Deciding the right things to do from a sustainability or procurement with purpose viewpoint isn’t necessarily a hard task in itself. However, in the world of energy companies – particularly oil and gas – it is somewhat harder to excel when you’re dealing with exploration, extraction, processing and distribution.
Speaking to Mark Smith of bp, a procurement veteran in the energy and utilities sector, was particularly interesting. He worked for Accenture after his law degree and a Masters in Information Technology, working in the energy sector for a decade. He joined bp in 2012 and has held various senior procurement roles, ending up now as Procurement Vice President, Digital & Talent Supply. Those two spend categories are highly significant in terms of both spend and their strategic importance to the firm.
“Both people and digital technology are central to how we transform the company”, Smith says. And that transformation is also huge, as bp transitions from a “traditional” oil and gas firm to a global, integrated energy company. “For instance, we are going to need people with different attitudes and skills, and so that requires different thinking on talent acquisition. There are also cultural issues to consider, and we need to actively encourage people to apply to us who might not have considered joining us until recently.”
Unsurprisingly, Smith works closely with human resources in that spend area, and he is obviously relishing that people dimension. “Many of us are personally motivated by the environmental changes required to protect the finite resources on our planet,” he adds. “What’s been great in recent years has been seeing bp shift its corporate position and embrace a new purpose”.
Shareholder returns are important, of course, but as others we have interviewed have pointed out, the sense of purpose can provide additional motivation for staff. Smith continues: “Procurement can play such an important role, the choices we make about how we work with suppliers can have a huge sustainability impact, so we have a great opportunity to make a difference.”
He explains there have been “examples of procurement with purpose” in bp for some time, but this has accelerated since bp declared its net zero ambitions in February last year. CEO Bernard Looney has been very clear in the goals of the company and 2050 emissions target. A corporate sustainability framework provides an anchor for procurement with purpose, and the firm has also published clear positions on climate policy.
Smith adds: “We want to embed purpose in the firm’s DNA, and we see that procurement and our suppliers have to be part of that.” It is this approach that has led to more focus on “partnership” with suppliers as an explicit part of the framework.
Smith feels that the changes are good news for the status of the procurement function too. “Procurement people tend to worry about our seat at the top table – the purpose agenda has seen bp really recognise the key role our suppliers have in terms of this agenda, driving up our opportunity to really partner deeply to achieve this,” he adds.
Indeed, the procurement transformation which is underway to reflect the corporate change is titled “procurement with purpose”. It is driven by the need to make sure procurement is focused on sustainability and purpose in line with the organisational goals. Smith explains that “we need to think differently about procurement in totality – the skillsets, the technology, and going beyond cost – without forgetting it of course! But we are focusing on the triple bottom line – planet, profit and people - and looking to measure our wider contribution, not just savings”.
In structural terms, that means appointing Leigh-Ann Russell last year to be the first ever Group-level CPO for bp. The procurement management team now includes both a leader from the gas and low carbon business and a dedicated VP for sustainable procurement. There is a parallel here with the wider company, which has Giulia Chierchia in its leadership team as EVP, strategy and sustainability.
The procurement sustainability team is quite new, and the model is to design the jobs in that team to align with the United Nations SDGs (sustainability development goals). That is an interesting approach to structuring roles which we have not seen before in other businesses. Understanding the baseline and setting targets are current priorities for the team, and the aim is for the sustainability professionals to work with category teams, providing expertise “in a similar way to how HR business partners work with stakeholders”. They will also ensure the line of sight is maintained from the SDGs through the corporate goals to the category managers.
For example, human rights is relevant in many category areas and is an important issue for a business that works in many parts of the world, both developed and developing. bp’s progress was highlighted when it was recognised as in the Corporate Human Rights Benchmark in 2020, ranked 7th out of 199 companies rated.
In areas such as auditing suppliers and supply chains, Smith explains that collaboration is vital, and the strong focus historically on safety in the energy sector supply chain, an area where firms have worked collaboratively for many years, has fed across successfully into wider sustainability approaches. The use of common standards and certifications helps and, he says, “we are coming from a position of strength here – although we know there is more to do”.
In the technology area, there is another good example of mutually beneficial collaboration. Smith continues: “We’re working closely with our cloud service providers such as AWS and Microsoft. Migrating to cloud brings some direct emissions benefits, as we can close down some relatively inefficient infrastructure and buy more energy efficient provision”. In turn, AWS and Microsoft have committed to zero carbon in their own businesses, and have also signed up to renewable-generated power purchase agreements with bp.
Smith adds: “That initiative brought together people from our technology, trading, operations, procurement and finance areas as well as a lot of involvement from procurement. It’s a good example of corporate purpose and procurement with purpose being well aligned”.
bp is starting to bring sustainability criteria into procurement strategies and supplier selection and contract award decisions, Circularity is yet another emerging area of interest. “We’re working with a US university looking at development of a digital asset re-purposing hub,” says Smith. Getting longer life from equipment, whether it is a laptop, furniture or a phone is a simple but effective idea, and the thinking around total cost of ownership is changing to reflect that.
It’s clear Smith has strong values personally, and has used his love of running to raise six-figure sums for charity in recent years. So we asked him how he felt when he heard others criticise the oil industry over its contribution to climate change and environmental issues.
“Oil and gas play a fundamental role in society, providing basic human needs. We have to be pragmatic to some extent,” he says. “But I personally recognise the need for change, as I think most of us in bp do – and we feel energised by the growing focus on purpose. There’s also the argument that we need to embrace those who have the furthest to travel. I also believe in being proactive, that’s a core value for me. If I want to see change, then it’s up to me to play a part. So if the steps I take in my work help the company and the planet move in the right direction, then I’m having an impact”.