6 Questions With .. Etosha Thurman

SAP executive digs into why ethical sourcing is important, and how to make it happen

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A lot of focus has been placed on ethical sourcing practices, with companies facing increased scrutiny, and even stock price drops, when they are associated with questionable practices. Procurement practices that address everything from child/forced labor to low wages, water conservation and land usage, are drawing increased scrutiny.

Etosha Thurman, chief marketing & solutions officer for SAP Intelligent Spend and Business Network, joins us this month for our 6 Questions With … feature, with a focus on ethical sourcing within supply chains.

(Answers have been edited for clarity and length).

SCMR: What are the biggest challenges companies are facing in 2024 to adopt responsible sourcing?

THURMAN: Consumer spending patterns tend to fluctuate, sometimes even more than anticipated. For example, retail sales fell 0.8% from December 2023 to January 2024, according to a U.S.  Commerce Department report, which was more than the expected post-holiday season drop. Changes in spending patterns impact supply chains as companies adjust to budget and forecast supplies. Geopolitical issues and climate impacts have altered supply chain routes with companies being forced to consider nearshoring or look for alternate shipping routes. These complications will continue and companies looking to prioritize responsible sourcing must be ready to navigate supply chain vulnerabilities, supplier relations, and manage overall transparency and resiliency. 

Additionally, regulators’ oversight of supply chain issues is increasing around the world. Several European countries and the United States have recently passed legislation mandating due diligence in supply chains, while the European Union and Canada have proposals under consideration. Responsible sourcing strategies are no longer optional.

SCMR: How do we measure responsible sourcing? Are there independent scorecards available, or are companies typically self-reporting their efforts? 

THURMAN: Procurement is the first step in building a responsible and resilient supply chain. Procurement teams begin the sourcing process by evaluating potential goods and materials suppliers that would make up the products made and distributed in the supply chain. In the evaluation, they take into consideration the environmental, societal, and economic impact of sourcing the materials. For example, potential risks with energy efficiency, water and land usage, and hazardous materials.  

It is important for procurement leaders to define responsible sourcing in alignment with the organization’s broader environmental, social, and corporate governance (ESG) goals. They should then educate their teams of procurement professionals about the necessary steps to ensure the goods and services under consideration meet the criteria. 

There’s a lot of buzz around ESG right now but the truth is, some of the goals, especially related to sustainability, can be hard to implement and measure. Today’s procurement leaders want to put their ideals into action but cannot make their organizations sustainable overnight or on their own. Procurement technology plays a crucial role in driving sustainability efforts. By leveraging advanced analytics companies can gain insights into their supply chain, identify areas for improvement, and make data-driven decisions to meet their sustainability goals.

SCMR: At its core, responsible sourcing requires supply chain visibility. But many companies are still not sharing data in a way that makes this possible. How far along are we in this journey to true visibility, and what do we need, as an industry, to achieve this?

THURMAN: Spreadsheets are a common business tool for managing supply chains, but while they’re digital, they still lack the ability to integrate data across an organization. Procurement and supply chain professionals have been plagued with a variety challenges the past few years, from environmental barriers to inefficient logistics, to geopolitical issues. These challenges clearly highlighted the need for technology to provide complete supply chain visibility to enable companies to quickly troubleshoot and adjust logistics. 

At SAP, we recently announced Spend Control Tower to help businesses gain visibility across all spend, uncover cost-savings opportunities and discover process improvements. Advanced AI features in the solution can also deliver first-pass accuracy, eliminate manual work and enable users to take action directly to enforce compliance. This means that organizations can do more than just pinpoint sustainable suppliers; they can make responsible supply chain decisions based on a comprehensive understanding of their spend. 

SCMR: What role can technology, specifically artificial intelligence and generative AI, play in ensuring responsible sourcing is taking place in procurement?

THURMAN: Generative AI can help customers improve productivity across key business functions. A good portion of daily work is spent doing tasks that aren’t very strategic and are time-consuming but need to be done. Generative AI has the potential to eliminate the mundane and make time for strategic tasks.

Responsible sourcing is a great example. When it comes to vetting potential suppliers, a lot of work goes into researching the supplier and determining the environmental impact of its goods and services. Generative AI can simplify this process by recommending quality suppliers with guided sourcing based on past success and intelligent resume analysis. 

Not only can generative AI recommend suppliers that meet sustainability requirements, but it can also balance other factors that go into building the supply chain: cost, labor, logistics, and diversity of suppliers. 

SCMR: Responsible sourcing has a sustainability component to it, but it also has a business (bottom line) impact. How should companies consider these separate, and sometimes contrary, concerns?

THURMAN: Many factors go into supplier selection, and it’s always been a balancing act. Businesses must weigh the quality and safety of products, flexibility, and the supplier’s ability to adapt to changing business needs, on-time delivery, reliability, cost within budget, and quality of service. There’s no perfect equation for how to weigh these factors; it comes down to business-specific priorities.

However, as government sustainability regulations loom, businesses have less agency in how they prioritize sustainability and cost effectiveness. Last year, several bills were passed in California that collectively require certain public and private U.S. companies that perform certain business activities in the state to provide disclosures about their greenhouse gas emissions, climate-related financial risks, voluntary carbon offsets, and certain climate-related emission claims. 

With these regulations, businesses are forced to prioritize sustainability in their supplier selection. They must prioritize suppliers that meet greenhouse gas and carbon emissions standards and be able to report those metrics across their entire supply chain. It makes it more difficult to select suppliers solely based on cost within budget. However, with regulations starting in California and likely spreading to other U.S. states, it’s possible that organizations may avoid more cost by prioritizing sustainable suppliers versus facing financial penalties due to noncompliance. 

SCMR: Once a company has decided to move to responsible sourcing, what are the next steps? Is it staff training? Technology deployments? Is there support available to guide them down this journey? 

THURMAN: Once companies have decided to adopt responsible sourcing, they should first evaluate their current product development process and determine how they could prioritize sustainability within both their design phase and their sourcing strategy. Most organizations will find that they need help to evaluate suppliers’ environmental impact. 

Technology can help organizations follow sustainable practices at every stage of the source-to-pay and procure-to-pay process. In strategic sourcing, the right solutions can help analyze current and future spend, find and source from suppliers, ensure compliance and reduce risk with sustainability in mind. SAP Ariba Sourcing is a good example of a solution that enables users to prioritize suppliers that align with ESG goals.  

In the procure-to-pay process, it is important that organizations use solutions that help guide business users to make risk-aware and sustainable purchases. The guided buying capability in SAP Ariba Procurement solutions can help guide employees to purchase from sustainable suppliers. 

SCMR: Thank you Ethosha.

SC
MR

SAP’s Ethosa Thurman answers Supply Chain Management Review’s 6 Questions on ethical sourcing and procurement practices. (Photo: Getty Images/SAP)
SAP’s Ethosa Thurman answers Supply Chain Management Review’s 6 Questions on ethical sourcing and procurement practices. (Photo: Getty Images/SAP)
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About the Author

Brian Straight, SCMR Editor in Chief
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Brian Straight is the Editor in Chief of Supply Chain Management Review. He has covered trucking, logistics and the broader supply chain for more than 15 years. He lives in Connecticut with his wife and two children. He can be reached at [email protected], @TruckingTalk, on LinkedIn, or by phone at 774-440-3870.

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