The Scandinavian countries may differ geographically, financially and even culturally but when it comes to corporate social responsibility – especially when it comes to dealing with distant suppliers – they have something in common…
Corporate social responsibility (CSR) – including both environmental and ethical aspects – is particularly important to Scandinavian governments, the general population and organisations. Consequently procurement follows the same pattern.
The focus is placed upon emerging markets, for example, global shipping firm Maersk Group has made this a key element of its procurement operations, and undertook a study in 2014 to assess the social and environmental practices of suppliers in particularly risky categories.
“In total, 1,185 suppliers were assessed and 51 per cent were found to be either in compliance with our third-party code of conduct or partially in compliance with minor improvements needed,” says Renata Frolova, head of responsible procurement, who is based in Denmark. “With more than 650 suppliers in need of or having an action plan, we acknowledge that a sizeable amount of effort is still required to ensure all suppliers with major and critical issues act on plans to reach compliance.”
The areas in need of improvement are labour and human rights, she adds, with health and safety, working hours and compensation, and environmental performance particular concerns.
This is also a strong focus for Per Hill, chief procurement officer at medical care business Getinge Group, and former CPO at Lantmännen, based in Sweden. In his previous post he oversaw the introduction of a supplier code of conduct, and is now working on a similar initiative in his new role.
“Auditing suppliers worldwide is quite a cumbersome activity, but we’re looking to buy more from low-cost countries and have to be aware of why they’re low-cost countries, and make sure they are not infringing our supplier code of conduct.”
The identification and admission of required action are the first steps to ethical procurement, and greatly enhances the visibility of global supply chains. Taking the time to ensure suppliers follow company practices (and enforcing the rules) is impressive stuff. With the UK’s upcoming slavery bill demanding similar action, businesses should look to learn from the Scandinavian model.
Lay of the land
The geography itself can pose some challenges, particularly from a logistics perspective.
“The geographic location in Finland means we’re almost like an island,” says Riissanen. “The sea is all around us and if there isn’t sea there is Russia. So the location is quite far away from other parts of Europe and the Far East and such markets, which means more of our suppliers tend to be located in Finland, because to get from the Baltic to Finland is quite expensive.”
But many businesses that rely on exports find themselves sourcing – or manufacturing – outside the area, says Hill. “Scandinavia has a very small home market, so many of the companies operating in Sweden or Scandinavia depend to a large extent on having production units outside their home market,” he says. “So we have a small head office and three major production sites in Sweden but most of our production sites are outside Scandinavia. That has an effect on purchasing, because you need to have a very international or global outlook; you can’t only work with supplier markets in the region of Scandinavia.”
Does this unique location demand a unique procurement prospective? Their emphasis on CSR may be due to a logistical necessity created by a relatively isolated location requiring stronger supplier relationships. However, there is another explanation…
Nordic culture also has an impact on procurement, and how the profession operates. However, it can be a challenge when businesses start to undertake organised procurement because people don’t necessarily understand the value in having friendly contracts in place, which you can call on when something goes wrong. But this can also be a positive too; it tends to lead to the all-important stronger supplier relationships.
There is strong emphasis on work/life balance, with the working day typically ending at 4pm and much of the workforce takes lengthy summer holidays. This can create quite the cultural disparity with other countries, causing issues as communications must be made during a shorter window.
The management style is also different to other cultures, suggests Hill, which can impact on how procurement functions operate.
“There is more transparency and consensus but also greater empowerment of people,” he says. “You can have decisions taken at a lower level in organisations but based on a greater degree of consensus.”
What can we learn?
The normal understanding of successful procurement is the sourcing of key materials from other businesses, whether foreign or local. But perhaps procurement should be reimagined to go beyond the material. Perhaps business ought to pay attention to others’ cultural ideas, standards and practices, and incorporate that which fits into their own processes. Whether local practices are only effective due to their geo-political location is open for debate, but one thing is for sure: the world could learn a lot about CSR, supply chain transparency and working standards from Scandinavia. And, if their standards were implemented by the major procurement powers, unethical supply chain practices such as slavery, environmental degradation, child labour, and the use of inferior/incorrect materials would be dramatically reduced.