What Is Sustainable Procurement and Why Is It Important?
Last updated: January 3, 2022
If you're involved with procurement within your business, you've probably heard the term sustainable procurement before. It's a growing concept amid procurement professionals and strives to address various environmental, economic and social issues within the business structure.
Regardless of your industry or company scope, a sustainable procurement strategy is within reach. Understanding the benefits and policies can motivate you to enact a sustainability initiative and help you bring positive change to your company and the labor market at large.
What Is Sustainable Procurement?
Sustainable procurement, also known as green procurement, is about using environmentally, economically and socially responsible methods within your supply chain to reduce your company's impact on public health. Enterprises that strive for sustainable procurement look to the concepts in Corporate Social Responsibility (CSR) to bring more ethical practices to their private businesses.
A sustainable procurement strategy reaches every corner of your supply chain, from sourcing and suppliers to materials and workers. While altering these aspects of your supply chain aims to make your company more socially responsible, it should also continue meeting the needs of your business and stakeholders. Balancing these two objectives can enhance your company's viability for the long term.
Businesses choose to follow sustainable procurement practices for many reasons. For one, the continuing conversation on climate change and environmentalism has made consumers wary of their buying habits. Sustainable sourcing brings products to consumers that align with growing public values.
Green procurement also addresses the growing scarcity of supply while needing to adapt to new markets with high demand. Sustainable procurement can help companies make the most of the investments in their supply chain and extend the life cycle of their resources, allowing them to grow even as the economy shifts.
What Are the Benefits of Green Procurement?
Using sustainable procurement practices in your company supply chain offers several benefits to your entity and the public. With sustainable procurement, you can:
Grow revenue: Among the growing population of eco-conscious consumers, many individuals actively search for businesses that align with their sustainability values. These consumers are often willing to pay more for an ethically sourced product or service, allowing you to increase your revenue.
Increase compliance: Legislation on environmentally responsible business practices continues to expand. Some of these standards are laws that require your compliance, like those from the Environmental Protection Agency (EPA). Compliance with other non-required initiatives can give you specialty ratings and awards that elevate your business. For example, Energy Star ratings and resources helped families and businesses save over $39 billion in energy costs in 2019.
Decrease costs: Just as Energy Star's mission has shown, aspects of sustainable procurement can save your business money. In the United States, industry makes up 33% of the country's total energy consumption. Sustainable procurement principles can reduce waste and energy usage. Lower energy usage means a lower energy bill, while reusing resources means spending less on required materials like product packaging.
Reduce risk: Understanding all aspects of your supply chain can reduce risk more than you thought possible. You might find an existing supplier faces scarcity issues with a specific resource, and sustainable sourcing can help you prepare for challenges related to this scarcity. Sustainability principles can also address risks associated with factors like air pollution and water waste. For example, poor air quality at work can increase employee sickness and reduce productivity.
Enhance brand: Knowingly polluting the environment or creating harsh working conditions for employees can create a negative association with your brand. Sustainable procurement assesses the many ways a company can be more responsible, making the entity favorable to the public.
Prepare for the future: The economy and environment change continuously, and companies need to know how to react when they do. Sustainable sourcing can address these fluctuations, like the availability of technology and economic shifts, to keep a business thriving for the long term.
How Can You Implement a Sustainable Procurement Strategy?
At the start of your sustainable procurement mission, the concept can feel intricate. While there's no one-size-fits-all approach for implementing sustainable procurement policies, using the following tips can make the process easier:
Build your case: The best way to start a sustainable procurement initiative is to identify why it should happen and communicate it to those involved. Create your case by assessing how sustainable procurement will affect your bottom line and discuss your vision with the key stakeholders in your company.
Identify unique business factors: Your business has unique needs to address with its sustainable procurement, so you need to identify them. Look into your company's pain points, priorities and risks to guide your planning and introduce policies in a way that supports you. Create realistic goals to address these factors.
Find new suppliers: While some of your suppliers might work with your sustainability initiative, some of them may not reflect your end goals. Research suppliers to find the providers who represent your policies and bring ethical practices to your business structure.
Create supply chain transparency: Knowing what goes into your supply chain is paramount for sustainable procurement. Doing your research and creating systems that increase transparency ensure you're aware of all the processes that go into your supply chain.
Collaborate with others: With sustainable procurement playing a role in every part of your supply chain, it's valuable to continually collaborate with your stakeholders and all departments of your organization. This collaboration creates a unified vision, and every department can work to keep each other accountable and meet goals.
Expect gradual change: Implementing sustainable procurement is a slow process, and you need to prepare for the many steps it takes to get there. Learn to celebrate the minor changes and keep your larger goals in mind as you slowly move toward a sustainable future.
Principles of Sustainable Procurement
Sustainable procurement is a concept and a standard described by the International Organization of Standards (ISO). The standard itself is complex, but it does reveal a series of principles about the concept that companies can use for their sustainable purchasing. Making these principles integral to your initiative can lead to more substantial outcomes for the long term.
1. Deliver Sustainable Outcomes
The most important principle of green procurement is delivering sustainable outcomes. Your sustainable procurement policy needs to view procurement as a strategy for meeting business objectives through your supply chain.
How will you address your sustainability goals at the early stages of procurement? Using techniques like market analysis, scenario modeling, whole-life costing and more can guide your procurement strategy. These tools can help you identify gaps in your current procurement system and find solutions that lead to sustainable outcomes.
