Sustainable Procurement: Putting words into action
Formerly a niche topic, sustainably produced goods today appeal to broad customer groups. More and more consumers are making their decisions how to spend their money based on environmental and social responsibility considerations. The number of investors who include these aspects in their investment strategy has also increased significantly. This is reason enough to orientate your own procurement towards sustainability goals.
What is Sustainable Procurement?
Sustainability was defined by the UN World Commission on Environment and Development as “meet[ing] the needs of the present without compromising the ability of future generations to meet their own needs”. Well known is also the term “Triple Bottom Line” coined by John Elkington in 1994 which introduces three core elements:
1. People / Society
2. Planet / Environment
3. Profit / Economy
These three key areas are also mirrored in the 17 Sustainable Development Goals (SDGs) defined by the UN – for example “No Poverty” (social), “Decent Work and Economic Growth” (economic) and “Life Below Water” (environmental).
Specifically for Procurement, the Sustainable Procurement Task Force defined Sustainable Procurement in its paper Procuring the Future as “a process whereby organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis in terms of generating benefits not only to the organisation, but also to society and the economy, whilst minimising damage to the environment.”
Why is sustainable Procurement so important?
Sustainable Procurement is more than a trend, it is fundamental to address in order to be able to achieve success in the supply chain in the 2020s.
In the development of procurement from a cost leader to a driver of sustainability, major steps are imminent – both within the company and, above all, in cooperation with suppliers and supply chain logistics.
Sustainability goals of global companies – Examples:
There have been prominent examples with the likes of Microsoft and the investment fund BlackRock announcing the Sustainability goals they have set themselves to tackle environmental issues.
In 5 steps to Sustainable Procurement
There are exciting steps ahead in the evolution of Procurement from cost leadership to also driving Sustainability – both within the organisation and most importantly in collaboration with its suppliers and supply chain logistics.
There are 5 first steps for organisations to take on this journey:
1. Supply chain transparency
Create transparency of your organization’s Sustainability across your complete Supply Chain (Tier 2, Tier 3, … Tier N suppliers)
In order to become truly sustainable, not only must a company implement sustainable practices in what they do themselves they also need to ensure that suppliers (and their suppliers, etc.) are adhering to the same standards too. As most companies’ supply chains are built of complex systems, it is imperative (and ultimately inevitable) to map their own supply chain in the first place and identify the drivers and/or inhibitors to Sustainability.
2. Sustainability Purpose
Define a Sustainability purpose and identify appropriate actions
Each company is different within the industry it is operating in and has its own vision and mission. The same applies to Sustainability. Prior to implementing Sustainable Procurement, a suitable strategy and action plan on Environment, Society and Economy addressing the company’s core purpose, values and impact areas must be developed and agreed on. Based on this, actions can be defined and communicated within and outside of the organisation, guiding all involved onto the same path to Sustainability.
Initial findings from INVERTO’s CPO survey on procurement purpose and impact highlight an increase in the importance of sustainability.
3. Sustainable Procurement initiatives
Implement Sustainability initiatives along the supply chain that go beyond compliance
When it comes to implementation, compliance is merely more than a first step. Most companies will get “stuck” in the compliance trap at this point and it is important to take a leap out of this based on the Sustainability strategy and create meaningful initiatives. These initiatives as any project will include timelines, milestones, stakeholders and specified targets.
4. Ecosystems, Innovation & Collaboration
Engage with third-party organizations to further innovate and develop new solutions
Collaborating with external parties such as research agencies, universities and NGOs but also in industry forums can give the Sustainability a further boost. Companies may not always be able to find solutions on their own and the exchange with third-party will provide fertile ground for new ideas.
5. Sustainability Reporting
Measure and report your success, i.e. with the help of the Global Reporting Initiative (GRI) standards
Finally, it will be critical to quantify the results of each initiative in order to determine the success or any shortcomings. In many cases, the tracking will pose another challenge due to the high complexity that is embedded in the supply chain. The GRI has setup a framework for the reporting with further work needed in order to ensure appropriate and standardised reporting.
On a personal note, there are also a number of changes each of us can make as a consumer – both in our own lives and to further advance Sustainability in the economy. We have repeatedly seen the impact of consumer’s choices to push companies to be more sustainable – for example the trends in the food sector moving to local and organic – and this will prove even more relevant in the future.
Contact us to discuss how you can implement sustainable procurement in your company. We are convinced that sustainability should be more than just a point on the CEO agenda!