What Is Sustainable Procurement And Why Is It Important?
Customers are more conscious about their purchasing decisions than ever before. More than 80% of consumers worldwide feel strongly that companies should do more to conserve the environment, according to one survey. Another survey from IBM found that nearly 60% of consumers are willing to change their shopping habits to reduce environmental impact.
Customers are paying attention to where their goods come from, and the impact that brands have in sourcing and creating these goods. For brands seeking to meet these new expectations, sustainable procurement can help. Sustainable procurement offers a win-win to the organization and also to society and the broader economy. Here’s what sustainable procurement is all about — and why it’s so important.
What is sustainable procurement?
Sustainable procurement is defined by the United Nations Procurement Practitioner’s Handbook as the process of procurement while taking social and environmental factors into consideration, as well as financial factors.
“It involves looking beyond the traditional economic parameters and making decisions based on the whole life cost, the associated risks, measures of success, and implications for society and the environment. Making decisions in this way requires setting procurement into the broader strategic context including value for money, performance management, corporate and community priorities,” wrote the UN.
Often, we hear “sustainability” and immediately think of the environmental impact a supply chain can have. The UN’s definition, however, expands the definition of sustainable procurement to consider how the process can positively impact:
- human rights
- labor rights
- the environment
- local entrepreneurship
- women’s empowerment
- poverty eradication
Beyond the ethics of treating people and the planet with more care, there are benefits to committing to sustainable procurement practices.
Benefits of sustainable purchasing
The Sustainable Purchasing Leadership Council breaks down the impact of sustainable procurement in two ways: how it brings positive benefits, and how it reduces negative effects.
Adopting sustainable procurement practices fosters higher employee and customer satisfaction, increases brand value, and can help build positive supplier relationships. Sustainable purchasing can also lead to higher innovation, cost savings, and raise a company’s profile with investors.
Outside of the benefits to the company, the community and society at large benefit from sustainable procurement. From resource optimization to biodiversity conservation, companies can do more besides lowering their carbon footprint.
Sustainable purchasing also benefits social systems. Companies have a role to play in protecting human rights, promoting safe occupational health standards, advocating for equal opportunity, and providing training and education. Sustainable procurement provides an avenue through which companies can show their commitment to proactively helping the environment and underserved communities.
Reduce negative impacts
Likewise, sustainable procurement offers the chance to reduce some of the negative side effects of sourcing and selling goods in a globalized economy. First, cost savings: A study by EcoVadis and PwC found that companies find the most ROI through cost savings, risk reduction, brand and reputation protection, and new value creation opportunities.
In addition to reducing costs, sustainable procurement policies contribute to lowering harmful environmental and societal impacts. Sustainable procurement contributes to less greenhouse gas emissions, pollution, waste, and water consumption. It also reduces the risk of child labor, human trafficking, discrimination, and sourcing materials from conflict zones. Ultimately, sustainable procurement brings a new level of consciousness to the supply chain that impacts more than just your partners and direct customers.
How to practice sustainable procurement
There are a few steps to take to start practicing sustainable procurement at your organization.
- Provide training in sustainable procurement to your procurement team;
- Create sustainable procurement policies to help guide your procurement strategy;
- Perform regular audits to see where your organization could improve;
- Invest in a supplier diversity tool that can help you diversify your procurement;
- Join a consortium of organizations committed to sustainable procurement to work together and continuously improve.
Sustainable procurement starts by setting key performance indicators and measuring them regularly to assess if your training and policies are working. It can take some time to get right, but sustainable procurement is a win for everyone. Fairmarkit has a range of tools that can help you improve your sustainable procurement processes. For more advice and resources check out Fairmarkit’s blog, The Source.