With global warming in our backyard, sustainability is trending now and everywhere, a business sector not being an exception. Recent studies show that consumers command accountability and prefer eco-friendly and socially responsible products over less sustainable goods and services. Sustainability, being one of the more recent trends, its definition is not always clear and the standard ways to achieve it are yet to be tested and confirmed. One of the most evident factors defining business as sustainable is its sustainable procurement strategy.
Organizations purchase considerable amounts of goods and services, and the way they use that buying power has the influence on company’s image, performance, employee’s well-being, let alone environment and society. Evidently, procurement is central to the delivery of the organization’s corporate commitments on sustainability.
What is Sustainable Procurement?
An independent International Organization for Standardization has issued a new document – ISO20400:2017 Standard for Sustainable Procurement, to provide guidance for organizations looking to integrate sustainability into their procurement processes. The document defines Sustainable Procurement as “the process of making purchasing decisions that meet an organization’s needs for goods and services in a way that benefits not only the organization but society as a whole while minimizing its impact on the environment.
This is achieved by ensuring that the working conditions of its suppliers’ employees are decent, the products or services purchased are sustainable, where possible, and that socio-economic issues, such as inequality and poverty, are addressed.”
A global organization of Chartered Institute of Procurement and Supply adds that “Sustainable Procurement should consider the environmental, social and economic consequences of design; non-renewable material use; manufacture and production methods; logistics; service delivery; use; operation; maintenance; reuse; recycling options; disposal; and suppliers’ capabilities to address these consequences throughout the supply chain.”
Five Operational Benefits of Sustainable Procurement
When it comes to sustainability, not only the consumers but also the business organizations themselves share the benefits.
There are five business operations benefits of implementing sustainable procurement strategy in an organization:
1. Customer acquisition and new sales opportunities
According to Unilever study, at least a third of the polled consumers prefer purchasing products that are good for the environment and the society. By offering sustainably sourced products, the businesses not only meet their customer’s requirements but also secure a growing base of environmentally and socially conscious consumers. Moreover, offering eco-friendly products allows companies command premium prices in the market. This is especially evident in grocery and garment retailing. Likewise, failing to meet the demand for more sustainable products might not only decrease sales but also damages company’s corporate image in the market.
2. Cost competitiveness
A false choice is often assumed between value for money and sustainability. Company’s Purchasers often make decisions based on upfront costs, not considering the full price of the product. Sustainable procurement considers the whole life cycle costing, which includes durability, reusability, recyclability and waste disposal. Upgrading the quality and improving processes companies may have considerable cost savings in longer life-cycles, cheaper scrapping and waste management. Ideally, sustainable procurement should challenge the need to spend and encourage re-use and recycling, as well as purchasing service, rather than the product. Most sustainable purchasing is no purchasing at all.
3. Risk Reduction.
Sustainable procurement minimizes business risks by securing the supply of goods and services in the backdrop of increasing environmental regulations. It also prevents the disruption of the supply chain by recalls or supplier failure.
Demand for sustainable products and services stimulates market innovation. Going green attracts research and investments to find better and more cost-effective methods to source and utilize raw materials.
5. Employee satisfaction and productivity
Deloitte 2014 Core Beliefs and Culture Study shows a strong evidence that company’s cultural focus on purpose rather than profit sustains higher levels of employee’s trust in company’s business and future. A sense of purpose inspires confidence among employees, which arguably translates into attracting and retaining quality workers and reduced turnover rates.
Though implementing sustainable procurement strategy is a valid starting point, no policy can be developed and upheld in isolation. It needs to be promoted and upheld by key stakeholders and decision makers within organizations. Sustainable procurement strategy and company’s overall policy must be in a harmonious alignment. It also must be integrated into main governance and ownership structures to avoid any contradictions and tensions among different stakeholders. The overall company’s policy needs to convey a strong and clear message to customers, investors and, in this case, most importantly – suppliers and contractors, about what the company expects from them – sustainability.
https://www.cips.org/Documents/Resources/Knowledge%20Summary/Sustainable% 20Procurement.pdf http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/69 417/pb11710-procuring-the-future-060607.pdf