This process is transforming how organisations make decisions, considering social and environmental factors alongside the traditional financial and economic ones.
Whether you're already on the path to sustainable procurement or just starting out, this article will provide insights into the common frameworks and category examples.
What is Sustainable Procurement?
Sustainable procurement might seem like a complex term, but it's a fairly simple concept if you put it in basic English.
Sustainable procurement is a process that combines both environmental governance and social factors of corporate responsibility into procurement decisions. It's not about acquiring the cheapest, quickest solution.
It's about adopting a holistic approach, striving to achieve the lowest environmental impact while achieving the most positive social outcomes.
Meeting Business Needs Sustainably
Sustainability in procurement is no longer a 'nice-to-have' feature for businesses. With the growing demand for companies to operate responsibly and transparently, it's become a necessity. It includes everything from lowering carbon footprints to supporting socially conscious suppliers.
For example, The Carbon Disclosure Project records that around 50% of a company's carbon emissions come from its supply chain. Hence, employing a sustainable procurement approach can drastically reduce a company's carbon footprint.
Adopting environmentally conscious methods in procurement benefits the planet and fits into businesses' wider aim to achieve sustainable development goals.
One area where this can be seen is in the procurement of machinery. When acquiring new equipment, integrating ‘Life Cycle Costing’ into your procurement decision can ensure sustainability.
Life Cycle Costing considers the initial buy cost and the costs of using, maintaining, and disposing of the product. This ensures a full account of potential environmental costs, such as carbon emissions during the product's use and the impact of its disposal.
Forging Sustainable Buyer-Supplier Relationships
Sustainable procurement influences the buyer’s practices and the supplier's operations. By requiring specific sustainability standards, businesses can encourage their suppliers to adopt more sustainable practices, leading to a more sustainable supply chain.
Businesses can also leverage their purchasing power to support socially responsible suppliers. This encompasses those creating employment opportunities for disadvantaged groups or those innovating to reduce their environmental footprint. By favouring such suppliers, businesses spread social and environmental responsibility within their industry and beyond.
The Steps Toward Sustainable Procurement
Regardless of your stage in your move towards sustainable procurement, remember it's a journey that demands consistent efforts, not a one-off project. Embrace it as an integral element of your organisational mission, vision statement, and day-to-day operations.
Not only can this enhance your firm's reputation, but it also signals that you're equipped to withstand fluctuating market forces. Remember, most customers look for partners with sustainability rooted deeply within their value chains.
Here’s how to start your journey:
Evaluate the Existing Setup
Making the shift to sustainable procurement begins with assessing your current procurement processes.
Answer questions like:
To what degree is sustainability integrated into your procurement activities?
Are there any existing policies that reflect commitment towards sustainable activities?
These initial inquiries form the roadmap for your shift towards sustainability in procurement.
Remember, it's easier to manage something that can be measured.
Like our above example, Life Cycle Costing (LCC) is one method that can provide valuable insights. LCC isn't restricted to the direct costs associated with a product or service's acquisition, maintenance, and disposal. It also weighs up the less obvious external environmental costs—for example, the cost of greenhouse gas emissions tied to a product's lifecycle.
Build a Business Case for Sustainability
Now that you've evaluated your existing setup, it's time to build a compelling business case for sustainable procurement.
The first step entails highlighting how sustainability plays in not only reducing environmental impact but also mitigating risks, achieving cost savings, and enhancing brand reputation.
After all, a robust, sustainable procurement strategy can protect an enterprise from market fluctuations, drive long-term revenue growth, and keep it ahead of regulatory changes.
Consider referencing credible studies and data to underline how organisations that embed sustainability in their value chains are more resilient and more likely to reap numerous benefits.
Create a Sustainable Procurement Policy Framework
The building blocks for a sustainable procurement strategy are your procurement policies.
Here, you'll outline how your organisation plans to incorporate sustainability into procurement activities.
Be specific about your objectives. For instance, you might aim to reduce carbon emissions by a certain percentage or work only with suppliers demonstrating firm sustainability commitments.
Remember, clarity and measurability are critical when setting these objectives. Ensure that your policy framework includes clear targets and a defined plan for achieving them.
Optimising Collaboration for Sustainability
Collaboration can't be overlooked on your journey towards responsible procurement. After all, sustainable procurement isn't an isolated activity. It calls for collaboration with different stakeholders, including various departments within your organisation, your supplier network, and even the communities in which you operate.
