this type of risk.
So, to better manage purchasing risks, you first need to carry out a risk analysis.
A 3-stage risk analysis
1/ Risk mapping
Step 1 involves identifying purchasing risks, particularly those with an ESG impact.
2/ Risk assessment
This involves assessing each purchasing risk identified in step 1. Two evaluation criteria are used: the probability of occurrence and the level of impact on the company.
3/ Controlling risks
This begins with the implementation of an action plan to reduce or eliminate each identified and assessed risk. This is followed by a purchasing risk review, carried out at least once a year, to measure the extent to which risks are under control.
Responsible purchasing to stand out from the crowd on ESG issues
Today, ESG criteria are virtually unavoidable in calls for tender private and public companies. In general, they weigh 10 to 15 % in the final assessment of the commercial offer. This can even go as far as up to 20 % for certain markets. The SNCF, for example.
So we need to develop an ESG strategy for our business sector and our customer base. The aim? To stand out from the competition and create new competitive advantages.
This ESG strategy can, for example, include decarbonising purchasing. Decarbonising purchasing is one of the priority actions in the responsible purchasing approach. This has become a major challenge for the largest companies since the publication of the BEGES decree. This decree of 1er July 2022 on greenhouse gas emissions assessments has extended the scope of the assessment to include significant indirect emissions. We know that greenhouse gas (GHG) emissions from a company's scope 3 often represent more than 60 % of its emissions.
Making your carbon footprint is the first step. This enables the main GHG emission factors to be identified and an action plan to be drawn up to reduce them in the medium term. In this way, buyers can promote suppliers who have made the most progress in reducing GHG emissions. More specifically, in the context of the development of a new product with aeco-design.
Another example: buy solidarity. Purchasing from the disabled sector or the social inclusion sector is responsible purchasing. It improves a company's social footprint in two ways. On the one hand, they encourage the employment of people who are far from the mainstream. Secondly, they often have a local impact, as they are carried out in the company's or customer's area.
Structuring the approach with the RFAR pathway
Many companies find it difficult to implement a responsible purchasing approach of this kind. Enrolling in the RFAR (Responsible Purchasing and Supplier Relations) programme enables you to structure your approach strategically and operationally.
The first step is to make a diagnosis to assess the organisation's maturity in terms of responsible purchasing. Based on this diagnosis, a strategic thinking is used to define :
- the main lines of a responsible purchasing policy in line with the company's CSR strategy;
- an action plan ;
- the objectives to be achieved.
This governance is the prerequisite for any responsible purchasing approach. Once the action plan has been validated, it's time to roll it out!
Then, when the company considers that its responsible purchasing approach is sufficiently mature, it can apply for the RFAR label. Once it has been awarded the label, it will have a competitive advantage, as it will be better able to meet the ESG requirements of its customers.
The case of a manufacturer
The purchasing department of a manufacturer makes some of its direct purchases from the disability sector (subcontracting of sorting and blowing operations, etc.). Several of its major customers are singling out their ESG-committed suppliers. It therefore decided to develop its solidarity-based purchasing even further. To do this, it had to involve the other business divisions. Human Resources and Communications/Marketing also took the plunge! These departments now buy their services from the disability sector.
On the strength of this experience, it decided to gain recognition for its commitment to responsible purchasing. The following year, it was awarded the RFAR Label. This recognition, awarded by a third-party assessor, enables the company to communicate with its demanding ESG customers. As a result, it now has an undeniable competitive advantage in its sector.
In conclusion, responsible purchasing is a powerful performance driver for companies. It enables them to create value over the long term. However, beyond its impact on reputation and competitiveness, it can also reflect a genuine desire for positive change. This raises a crucial question: how do purchasing departments measure its impact on society and the environment? Finally, what new approaches to evaluation and transparency can they explore to contribute to a more sustainable future?
