Sustainable Procurement is a multiplier, which shapes the value creation of numerous suppliers as well as the own business.
Challenge – change of the procurement function
Procurement developed over the last decades from an operative into a strategic function. Modern procurement proactively contributes to realizing the corporate strategy, drives transformation and innovation, cross-functionally realizes competitive advantages in the value chain and thus, is more important than ever before for the overall company success. Current megatrends in procurement include, besides digitalization, data analytics and co-innovation, also the topic of sustainability. About 80% of companies’ CO2 emissions are caused in context of procurement (incl. packaging and logistics). The rising importance of sustainability in purchasing is not only demanded by customers and consumers, also businesses themselves notice the business case for sustainable procurement.
Solution – sustainable procurement as multiplier
Sustainable procurement is “procurement that has the most positive environmental, social and economic impacts possible over the entire life cycle“ (ISO 20400). Sustainable procurement is a multiplier, which shapes the value creation of numerous suppliers as well as the own business, and thus provides considerable value-add for environment and society. Procurement therefore has the opportunity to position itself strategically on board level, and to pave the path for sustainable and long-term business success.
Approach – steps for implementing sustainable procurement
SustainNet Consulting partners with you in formulating your sustainable procurement strategy and implementing it in the different stages of the purchasing process. Further information with regard to the business case for sustainable procurement, sustainable supplier management and sustainable digitalization in procurement can also be found in the SustainNet Consulting blog.
Analyzing the Status Quo
This phase is aimed at getting an overview about the company’s procurement process, the structure and stakeholders in the supply chain, the ecosocial impacts and risks as well as relevant guidelines. In addition, it is important to understand the company’s general status and strategic course regarding sustainability. It is recommended to review and discuss available information and parameters such as sustainability reportings and relevant standards in collaboration with further business functions (e.g. Corporate Social Responsibility – CSR).
Formulating the Strategy
The first step in formulating a sustainable procurement strategy is to define the scope and goals. With regard to the scope, it should be determined which product categories and which organizational units will be covered by the sustainable procurement strategy. The goals, which are subject to be realized through sustainable procurement, need to be defined and underpinned by key performance indicators (KPIs). Within the procurement strategy, the company’s positioning and aspiration regarding sustainable purchasing is being formulated. The sustainable procurement strategy thereby should be in line with the corporate sustainability strategy. Its formulation is an iterative process during the gain of experience.
In order to realize the sustainable procurement strategy, concrete measures need to be defined. The plan of actions should include a description of the scope, the actions and related goals, the responsibilities, KPIs, and the planned timelines. Measures for sustainable procurement can be anchored at various stages of the procurement process, for example by improving the demand planning in strategic procurement, by considering sustainability criteria for selecting, awarding and evaluating suppliers in tactical procurement, and by sourcing from suppliers with good sustainability rating in operative procurement. Besides the actual procurement activities, additional measures should be considered, for example the execution of workshops and trainings (internal / with suppliers), the implementation of working groups and committees, the development of incentives, the integration of sustainable procurement in job profiles, as well as the regular communication to internal and external stakeholders.
Regular updates, reviews and audits are essential for ensuring progress in implementing the actions and for supporting the responsible parties to realize sustainable procurement. These kind of supporting measures include, for example, supplier trainings and qualifications as well as corrective action support in collaboration with suppliers in case of detected deficiencies.
Measuring & Reporting
Measuring and reporting the target achievement serves to document and communicate the progress regarding sustainable procurement. This ensures transparency and therefore trust and credibility by the stakeholders. Additionally, problems can be identified quickly and respective solutions can be developed. The key measures and related goals should be included in the company’s sustainability reporting. Furthermore, the processes, systems, standards and structures of sustainable procurement should be documented in the procurement policy.