In the wake of the COVID-19 pandemic and mass shortages of basic goods like toilet paper, the world is realizing the pivotal role that procurement plays in the everyday running of businesses and global commerce. Without successful procurement processes, there would not be on-demand access to the goods and services we have come to rely on at both a commercial and consumer level.
In recent years, as consumer demand has increased, so have the consequences. As a result, procurement processes—or the introduction of more sustainable ones—could be thrust into the spotlight as the savior of the current environmental, social, and corporate governance (ESG) crises that we face today.
If companies align their procurement processes with sustainable norms and values, they’ll begin to minimize the environmental and social impact of the purchases they make. This is especially important as activists, consumers, and governments increasingly scrutinize the organizations that are ESG-noncompliant. Where possible, companies must empower and resource their procurement departments to more sustainably source goods and services to match the current situation.
Here are some steps to simplify sustainability and set procurement teams up for success:
Align Leadership and Sustainability Teams
Sustainability goals cannot be achieved in a vacuum. Instead, it takes both internal collaboration and external support. This can be a challenge for procurement leaders and teams, but larger organizations tend to have immense purchasing power and can drive trends in more sustainable procurement practices. This isn’t afforded to small and medium-sized businesses—but as a collective they can also influence the values and best practices of companies that make up the globally interconnected supply chain.
All companies should align their goals internally before approaching suppliers and third-party service providers along their supply chain with new sustainability initiatives. First and foremost, you must align leadership with current sustainable procurement needs.
If you can successfully gain the support of leadership within the company, their newfound interest and belief in sustainable practices will likely trickle down throughout the company infrastructure, influencing employees at all levels of the operation. Alternatively, sustainable practices can be driven bottom-up through employee pressure or externally by consumers, investors, and NGOs.
Sustainability will be a journey for any company that decides to get on board with initiatives of this scale. The culture and business operations within your company may need to transform to reflect the sustainable future that the global economy is striving towards.
Invest in the Right Tools for the Job
When it comes to getting your company on board with the sustainable practices of the day, you’re going to need data. Without data, it is difficult to maintain market positions, innovate new solutions, or develop smarter systems. Gathering supplier sustainability data for your procurement teams doesn’t have to be as complicated or confusing as it sounds—there are a lot of tools that can help simplify the process.
According to Gartner’s 2021 Market Guide for Sustainability Applications, “vendors in this market have different philosophies when it comes to helping organizations define what supplier sustainability means. Some vendors take a prescriptive approach and have established a list of parameters they use to assess the supply base.”
Whether prescriptive or dynamic, companies need to ensure that their procurement teams have access to tools that give them the actionable data they need to make decisions regarding supplier sustainability. Various technologies can free their time to manage other competing priorities and allow them to make more informed choices as well
Furthermore, when it comes to simplifying procurement processes, the best supplier sustainability tech tools integrate with existing systems seamlessly so that the company’s procurement team can see a snapshot of sustainability data alongside their traditional performance factors like price, volume, quality, or others.
This level of visibility allows companies to:
- Include sustainability performance in supplier selection and performance reviews.
- Empower procurement teams to easily include supplier assessment as a contractual condition ahead of partnering with third parties.
- Provide standardized, user-friendly supplier scorecards.
- Integrate supplier score-carding into RFP evaluation and awarding rules.
- Provide the company with third-party risk data for immediate insights while also letting procurement teams send assessments directly to suppliers for more granular data collection.
- Provide valuable feedback to suppliers, so they know where they stand.
- Easily collaborate and communicate with suppliers on how they can improve, manage corrective actions, etc.
Accessible Insights For Suppliers
Once your procurement team has invested in the necessary tools to achieve your supplier sustainability goals, it is time to establish best practices and roll them out across the entire value chain. Ensuring that suppliers, manufacturers, and other third-party participants are ESG-compliant and sustainability-oriented won’t be the easiest task; relationships are a two-way street and suppliers must see value in the process as well.
To make the effort of data collection valuable for suppliers, ensure that they can access any insights they might need to assist them in smoothly adopting new practices. This will be beneficial for your business and potentially also profitable for the supplier.
Sharing back results and their scorecards is a great way to do this. Again, this ties to the importance of having the right tech tools to measure your suppliers’ sustainability performance and why the tool you choose should pride itself on adding supplier value.
The Four Key Benefits
Sustainable procurement is arguably one of the most important agendas of the day. The methods corporations employ to facilitate growing consumer demand are damaging the environment and ecosystems in the world around us—and a great deal of that damage comes from the global supply chain network that modern societies depend on.
Companies should consider implementing social, economic, and environmental factors alongside standard price and quality considerations when developing procurement processes and procedures. According to CIPS, there are four key areas where sustainable procurement can lead to corporate benefits:
Cost Reduction
- Having sustainable procurement partners should prevent cost increases through the transfer of ownership and the consumption of energy costs. Any cost savings can be reinvested into the organization for further development of operations.
Revenue Growth
- The majority of western consumers appear to place value in sustainably sourced goods and services and the companies that strive towards sustainable norms and values. They’re more likely to purchase your product or service over a less sustainable competitor.
Future Proofing
- By developing sustainable procurement practices, companies can mitigate scarcity in supply and change in ESG factors in the future.
Risk & Reputation
- The reputation of your company is always at stake. If one of your suppliers is doing something ESG-noncompliant, like practicing child labor or negligently burning fossil fuels, it could potentially damage your company’s reputation to the wider world.
As corporations take on their role as stewards of the world, it’s time to get on board with sustainable procurement practices and ESG compliance. Give procurement a seat at the table, and you will see the excellent results that follow. Realizing that the on-demand access that consumers require is more than just buying and selling is crucial to a sustainable future.
