October 18, 2022 | Procurement Software
In today’s uncertain business landscape, sustainable practices are not a choice; they are a business imperative. In fact, sustainability is a strategic choice that transcends both economic imperatives and the requirements of the legislation.
Sustainable procurement ties together sustainable corporate behavior and procurement policies. Sustainable procurement guidelines provide a framework to achieve sustainability, profitability, as well as stakeholder expectation.
Sustainable procurement (also called green procurement) aligns corporate social responsibility (CSR) principles with the business's procurement practices. It considers the impact of the business's procurement practices on the environment, economy, and society as well as its impact on price and quality.
Sustainable procurement considers waste disposal and maintenance over the entire life of goods and services. It, therefore, helps create a circular economy that reduces negative social, economic, and environmental impacts.
A business may ask - why is sustainable procurement important? Here are a few benefits of adopting sustainable procurement processes:
When a business partners with vendors and suppliers, it creates risk in the business's operations. The supplier or vendor may be causing pollution, which can adversely impact the business's brand. It may also have an economic impact by causing supply chain disruptions due to non-compliance with environmental regulations. Sustainable procurement ensures that the business only partners with suppliers who understand corporate social responsibility and comply with environmental regulations.
Sustainable procurement reduces the overall cost by bringing down energy costs, reducing over-specification, lowering consumption, and reducing environmental and social compliance costs.
Sustainable procurement focuses on social and environmental impact. It promotes innovation to find sustainable products and services and target income from recycling programs. All of this contributes to revenue growth for the business.
The steps involved in the sustainable procurement process are:
Identify the country-wise supply chain standards and regulations that affect your business and fix accountability within the business for compliance.
Assess suppliers against the business's corporate strategy and compliance requirements. Also, consider legal, risk, sustainability, and information security compliance requirements. The assessment should be based on consistent and global standards - for example, GRI, UNGC, etc.
Inform concerned business units and suppliers of non-compliance, integrate the performance metrics in supplier selection and ensure periodic review processes.
Create a framework for continuous improvement with suppliers. Future assessments should be linked to review. For example, high risk or poor performance should lead to a more intensive audit.
Also Read: Building Blocks of Sustainable Procurement
Sustainable Procurement Standards
The standard - ISO 20400:2017 lays down the standards for organizations, irrespective of industry or size, for integrating sustainability within procurement, as described in ISO 26000. It is meant to guide stakeholders involved in or affected by procurement decisions and processes.
The factors that go into making a procurement system better and more sustainable include:
End-to-end transparency in the procurement process is key to sustainability. All the stakeholders in the process should know their roles and responsibilities. Transparency fosters trust among the stakeholders. It demonstrates to everybody that the practices are fair and are applicable to everyone. It also allows any disagreements and issues to be raised and resolved.
Businesses, vendors, and suppliers must work together with aligned business goals. This is possible only when everyone knows their exact roles and responsibilities. Engaging with stakeholders makes them feel valued, and at the same time, they can be held accountable when agreed objectives are not met. Stakeholders understand the impact of delays or disruptions and can initiate corrective action - making the process sustainable.
Sustainable procurement is also vital to implement standards across the organization. Stakeholders must know and adhere to the standards during the contract duration. To comply with the standards, periodic evaluations must be conducted for the goods and services delivered. Periodic reviews and corrective measures also help bring about improvements in the system.
As a business practice, sustainable procurement discards the traditional one-dimensional, economics-focused approach to procurement. It adopts a three-dimensional - economic, social, and environmental - approach. However, this does not mean it adds cost or time to the process.
Businesses must adopt sustainable procurement best practices to optimize procurement processes and enhance cost savings. Sustainable procurement moves the focus away from competing against prices to a concern for the planet and future generations.
The common factors for sustainable procurement are transparency, accountability, and standards.
Sustainable procurement helps businesses protect their corporate brand value through robust risk management. It enables better identification of unreliable suppliers and helps them address weak areas in their supply chain.