Examining Purchasing Social Responsibility
by Jimmy Alyea
The concept of purchasing social responsibility (PSR) is defined by Carter and Jennings as “the involvement of purchasing managers in the socially responsible management of the supply chain” (2002) and as “purchasing activities that meet the discretionary responsibilities expected by society” (2004). Discretionary activities are those based upon an organization’s judgment rather than upon legal requirements or ethical issues. Carter and Jennings consider five discretionary undertakings of supply management--diversity, the environment, human rights, philanthropy, and safety--to be interrelated parts of a broader concept of purchasing social responsibility (PSR) rather than stand-alone areas of management and of research.
Purchasing managers should be concerned with PSR because of their unique position to leverage strategic roles to set company standards for socially responsible practices. Purchasing’s organizational importance has changed from that of providing the lowest-cost supply solution to that of coordinating and integrating procurement processes, both internally and externally, to one of adding value to the supply chain. Through interaction with other key functional areas of an organization, as well as externally with suppliers and customers, purchasing managers can positively impact social responsibility performance in the supply chain both upstream and downstream. For example, contract language and conditions can require that suppliers (and second- and third-tier suppliers) observe environmentally sound practices, provide safe and humane working conditions, and permit periodic audits of their compliance in these areas. On the other hand, irresponsible actions by supply managers and their suppliers in areas such as human rights and the environment can significantly damage a firm’s performance and reputation, which can lead to backlash from customers, stakeholders, regulatory agencies, activist groups, and the media.
Another PSR area of significance to purchasing organizations is the understanding by supply management of the interrelatedness of individual discretionary undertakings of social responsibility, such as diversity and philanthropy, within a broader framework of purchasing social responsibility. With this understanding, Carter and Jennings (2004) point out that supply managers can leverage the knowledge gained in implementing one area of PSR when determining how to implement and manage other PSR activities. Specifically, the similarity of the drivers, barriers, and effective tactics used to overcome these barriers to implementation of an initiative such as minority business enterprise (MBE) sourcing may, in many cases, be applied to implementing and managing programs in other areas of PSR such as human rights issues in suppliers’ plants.
To help supply managers fully understand the interrelationships among key social-responsibility elements, the ISM’s (Institute for Supply Management) Commission on Social Responsibility identified seven core principles and practices of PSR in 2002. ISM (2008) believes that utilizing these guidelines will enable purchasing professionals to strengthen an organization’s culture, improve trust in internal and external relationships, anticipate challenges more readily, and reduce business risks, while adding significant long-term value to their organizations and to society.
The best corporate social responsibility initiatives often come from within a company whose employees readily embrace new ideas and truly care about making changes for the better. As reported by Carter and Jennings (2004), top management leadership by example, combined with shaping an organizational culture that embraces fairness and good corporate citizenship, has a direct and significant effect on purchasing social responsibility (PSR). Supply management professionals are a key to helping organizations identify methods and opportunities to support future social responsibility initiatives. They are uniquely positioned to take a leadership role within the organization and with suppliers. With their wide range of contacts and sphere of influence throughout the supply chain, they can be pivotal in the success of “raising the bar” and removing barriers to developing and implementing new PSR programs. By working across boundaries, purchasing managers can take the lead in highlighting what needs to be done in terms of social responsibility, now and in the future.
Innovative employee initiatives of front-line purchasing personnel who are aware of customer demands and trends—such as concerns for product safety, environmental impact, and product origin--are also important to shaping forward-looking PSR programs. Carter and Jennings (2004) found that although individual values of supply management employees do not directly impact PSR programs, their values can play a key mediating role in initiatives instituted by employees. The implication for purchasing managers is that employees selected to develop new PSR programs should be ones whose personal values and beliefs support PSR and align with the activity under consideration. Additionally, successful employee initiatives concerning the enhancement of PSR activities are more likely to occur in a people-oriented environment that allows for missteps and risk-taking in order to capture opportunities and encourage innovation.
The Institute for Supply Management’s (ISM) seven core Principles of Social Responsibility (2008) provide a framework for purchasing organizations to lead the way in developing proactive programs as new PSR issues arise or are foreseen. These guidelines are organized by the following dimensions of social responsibility involving the purchasing function: community, diversity, environment, ethics, financial responsibility, human rights, and safety. They can be used by supply management to define and put into place, both internally and externally, ambitious and demanding goals for the future. ISM recommendations for interacting with suppliers on social responsibility issues can be used to encourage collaboration, partnerships, and open communication lines for the sharing of product innovation, new technology, and the use of best practices in order to better position the supply chain to meet future PSR challenges. For example, early supplier involvement in such areas as product design for reuse and disassembly, waste reduction, reduction of packaging material, and product life-cycle analysis can increase commitment and opportunities for firms to be environmentally responsible and to stay ahead of rising public expectations and demands for environmental friendliness.
Other ways in which purchasing can influence an organization’s future social responsibility agenda is by having clear policies firmly in place concerning issues such as safety and human rights and by following through on their utilization. To address diversity, purchasing can encourage or require the use of minority business enterprise procurement programs in certain areas of its own and its suppliers’ organizations. It can refuse to do business with firms that are irresponsible in dealing with human rights issues such as paying workers a living wage and providing humane working conditions in factories. Other important PSR considerations can be included in the supplier selection process and in procurement contracts. Social responsibility audits can be conducted periodically to insure compliance although guidelines and standards need to be developed for consistency in evaluating findings. Similarly, purchasing needs to develop performance metrics for most of the PSR dimensions in order to build a convincing business case for their implementation. A purchasing organization that does more than “talk the talk” on socially responsible practices will be in a stronger position to influence its firm’s social responsibility agenda as it evolves in a complex and dynamic environment.
Social responsibility has to be a companywide, cross-functional effort that is embedded in an organization’s culture and that extends outside the organization as well. Although no one function or person can do it all, supply management is well suited to be the facilitator for developing, coordinating, and implementing a firm’s socially responsible initiatives and for guiding its future progress.
Copyright 2012. James L. Alyea. All Rights Reserved.
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Carter, C. R. (2006). Purchasing social responsibility—what is it, and where should we be headed? In J. L. Cavinatto, A. E. Flynn, & R. G. Kauffman (Eds.) The Supply Management Handbook, Seventh Edition (pp. 393-407). New York: McGraw-Hill.
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Carter, C. R., & Jennings, M. M. (2004). The role of purchasing in corporate social
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Retrieved from http://web.ebscohost.com.ezproxy.uhd.edu/ehost/pdfviewer/pdfviewer?vid=3&hid=14&sid=62c64b61-3153-4887-9dc1-b54b2cd26ff9%40sessionmgr13
ISM principles of sustainability and social responsibility. (2008). Institute for Supply Management. Retrieved from http://www.ism.ws/files/SR/SSRwGuideBook08.pdf