Procurement has such huge potential to be a key part of a greater corporate mission to make a positive impact on the world. It can act on business spend insights to initiate strategic business plans that drive beyond improving traditional KPIs. From there, procurement can measure and improve ESG performance and compliance metrics. But many teams neglect or underestimate the value of using spend analysis to provide their businesses with the insights necessary to become more sustainable, ethical, and compliant companies.
Procurement can use spend insights to set non-financial performance benchmarks, propose new goals and timelines for their businesses, and drive holistic enhancements across its value chain to achieve their objectives. For example, is the company:
- Reducing greenhouse-gas emissions and environmental impact/pollution? Partnering with the “right” suppliers? Planning long-term to become more sustainable?
- Sourcing from fair-trade compliant suppliers, suppliers that pay livable wages, and that uphold human rights? Sourcing from local farmers and partners closer to home, where they’ll also have lower environmental impact?
- Complying with ESG laws, policies, and regulations – by submitting disclosure reports, reducing problematic categories or suppliers from its value chain, and being transparent with customers and advocacy groups? What about the company’s suppliers?
Procurement teams are uniquely positioned to not only drive cost savings and efficiencies and reduce risk for enterprises, but also drive value beyond traditional financial measures – for the good of the business, the planet, and its fellow citizens.
But to be effective change agents, procurement teams need to learn from past business decisions and behaviors, and current supply chain partners, and use this intelligence to optimize future decisions and outcomes for the greater good.
Spend Analysis’s Untapped Potential
Spend analysis, procurement’s best-in-class method for identifying cost-cutting, spend optimization, and performance-improvement opportunities to save organizations more money, is not a new method or tool. To get there, procurement teams must connect the dots between what they know about their spend and their supplier base, what they want to achieve next, and how they plan to execute their goals.
Our Procurement Performance Management platform, together with our Spend Intelligence software, provides our customers with the connective tissue that enables them to use category, spend, and supplier insights to make more sustainable, ethical, and compliant sourcing and procurement decisions.
Using spend analysis, we enable our customers to turn those procurement insights into new projects with transparent goals, leading to greater performance that surpasses cost cutting and savings realization that benefit customers, stakeholders, and the planet, as well as the company’s bottom line. Here’s how.
Connecting Spend and Supplier Insights
You can’t improve what you can’t see.
Spend analysis helps procurement teams to make more economical or “total value” sourcing and procurement decisions. But spend analysis alone cannot measure a supplier’s performance against non-financial KPIs – specifically ESG benchmarks and goals. Procurement requires a 360-degree view of its suppliers’ information, performance, and risk profiles to do so.
To gain this all-aspect view of suppliers, enrich your spend data with supplier data – business information, performance, and risk assessments. This allows you to culminate your spend data into actionable intelligence – data and information greater than the sum of its parts that adds unique value – to inform business decisions. It helps procurement teams understand if their suppliers use environmentally friendly and sustainable business practices, protect workers’ rights, and comply with laws and regulations – no matter how expansive, expensive, or onerous.
Turning Spend and Supplier Insights into Action
Supplier and spend intelligence can uncover insights that will be indispensable moving forward.
Procurement can then assess its current performance and determine whether (and to what extent): its sourcing and buying behaviors are compliant with applicable laws and regulations, uphold commitments to its shareholders and customers, and are ethical and sustainable. If they are, then procurement can drive greater awareness of its strategic value to the enterprise as a change agent and good corporate steward.
If they’re not, or if there is still more progress to be made, then procurement teams can convert these insights and assessments to new procurement performance initiatives, such as allocating more spend with diverse or sustainable suppliers. Armed with this intelligence, procurement leaders can resource, set goals against, track, and monitor ESG and other non-financial outcomes.
You’re not just gathering data for data’s sake – you’re using your spend data to prioritize sourcing projects with specific suppliers to transcend cost optimization and savings realization to achieve something more for your organization. With a solid procurement performance management focus, all sourcing projects in your pipeline are transparent, and leadership can see in one place how they are performing against ESG and non-financial KPIs.
Want to learn more about how Procurement can help advance the environmental, social and governance (ESG) goal commitments and other critical measures of non-financial performance?
Register to our webinar on Thursday, February 23, 4:00pm CET | 10am ET.
