Ethical Artificial Intelligence (AI) in Procurement

Artificial Intelligence (AI) is rapidly reshaping procurement. From automating supplier assessments to forecasting demand and analysing spend, AI in procurement offers powerful opportunities to improve efficiency, transparency and decision-making. However, without strong ethical foundations, AI risks eroding trust, reinforcing bias and undermining procurement integrity.

For procurement leaders, particularly across Australia’s public and private sectors, the challenge is no longer whether to use AI, but how to use it responsibly.

This is where ethical AI in procurement becomes a strategic imperative.

What is Artificial Intelligence?

Artificial Intelligence (AI) refers to the use of algorithms and data-driven systems to perform tasks that typically require human intelligence. These tasks include pattern recognition, predictive analysis and decision-making.

In recent years, AI adoption has accelerated across Australian procurement teams, driven by the need for greater efficiency, improved transparency and more responsive procurement processes. When implemented well, AI can streamline operations, uncover valuable insights and support better procurement outcomes.

However, without ethical guardrails, AI can amplify historical biases, compromise data privacy and weaken stakeholder confidence. Ethical AI ensures that technology aligns with organisational values, community expectations and regulatory obligations.

The Role of AI in Procurement

AI is increasingly embedded across the procurement lifecycle, including:

• Supplier selection and prequalification

• Spend analysis and cost optimisation

• Demand forecasting

• Contract management and compliance monitoring

As AI tools become more integrated into procurement workflows, the focus is shifting from capability to responsibility. Questions of fairness, accountability and transparency are now central to procurement strategy.

In Australia’s evolving procurement landscape, where social value, Indigenous participation and SME engagement are increasingly prioritised, ethical AI is essential to maintaining trust and legitimacy.

Breaking Down Ethical AI in Procurement

To embed ethical AI into procurement strategy, organisations can focus on five key pillars.

1. Transparency and Disclosure

Procurement teams must clearly disclose when and how AI is used in procurement decision-making. This includes explaining:

• What data AI systems rely on

• How recommendations or decisions are generated

• How outputs are validated and reviewed

Transparency builds trust with suppliers, stakeholders and communities, enabling informed scrutiny of AI-enabled procurement processes.

2. Bias Identification and Mitigation

AI systems can unintentionally reinforce historical and structural biases if trained on incomplete or skewed data sets. Ethical procurement requires proactive bias mitigation, including:

• Using diverse and representative data sources

• Applying inclusive design principles

• Conducting regular audits of AI outcomes

This is particularly critical for ensuring fair access for Indigenous businesses, social enterprises and small to medium enterprises.

3. Data Privacy and Governance

AI in procurement relies on large volumes of commercial and supplier data. Strong data governance is essential to protect confidentiality, integrity and compliance with Australian privacy legislation.

Procurement teams must ensure AI systems have clear controls around data access, storage and usage, supported by robust governance frameworks.

4. Inclusive Design

Ethical AI tools must be accessible and equitable. Procurement platforms and decision-support systems should not disadvantage smaller suppliers or underrepresented groups due to complexity, cost or digital barriers.

Inclusive design is not only ethical, it strengthens competition, innovation and supply chain resilience.

5. Accountability and Oversight

Human judgement must remain central to procurement decisions. Clear governance structures are needed to ensure accountability for AI-driven outcomes, including:

• Defined ownership of AI systems

• Escalation pathways for concerns or errors

• Ongoing monitoring and review processes

Ethical AI complements human expertise, rather than replacing it.

Procurement as a Lever for Ethical AI Adoption

Procurement is uniquely positioned to influence how AI is developed and deployed across supply chains. By embedding ethical AI expectations into procurement processes, organisations can drive responsible innovation beyond their own operations.

This includes:

• Disclosing AI use within procurement processes and setting expectations for suppliers

• Requiring suppliers to demonstrate ethical AI practices as part of tender responses

• Co-designing AI-enabled procurement tools with suppliers and stakeholders

• Establishing governance protocols to oversee AI use across procurement teams

• Conducting regular reviews, audits and stakeholder feedback loops

Together, these actions position procurement as a powerful enabler of ethical AI adoption, supporting transparency, accountability and community trust.

Conclusion: Ethical AI as a Strategic Procurement Enabler

Ethical AI is fast becoming a central addition of modern procurement practice. As organisations use AI to automate processes, analyse data and enhance supplier engagement, the need for responsible, inclusive and transparent systems has never been greater.

In Australia, where procurement is increasingly expected to deliver social value, support local participation and uphold public trust, ethical AI is not just a safeguard, it is a strategic advantage to build more efficiencies and outcomes in procurement functions.

Embedding ethical principles into procurement ensures technology serves people, not the other way around. It allows procurement teams to unlock efficiency while maintaining fairness, legitimacy and alignment with organisational values.

By taking a proactive and structured approach, procurement leaders can build AI-enabled systems that are smarter, more trusted and future-ready.

How Sedo Group Can Help

At Sedo Group, we support organisations to translate ethical AI ambitions into practical procurement action.

We can help with:

• Strategy and framework development, co-designing procurement strategies that integrate ethical AI principles

• Supplier evaluation and engagement, developing assessment tools to evaluate ethical AI practices

• Briefings and workshops, building shared understanding and co-designing ethical solutions

• Translating ethical AI policies into procurement practice, ensuring alignment across teams

• Bid and tender support, articulating ethical AI commitments clearly and credibly

Let’s build procurement frameworks that earn trust, deliver impact and reflect the best of responsible innovation.

Get in touch with our team to learn how Sedo Group can support your next procurement project.