Sustainable Procurement: 4 Steps for Transforming Your Organization

Why is Sustainable Procurement Important?
For hundreds of years, most businesses operated with the primary goal of generating profit and value for shareholders. At times, however, this objective has been at odds with other goals, such as being good stewards of our communities and of our environment. Almost every day, there are news stories of a climate-driven drought causing wildfires or mass pollution of the ocean wreaking havoc on a critical ecosystem. For over a decade, the Business Roundtable CEOs, have been committed to modernizing the purpose of a corporation and demonstrating that environmental sustainability and economic growth in the U.S. can be achieved together. Their mandate is to challenge old rule that a business exists to maximize profit. The Roundtable came away in agreement that companies must also protect the environment “by embracing sustainable practices.”
Now, it is Procurement’s time to step up and to be the leader of change. Procurement is the control point in the organization to ensure third parties sustainably conduct business. In a recent trend, Chief Procurement Officers are taking on the responsibility of ensuring enterprise-wide sustainability efforts.

Sustainable Procurement- 4 Steps for Transforming Your Organization

Sustainable Procurement: 4 Steps for Transforming Your Organization

Sustainable Procurement- 4 Steps for Transforming Your Organization featured

Why is Sustainable Procurement Important?
For hundreds of years, most businesses operated with the primary goal of generating profit and value for shareholders. At times, however, this objective has been at odds with other goals, such as being good stewards of our communities and of our environment. Almost every day, there are news stories of a climate-driven drought causing wildfires or mass pollution of the ocean wreaking havoc on a critical ecosystem. For over a decade, the Business Roundtable CEOs, have been committed to modernizing the purpose of a corporation and demonstrating that environmental sustainability and economic growth in the U.S. can be achieved together. Their mandate is to challenge old rule that a business exists to maximize profit. The Roundtable came away in agreement that companies must also protect the environment “by embracing sustainable practices.”
Now, it is Procurement’s time to step up and to be the leader of change. Procurement is the control point in the organization to ensure third parties sustainably conduct business. In a recent trend, Chief Procurement Officers are taking on the responsibility of ensuring enterprise-wide sustainability efforts.

The Basics of Procurement’s Influence on Sustainability:
First, let’s define procurement

  • Procurement’s goal at the most basic level is to obtain third party goods or services at the most competitive price and the best quality needed for the everyday functioning of the business.

Second, let’s define sustainability

  • Avoiding the depletion of natural resources to maintain an ecological balance.

Now, let’s bring it all together

  • Sustainable Procurement evaluates the impact a purchase or third party partnership has: on the environment, socially and economically rather than solely focusing on price point and quality.
  • Now more than ever, procurement professionals must re-examine their priorities in accordance with these three pillars:

The 3 pillars of sustainable procurement

Understanding the basics will help professionals better evaluate everyday purchasing decisions. However, to have an impact enterprise-wide, organizations must develop a more detailed and holistic approach.

Putting the Basics into Action: A 4-Phased Approach to Become a Sustainable Procurement Organization:

Spend Analytics, KPIs and Best Practices for Procurement

Collaboration and Sourcing for Sustainable Procurement

 

  1. Spend Analytics – Analyze your trailing 12 months of spend and tier your supply base based on the value of spend, category of spend and transactional volume. Leverage the Pareto principle and focus on suppliers that compose the top 80% of total spend value.
    1. Helpful hint – prioritize quick win categories at first that will drive a sustainable impact without substantial resource/expense commitment.
  2. KPIs & Best Practices – Review best practices for implementing sustainable operations. Define key metrics to evaluate your supply base and create metrics that connect to corporate sustainability objectives.
    1. A few standard metrics to measure supplier performance are: annual carbon footprint, work travel emissions, number of deliveries, percentage of recyclable materials in products, usage of alternative energies and plastic packaging usage.
  3. Collaboration – This is a critical component. Businesses must collaborate with their suppliers to improve operations. You will not accomplish your sustainability objectives without developing a partnership with your suppliers.
    1. Set up a meeting with your partner and align on measurable sustainability metrics.
    2. Develop a baseline for measurement.
    3. Develop an action plan to improve on agreed-upon metrics.
    4. Incorporate the metrics into supplier performance management programs for regularly cadenced reviews.
      1. Reference our blog for more information on supplier performance partnerships Supplier Performance Management
  4. Sourcing – If a supplier cannot improve upon the metrics defined, it may be time to evaluate that relationship by conducting a sourcing event and introducing new suppliers that emphasize sustainability.

By understanding the basics of Procurement’s influence on sustainability and developing a 4-phased approach to strategically target suppliers based on analytics and metrics, your organization will see a clear improvement in both environmental impact and improved public image and likely increasing sales!

Start implementing sustainable procurement principles within your organization by scheduling a consultation with our experts today!

Sources:

Samani, Nita. “What Is Sustainable Procurement.” Deskera, 1 Jan. 2021, www.deskera.com/blog/sustainable-procurement.

Farge, Emma, and Gerry May. “Greenhouse Gas Levels Hit Record; World Struggles to Curb Damage.” Reuters, 25 Oct. 2021, www.reuters.com/business/cop/world-scrambles-contain-damage-greenhouse-gas-emissions-hit-record-2021-10-25.

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