Despite a growing focus on ESG, sustainability in procurement has often struggled to progress beyond a box exercise, without realising its true value or potential. However, this is quickly changing.
“Sustainable procurement”, which incorporates sustainability into all procurement procedures and operations, is becoming the new standard rather than a subset. Organisations are facing increasing pressure from numerous directions to demonstrate their commitment to sustainability – stakeholders are seeking strong sustainability credentials, and legislative changes are increasing reporting obligations. Organisations must therefore change their tactics in order to achieve their sustainability goals, and with procurement sitting in a unique position to transform the supply chain, this is the perfect place to start.
So, how can business and procurement leaders ensure they implement the correct sustainable procurement measures and head in the right direction regarding sustainability?
This all starts with a seven-step process:
1. Know your objectives
For businesses at the start of their sustainability journey, trying to tackle everything at once can be tempting. However, the best approach is quality rather than quantity. A targeted approach that is aligned with your organisation’s core issues will have a greater impact than tackling numerous problems superficially. For instance, an organisation heavily involved in the agricultural industry may prioritise water concerns, whilst a professional services firm will likely deliver a bigger impact by reducing business travel-related emissions.
It is important, therefore, to make sure you understand the business’s commitments and set priority objectives and actions in line with this. Order these according to their significance to the company and the potential for procurement to drive change – with the highest priority given to external obligations.
2. Connect with your organisation’s sustainability leads
Procurement and sustainability teams have traditionally had different objectives, and bringing these two teams together requires dismantling their compartmentalised methods of operation.
Procurement teams can better understand where they can best support sustainability objectives and align with sustainability teams’ goals by spending regular face-to-face time with them. This helps teams match short-term goals (like annual procurement pipelines) with longer-term sustainability planning (such as for 2030 and 2050 goals) and create a two-way feedback channel.
3. Empower your procurement team
Procurement teams frequently lack the time, knowledge, and motivation to fully pursue the sustainability agenda, even though the intent is usually in the right place. Organisations frequently marginalise sustainability in procurement in favour of cost and service considerations when it comes to setting policies and procedures.
To give Procurement the mandate needed to prioritise sustainability improvements, senior leaders should provide buy-in and clear objectives, such as a target number of suppliers with science-based targets (validated by the Science-Based Targets initiative, or SBTi).
Training and upskilling must also be at the core of a sustainability transformation; make sure procurement professionals have the ability and know-how to adapt to a more sustainability-focused business as usual (BAU). Procurement teams must have the flexibility and aptitude to think creatively to leverage less frequently used levers, such as collaborating more closely with existing suppliers and pooling resources to facilitate sustainability improvements.
4. Embed sustainability in Procurement’s BAU activities
Once policies and methodologies are updated to reflect the organisation’s sustainability goals., Procurement will need to put these new ways of working into practice. This can be done in a variety of ways, such as collecting supplier-specific data or adding sustainability-focussed criteria into RFP evaluation methodologies and much more. Procurement teams will need some time to transition from a two-dimensional approach that focuses on cost and quality to a three-dimensional one that includes sustainability. However, if implemented correctly, sustainable procurement builds on, rather than completely overhauling, existing processes, which means the transition may be smoother than you expect.
5. Focus on Supplier Relationship Management (SRM)
Even under the best of circumstances, it can be challenging to understand your supply base; information and data are not always readily available. Since data and information are not always readily available, supplier fragmentation increases. This adds to the workload, and organisations sometimes respond by deprioritising supplier engagement in favour of more pressing matters.
To help you focus your resources on the right suppliers, segment your suppliers based on a simple two-by-two matrix measuring their strategic importance to your business and their sustainability readiness. Create a customised supplier engagement strategy for each cluster in this matrix, giving important strategic suppliers with less sustainability maturity more guidance. By incorporating sustainability into SRM meetings, procurement leaders can show how important sustainability is to the business and better understand the difficulties faced by suppliers, and how the business can help.
6. Don’t let the data stop you
Data is critical to understand current baselines and tracking changes. Nevertheless don’t let a lack of data stop you from taking steps to improve sustainability. Teams can run successful projects that are headed in the right direction without being derailed by an inability to measure sustainability improvements perfectly. Even if the emissions reduction cannot be precisely measured, starting with initiatives like implementing electric vehicle fleets can help build up the company’s sustainability success stories.
Usually, the data landscape changes in line with the business’s maturity. Activity or supplier-specific data can eventually replace less granular emissions calculation methodologies, such as spend-based approaches. This enhanced data can then be used for tracking and reporting on KPIs – feeding back into the planning process – and teams will more quickly be able to identify their burning platforms.
7. For lasting impact, share your procurement team’s knowledge
A lack of knowledge sharing is a common issue when it comes to sustainability expertise. Often, organisations risk overlooking or forgetting excellent practices due to ineffective disribution of information or inadequate training.
To overcome this, business leaders should encourage procurement teams to develop a “sustainable procurement playbook”, to act as a guide, centralising knowledge and making recommendations for the future. As with all the other actions in this seven-step process, this step must be iterative, not static. This means reviewing the document regularly to make sure it integrates new learnings and identifies areas to address next.
A new era for procurement: moving beyond cost and quality to sustainability
The two main goals of procurement have traditionally been to minimise costs and maximise quality. However, we need to shift to a three-dimensional model that incorporates sustainability as an additional procurement pillar as it becomes increasingly central to an organisation’s strategy.
Without procurement, organisations cannot effectively advance the sustainability agenda, and procurement can no longer overlook its part in the sustainability shift. Businesses that prioritise sustainability in procurement will not only be able to adapt to emerging trends but also be in a strong position to capitalise on new opportunities.