In April I was fortunate enough to be able to attend the IPSERA 2023 conference on Systemic Change. IPSERA is the International Purchasing and Supply Education and Research Association that brings over 300 academics from across the world to discuss the latest knowledge and insights on procurement and supply chain thinking.
This year’s conference focused on Systemic Change with the intent to bridge research over borders, cross disciplines, between industry and academia. The topics discussed included green supply chains, sustainable business practices, supplier ecosystems, the circular economy, collaborative procurement, collaborative consumption platforms, carbon reporting, social value and modern slavery. Below I cover some of the key findings from the event:
Barriers to Systemic Change
It was evident that Procurement is seen as a key strategic business function that can make a difference on how an organisation’s supply chain operates and behaves. With my practitioner hat on, I felt overwhelmed with how much as a profession we need to do to bring about systemic change. Typical recurring themes centred on why certain activities are not happening (communication, tools, processes, regulations). Procurement regulations were perceived as a barrier for collaboration with tier 1 suppliers due to public perception and the thoughts that arm’s length relationships meant that every supplier was treated equal. A clear message was that more collaboration is needed across supply chains, particularly surrounding carbon reduction as we are ‘all in it together’.
The event also highlighted that current societal challenges need more than process and governance change. Instead, real investment is needed within ‘fit-for-purpose’ procurement systems and people development to empower the procurement professional to start to embed these changes. In one of the development workshops, research findings were shared that revealed that technology wasn’t helping to address today’s issues, and was too focused on operational tasks, highlighting that a substantial amount of additional resources are required to help the transition. Others explained how larger organisations from across the globe were outsourcing their procurement functions to help solution complex issues that the organisations felt they did not have the expertise to manage in-house.
Carbon Reduction and Reporting
Of particular note were sessions focused on carbon and scope 3 reporting. It wasn’t surprising to hear that there is no clear direction or route for how the issues around carbon will be resolved. What was universally agreed was that organisations are responsible for their supply chains and that typically 80% of emissions are in the supply chain. Furthermore, when reviewing the financial performance of organisations, research highlighted that those which took direct action on carbon rather than offsetting or doing nothing, performed better.
The Circular Economy
A theme of particular interest was the circular economy. The research presented highlighted that every €1 invested gave a €4-5 return. If this is correct why wouldn’t we explore options given current market conditions? The researchers highlighted how countries such as Sweden encourage the right behaviours by removing the VAT off circular economy materials. Other interesting themes emerged such as the need for change, moving research and development to the real world by sharing with SME’s (so everyone gains rather than larger organisations who may struggle to create outputs), using more products-as-a-service so that GDP can continue to grow whilst reducing consumption and outputs – all of this is different thinking versus a typical capitalism model.
It is well reported that there has been growing concern over the sustainability of our global economy. Traditional business models, which have long relied on the consumption of finite resources, are increasingly being called into question as we face the environmental and social impacts of our current economic systems. The circular economy offers a promising alternative to this linear model, as it emphasises the use of renewable resources and the reduction of waste.
For procurement professionals, the circular economy represents both a challenge and an opportunity. On the one hand, shifting to a circular model requires rethinking how we source and manage resources. On the other hand, it also presents new opportunities for collaboration, innovation, and cost savings.
Here are some key options in which procurement can embrace the circular economy:
- Source materials responsibly: The circular economy starts with responsible sourcing. Procurement teams play a vital role in ensuring that the materials and products they source are produced in an environmentally and socially responsible way. This means engaging with suppliers to understand their sustainability practices and encouraging them to adopt circular principles, such as closed-loop production and resource efficiency.
- Focus on product lifecycle: The production of products with long lifecycles support a circular economy. Procurement can work with suppliers to focus on durability, repairability and ease to recycle to help the reduction of waste.
- Implement circular business models: Procurement can also support the adoption of circular business models, such as product-as-a-service or closed-loop supply chains. These models can help reduce waste and improve resource efficiency, while also creating new revenue streams for suppliers.
- Collaborate with stakeholders: Collaboration across key stakeholders including suppliers, customers and regulators is key to identifying opportunities for circularity across the entire value chain.
- Measure and report on circularity: It is important that procurement prioritises tracking metrics such as recycled content and waste reduction to demonstrate impact. The data will also reveal areas for improvement ensuring the circular economy remains a business priority.
In summary, the circular economy represents a major opportunity for procurement professionals to drive sustainability and innovation. By focusing on responsible sourcing, product lifecycle, circular business models, collaboration, and measurement, procurement can help create a more sustainable and resilient supply chain. While the transition to a circular economy may not be easy, it is essential for the long-term health of our planet and our economy.