Supplier engagement and creating a “delivery roadmap” are among the key actions businesses must take for successful sustainable procurement.
The Hackett Group, following research and surveys of procurement executives in the US and Europe, said sustainability appeared in procurement’s top 10 issues for the first time this year.
Procurement is being asked to support three categories of corporate sustainability: economic development, social well-being, and environmental protection, said Hackett.
By 2023, 92% of enterprises expect to have sustainable procurement programmes in each of these categories.
However, only 40% of sustainable procurement strategies are clearly aligned with an enterprise’s ESG strategy. A third of procurement organisations do not have a formal sustainable procurement programme.
Compliance was the top reason companies developed sustainable procurement strategies, cited by 74%, followed by reduced risk exposure (67%), emission savings (56%) and brand value (55%).
Hackett estimated that top performing sustainable procurement programmes generated more than three times the spend cost reduction than typical companies.
“Meeting environmental, social and corporate governance compliance objectives has become a critical element of procurement’s value proposition,” Hackett said.
“On the other hand, organisations that want to do more than just meet internal KPIs can find themselves in challenging and uncertain territory. Understanding best practices to support long-term sustainability goals is key.”
The five critical enablers for sustainable procurement are:
1. Define what sustainability means, who is the audience, targets/goals, and public commitments. The three main pillars of sustainable development are environmental protection, social equality and governance.
2. Formulate a programme strategy, delivery roadmap, and enabling resources. This includes developing and appointing the sustainability organisation, setting governance and defining roles and responsibilities.
3. Drive a supplier engagement strategy with focused interventions aligned to identified areas of greatest impact. This includes buying the broader procurement team into the need to incorporate sustainability within requirements gathering, supplier discovery, sourcing and contracting, and supplier management processes
4. Embed sustainability within sourcing and supplier management processes and activities. This could include using contract clauses, segmentation of supplier base and using technology to score sustainability.
5. Measure and report metrics including carbon emissions, waste volumes, recycling and water consumption.
Hackett identified a total of almost 30 best practices for companies seeking to improve sustainable procurement, including:
• Establishing a mutually agreed buyer-supplier code with obligations for both parties.
• Defining accountability of sustainable procurement activities with clear roles and responsibilities.
• Providing sustainable procurement training to procurement staff.
• Incorporating sustainability-related metrics into supplier scorecards.
• Conducting cost implication analysis of major sustainability-related changes.
• Agreeing on sustainability policies and guidelines during supplier pre-qualification.
• Creating a strategy to attract and manage sustainability-driven innovation from suppliers.
• Making use of online collaborative platforms to access, compare and share performance data.
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