Unleash Opportunity Conference: Tackling CSR

issues while gaining competitive advantage

Amfori Trade with Purpose

June 2019

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Importance of supply chain

transparency

Going beyond audits and

compliance

Business case for creating supply

chain transparency

Top management buy-in and

support

What we will cover

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outsourcing | trading partners | geographies | technologies

Complex manufacturing and retail supply chains reduce visibility into supply

and drive up supply chain risk

Raw material

suppliers

Component

suppliers

Contract

manufacturers

Subassembly

suppliers

Large

enterprise

OEM

Consumer

Packaging

suppliers

Distribution

centres

Consumer

packaged

goods supplier Retail

stores

Logistics

provider

Brand owners

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Challenges adopting Impact-driven Procurement

Inconsistent, volatile, fragmented information on potential risks

Effective due diligence and monitoring is too lengthy and costly

Multiple questionnaires and audits focus on ’document management’ and not on impact based decisions

Risk not integrated into Procurement processes causing redundant requests for same information

Post-contract costs and inefficiencies due to disruptions bleed sourced savings

Inconsistent metrics and too many ratings to track

Undue Pressure

Risky Behavior

Supplier

Impact

Buyer

Challenges

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How SAP Ariba is helping

1 Platform for all sources

of Risk data

Integrated into procurement

process

Engagement-level Risk

Assessment

Risk assessment is codified systematically

Coverage across all risk domains with multiple

partners

Risk scores and mitigation plans embedded into

sourcing and contracting processes

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Value improvement Benefit by value lever Financial benefit

Investor

▪ Brand protection

▪ Shareholder value loss avoidance – balance sheet impact

▪ Revenue loss avoidance – profit and loss impact

▪ Lower costs of capital as lower probability of default1

▪ Market capitalization

▪ Revenue protection

Shareholder

value

Business

▪ Business continuity

▪ Avoidance of supply chain disruptions

▪ Reduced expedited transportation costs

▪ Supplier switching costs and higher unit cost avoidance

▪ Cost increase avoidance

▪ Lower logistics costsCost

Economic ▪ Regulatory penalty and fine avoidance

Operational

▪ Improved risk management efficiency and effectiveness

(number of suppliers x due diligence costs)

▪ Better and closer supplier relationships

▪ 360-degree view of suppliers

▪ FTE process efficiencyProcess

excellence

Return on

investment

There is a range of business benefits when an organisation addresses supply chain risk and starts the journey to transparency.

4.8%Market outperformance and access to cheaper

equity financing from strong purpose performance2

Business case for a purpose-driven organisation

1Harvard Business Review 2016 and EY Institutional survey 2017: 16% believe nonfinancial disclosures are not material nor financial

impacts, decrease from 56% in 2015; 2Organization for Economic Cooperation and Development and Columbia Univ. School of

International and Public Affairs, Quantifying the Cost, Benefits and Risks of Due Diligence for Responsible Business Conduct,

June 2016

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Relationship between sustainability

and stock market performance

In reviewing 200 academic studies on sustainability and

corporate performance, researchers found that, of those

200 studies:2

• 90% conclude that ESG standards lower the cost of capital

• 88% show that good ESG practices result in better

operational performance

• 80% show that stock price performance is positively

correlated with good sustainability practices

1BrandZ, Top 100 Most Valuable Global Brands 2017; 2Harvard Business Review, The Comprehensive Business Case for Sustainability, October 2016

3x Market outperformance by brands with

purpose compared with those without

purpose1

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How business behaviours impact the balance sheet

Recent research suggests that there is now more value placed on brand image, customer loyalty, and employee

engagement. Business behaviours impact intangible assets on the balance sheet.

Intangible assets market value study1

1Ocean Tomo, Intangible Asset Market Value Study, 2017, based on market capitalizations of 500 largest companies having common stock listed on the NYSE or NASDAQ (S&P 500)

9© 2019 SAP SE or an SAP affiliate company. All rights reserved.

SAP Ariba’s Approach: Enabling Supply Chain Transparency

SAP Ariba Platform Collaboration & Transparency

Sellers

Buyers

Supplier OnboardingSupplier discovery based on CSR metrics

Supplier enrichment through modular questionnaires

Supplier SelectionEnrichment

Engagement Risk Assessments

Enhanced Supplier Profiles

Supply Chain MappingSubtier Risk Modeling & Exposure

MonitoringSupplier Residual Risk Score across

engagements

Supply Chain CollaborationReputational & Governance Risk Reduction

Creating impact for Diversity & Inclusion

Efficiency for Environmental Impact

ReportingStandardized measures and benchmarking

I

M

P

A

C

T

Driving Transparency through

Supply Chain tiers

10© 2019 SAP SE or an SAP affiliate company. All rights reserved.

Success requires top management

buy-in and support

Leading with purpose:

• Board level commitment to set the corporate strategy

and to support investments to improve sustainability

performance and brand value

• Corporate strategy to define the approach and

commitments to improve collaboration with supply chain

partners and increase transparency and responsiveness

• Social accountability team to identify and promote good

practices across the organisation in support of the

corporate strategy

• Corporate goal setting based on key social impact

metrics with goals for each line of business and ESG

analysis that enables purpose driven procurement

Each of us can make a difference through the choices we

make.

Thank you.

Contact information:

Frank Omare

Senior Director, SAP Ariba Global Value Advisory

francis.omare@sap.com

+44 7583 770 506

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