6 things to consider in your sustainable procurement roadmap

Sustainable procurement is the integrated process of lowering environmental impact and creating positive social results in procurement decision-making.

Being sustainable is no longer optional. Two external factors are driving the adoption of sustainable practices:

1. Compliance with reporting regulations, and
2. Customer pressure.

Oh, yea, and the catastrophic risks of climate change. 

There are competitive implications to sustainability--judging by where the market is going. Consumers pay more attention to supply chains. Employee engagement can be affected by the practices of your company. 

Being sustainable is becoming a standard business requirement.

All these factors point to why NOW is the time to start planning your roadmap to sustainable procurement. 

In this article, we'll go over 6 things you should consider when starting your strategic plan.

Being sustainable is a business imperative 

Here's just one example of the business ramifications of being sustainable: onshoring.

Onshoring and promoting local sourcing improves resilience and introduces more agility to counter disruptions. In 2022, 24% of manufacturing executives surveyed considered moving operations closer to the end customer.

Bringing supply chains closer to home is one way of getting around the supply chain shocks and increased transportation costs related to the events of 2019-2021.

The distances goods travel is reduced, communities are supported, and the customer benefits from shorter delivery windows. Organizations can reduce carbon emissions while saving on costs.

Some companies leading the way in sustainable supply chain management are global fast-moving consumer goods (FMCG) companies. They have been under consumer and NGO focus.

Simultaneously, there are more and more companies entering the market with sustainable product offerings and company missions. In order to stay relevant in the business space, you must start considering sustainability as a fundamental part of your procurement strategy. 

6 things you should consider when making your sustainable procurement roadmap

1. Building the business case

The first step is to understand your organization’s needs.

• Is sustainability a core value for the organization every step of the way?
• Are you incorporating sustainable practices to please your target market?
• Is it to satisfy your investors and stakeholders?
• Are you driving sustainable procurement initiatives just to comply with government regulations?

Align your internal stance on the topic first. Identify which country-specific standards and regulations affect you and which functions in your business would be responsible.

Consider what level of depth your key stakeholders expect of you. When your priorities are clear, a sustainable procurement strategy becomes an opportunity waiting to be realized.

Embarking on this requires time, commitment, and resources which should not be underestimated. Understand your limitations.

2. Sustainable supplier management

Supplier monitoring starts with developing a consistent approach to supplier selection and sharing your code of conduct requirements with your suppliers.

Tier 1 suppliers will need to be continually assessed for compliance with this code and to requirements on measures covering environmental, social, and economic responsibility.

If you are not already engaging your suppliers in your sustainability plans, now is the time. Your suppliers can provide you with added perspective on the topic as well as fresh ideas on how to implement responsibility into your supply chain, product development, and sourcing.

As your organization grows in maturity, you can build innovative partnerships to embed best practices in all sourcing decisions and look beyond tier 1 suppliers.

In sustainable supplier management developing together is the key.

Changing a supplier every time problems occur may not result in long-term results and close partnerships, as sustainability is an ongoing effort and demands evolve.

3. Setting realistic targets for sustainable procurement

Be optimistic yet realistic in terms of expected speed of progress, when setting targets for sustainable procurement.

Identify your main goals in the areas of economic, environmental and social responsibility in the short and medium terms. Establish the baseline: what is the current state? Setting targets provides direction, commitment, and a way to measure progress.

Examples of sustainable procurement targets are given below:

Economic:

• 100% compliance with regulations and applicable laws
• 100% compliance with terms for anti-bribery and anti-money laundering
• X% of key suppliers engaged in joint sustainability program
• X% of suppliers are diverse suppliers (see webinar: Five steps to increase your supplier diversity spending)

Environmental:

• 100% compliance with environmental guidelines in your industry
• 100% of key suppliers’ environmental impact assessed
• X% reduction in consumption of resources such as energy and water
• Become carbon neutral by 2030 (see article: 5 key steps on your sustainable procurement journey)

Social:

• 100% compliance with paying living wages and eliminating child labor
• 100% compliance with Modern Slavery Act
• 100% compliance with The United Nations Guiding Principles on Business and Human Rights (UNGPs)
• Positively contribute to communities in areas of operation

4. Sustainability reporting - data and information

Sustainable procurement initiatives are powered by data. Measuring your sustainability performance and setting milestones requires reliable data. It needs to be assembled, verified, and converted into information.

There are established reporting frameworks to guide you and domain experts for reference in each of the three areas, economic, environmental and social.

Reports have two objectives:

• to satisfy compliance requirements 
• to guide future targets and sustainability plans.

Sustainability reporting is a part of an organization’s annual reporting process. There is a growing demand for wider and more accurate reporting on sustainability programs.

5. Increasing maturity in sustainable procurement

The key to success and making growth happen in sustainable procurement is to establish consistent principles across sourcing categories, both products, and services, and embed them in everyday activities and source-to-pay processes.

Policies need to be continually reviewed to align with market expectations and competitive behavior. Procurement professionals need to understand the changing sustainability landscape and apply innovative solutions in sourcing and supplier management activities.

To scale up, sustainability thinking needs to be in all supplier engagements, including selection, contract negotiations, and performance management, beyond only engaging with key suppliers.

McKinsey believes that three approaches can help companies make their supply chains more sustainable:

• Identifying critical sustainability issues across the whole supply chain and addressing them
• Linking the company's supply chain sustainability goals to the global sustainability agenda i.e. the UN Sustainable Development Goals 2030.
• Helping their suppliers to manage their environmental and social impact which in turn provides a basis for strong growth.
  
  

6. Sustainability data and procurement analytics

Using data and analytic techniques, procurement teams are employing new approaches to look at the sustainability of their products and services.

With available sustainability data and analytical tools, it is possible to establish CSR performance development programs and carbon footprinting on category, supplier, and product levels.

In order to be timely and accurate, these analyses require reliable data sources (internal and external), automated data management, and skilled expertise in combining those for meaningful insights.