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Looking Beyond Direct Suppliers: Why Sustainability Matters in Your Company’s Indirect Spend

by | Jul 20, 2023 | Blog, Industry Trends, Supply Chain Management

Indirect Spend Sustainability focuses on reducing the environmental, social, and economic impact of a company’s indirect spend activities, including logistics, office supplies, utilities, facilities management, IT, professional services, travel, and marketing. Until recently, companies focused their supply chain sustainability efforts almost exclusively on direct spend suppliers, under the assumption that there is more reputational risk and opportunities in materials that end up in final products.

However, companies are beginning to recognize the materiality of indirect spend sustainability. This includes both service-oriented firms and product companies that are starting to look beyond their direct spend supply chain. Upcoming EU legislation will require companies to cover their entire supply chain, not just product production, further emphasizing the importance of indirect spend sustainability.

Why should you be concerned about Indirect Spend?

Consider the effect of poor labor practices–reputational hazards from these practices are probably similar across direct and indirect spend. Does the consumer care less if there is forced labor in your office cleaning vendor versus in your first manufacturing supplier’s factory? Probably not – and so the reputational hazards need to be addressed. That is one reason why companies are starting to place focus on indirect spend suppliers. And, as companies look to reduce their Scope 3 carbon emissions, including logistics and other key categories are becoming a critical component of the strategy.

By focusing on Indirect Spend Sustainability, companies can reduce their overall environmental footprint, mitigate risks, enhance their brand reputation, and demonstrate commitment to corporate social responsibility. This, in turn, can lead to cost savings, better stakeholder relations, and improved long-term business performance. Indirect spend suppliers often have different employment structures, such as self-employed drivers or waste pickers. As a result, assessing indirect spend sustainability requires asking different questions and utilizing tools specifically designed for this purpose.

Want to learn more about Indirect Spend sustainability and what your organization needs to know? SupplyShift’s Indirect Spend Alliance is a growing coalition of over 15 leading global companies that are collaborating to assess and address sustainability in indirect spend. Or, download SupplyShift’s new free eBook The Sustainable Supply Chain: Rethinking Indirect Spend for a Greener Tomorrow to learn more about the key concerns and strategies for addressing Indirect Spend sustainability in your organization.

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