2. Address More Than Tier One
It's easy to address tier one of your supply chain because it's the one you interact with most, but there's much more to your procurement. Considering your processing facilities and raw materials suppliers are just as essential to sustainability initiatives. Looking beyond tier one also involves addressing other aspects of your supply chain that may present risks, like labor standards.
This principle of sustainable procurement requires thorough research to create a sense of transparency across all areas. If you don't know where your raw materials are coming from, it's time to look into your suppliers and where they source.
3. Support Innovation
Your sustainable procurement initiatives should lead to innovative practices that can transform goods and services in your industry. Market research can help you understand existing approaches and find new perspectives for solving sustainability issues.
Creating trust and openness with your suppliers also opens the door for collaborative innovation. Ideating new products, developing new processes and introducing new company structures are all forms of innovation that can arise from sustainable procurement.
4. Create Full and Fair Opportunity
In sustainability models, small businesses, local providers and minority enterprises may take priority in your stakeholder framework. The social responsibility side of sustainable procurement looks to social and economic duty, and these entities fall under that umbrella.
It's essential to provide support for these stakeholders where they need it, but full and fair opportunity should play a role. Work with these parties when they need your support, but refrain from choosing them over other groups at all times to limit positive discrimination and offer a chance to all stakeholders in your structure.
5. Strengthen Your Team
You've likely relied on procurement professionals in the past to iron out your supply chain, and your sustainable sourcing initiative requires this expert assistance just as much. Your team is a valuable asset to your procurement process, and supporting them with sustainability professionals can lessen the burden on the rest of your network.
While these experts can make the process more effective, they can also give your team the resources to stick with your initiative. Awareness and training programs can go a long way, especially as your team expands amidst your initiative.
6. Aim for Sustainable Supply, Not Sustainable Suppliers
The distinction between sustainable supply and suppliers is rooted in your focus. When you're developing procurement strategies, you want your suppliers to comply with your internal policies. You shouldn't prioritize rewarding your suppliers for sustainable practices or changing their internal policies. The only time focusing on supplier policy is valuable is when their approach presents a risk to your company, like if they fail to comply with labor standards.
7. Develop Your Supply Chain to Compete
Sustainable procurement aims to be a long-term initiative, which requires continuous development within your supply chain. Making your sustainable supply chain competitive can reduce the perception that sustainability is more expensive.
Instead of selecting the most sustainable suppliers out there, involve your suppliers in a development program that encourages them to improve specific areas throughout your contract. You might select a supplier with lower sustainability for technical or commercial reasons, but that doesn't mean they can't support your initiative.
This ongoing development increases the pool of suppliers that deliver sustainable outcomes, and it prevents the market from shrinking and driving prices up.
8. Work With Your Business's Unique Needs
Green procurement isn't about simply buying better — it's about embedding sustainability into your existing procurement strategies. Every business handles procurement a little differently, and it's up to you and your team to determine the best moves for optimizing your existing procedure.
A way to use this principle is to identify your priorities and how you can address them with your stakeholders. The changes with the most significant effects on your bottom line will likely be just as appealing to suppliers. Make a point to consider the risks involved with these priorities, and address and incorporate policies and stakeholder requirements in the process.
9. Commit All the Way
A sustainable procurement strategy is only meaningful if you commit all the way. While the process may take time, it can lead to positive outcomes for your company and the overall market. When you identify your priorities, you'll likely find low sustainability across supply categories. When you see these areas, act on them. If you maintain this philosophy long term, you can make a significant difference in your supply chain structure.
Why Is Sustainable Procurement Important?
Ultimately, why should we care about sustainable procurement? You can look at the importance of this practice from a business and global level.
On the business side, sustainable procurement can improve your bottom line and future-proof your organization for unforeseen economic changes. Keeping a company afloat requires income and agility, and the in-depth analysis that comes with sustainable procurement can help you achieve these factors. While this policy can increase savings and efficiencies within the organization, it also addresses risks and how to respond to them.
Among revenue and agility, sustainable procurement aligns more with modern consumer views. As more people search for businesses that reflect their environmental and social values, companies will need to keep up with the changing social landscape. Sustainable procurement leads to long-term enterprises.
As more companies take on sustainability initiatives in their procurement strategies, it becomes a competitive element within the labor market. This competition drives more enterprises to strive for sustainability, leading to widespread social and environmental benefits.
In 2019, carbon dioxide concentrations in the air were higher than they were at any time in the last 2 million years, and 23% of greenhouse gas emissions come from industry. These emissions facilitate the warming of our climate, which reduces biodiversity and puts humanity at risk. Reducing energy usage and carbon dioxide emissions is critical for businesses to slow the process of climate change.
Sustainable procurement is valuable at a global level because it addresses the climate and social issues that affect all of us. In addition to its environmentally friendly practices, a sustainable procurement strategy looks at the social value of its process. Factors like workers' rights and labor standards also play a role in ethical procurement.
When businesses strive to represent the needs of workers and the environment, they make the world a better place for everyone. Just as sustainable procurement can protect your company's interests, it can represent humanity's needs.
Choose Dryden Group for Procurement Consulting
Sustainable procurement might be a goal for your business, but you might not know where to start. Dryden Group offers procurement consulting, among other services, to help you develop an organized approach to your sustainability. Our efficient team integrates with yours to negotiate contracts, assess spending and much more.
With our procurement solution, sustainable sourcing is within reach. Get in touch with us today to learn more about our services and partner with our team.