Consider hosting workshops and training sessions to ensure everyone understands the importance of sustainability in procurement and their role in achieving your sustainability goals. Consistent communication with your supplier network is also instrumental in driving sustainability efforts.
Benefits of Sustainable Procurement
Economic Benefits
One of the most surprising benefits of sustainable procurement lies in its economic promise. Reducing waste, enhancing process efficiency, and cultivating long-term supplier relationships can bring significant financial benefits.
Even outside the supply chain, we’ve found that sustainable construction often results in long-term savings. So, consider sustainable approaches for all forms of procurement, not just in your supply chain.
Environmental Benefits
As the term suggests, sustainable procurement plays a significant role in environmental protection. By choosing suppliers who prioritise environmentally friendly practices, your organisation plays a part in reducing carbon emissions.
Social Benefits
Engaging in sustainable procurement practices positions your company as more than a profit-churning entity. You essentially communicate that your organisation takes a stand for worthwhile societal causes.
For example, by partnering with suppliers who offer employment opportunities to disadvantaged groups, you can help create a more equitable society.
Challenges of Sustainable Procurement
Sustainable procurement holds immense potential for promoting social, economic, and environmental well-being.
But it's not always a smooth path.
Undeniably, many organisations encounter some common obstacles in their journey towards fully sustainable procurement. These challenges include stakeholder engagement, supplier ESG evaluation and performance monitoring, and sustainability reporting and communication.
Stakeholder Engagement
In sustainable procurement, getting everyone onboard isn't as simple as it seems.
Remember, a small contradiction can potentially become a hindrance in implementing the sustainable procurement process. It's crucial to involve all stakeholders and gain their consensus on a common framework.
Supplier ESG Evaluation and Performance Monitoring
It's also paramount to carry out comprehensive supplier assessments based on Environmental, Social, and Governance (ESG) criteria.
While these assessments are indispensable in making the right procurement decisions, they also demand significant time and resources. Combined with some suppliers lacking the capacity to meet stringent ESG requirements, the whole set-up can get intricate.
You could leverage training, incentives, and partnerships for capacity building to navigate this.
Sustainability Reporting and Communication
Mapping a procurement activity's sustainability impact is often not straightforward, especially in complex supply chains. Hence, robust reporting structures that ensure traceability can indeed be challenging.
But, tools like supply chain mapping and risk assessments can help maintain transparency. It's essential to convey the value of your sustainable procurement practices both internally and externally.
Remember, communicating your responsible procurement strategies and achievements helps strengthen stakeholder relationships while enhancing your organisation's reputation.
ISO 20400 Standards
ISO 20400, often known as the Sustainable Procurement Guide, prescribes guidelines for organisations aiming to integrate sustainability into their procurement policies. It's not a set of specific requirements or a system but more of a guidance note to help you achieve procurement sustainability.
Intricately designed and ratified by industry experts, it is an international standard to help organisations measure their procurement activities against global best practices.
The ISO 20400 guidance emphasises three pillars of sustainability: social, Environmental, and economic. These pillars comprehensively cover every facet of sustainability, from human rights, diversity, and labour conditions to waste management and carbon footprint reduction.
The 20400 standard also enhances one's ability to control risks and capitalise on new opportunities, creating a positive cycle of continuous improvement. This improved visibility across the supply chain accounts for a more responsible procurement process.
Before embracing the sophistication of ISO 20400, remember that it's about aligning procurement with your broader sustainability ambitions. It's not a journey for the faint-hearted—it requires commitment, investment, and a systematic approach.
Conclusion
Sustainable procurement isn't just a buzzword. It's a strategic approach that intertwines economic, environmental, and social aspects to create a more sustainable world. From reducing carbon footprints to managing risks, it's a journey that requires commitment and a systematic approach.
The ISO 20400 standards serve as a guiding light, helping you to integrate sustainability into your procurement policies effectively. It's not an overnight transformation, but with the right tools and resources, you're well on your way to aligning your procurement with broader sustainability goals.
Remember, it's not just about the financial costs. It's about prioritising societal and environmental impacts and reshaping businesses for the better. As you move forward, keep evaluating, understanding, and optimising. Your journey towards sustainable procurement has just begun.
