The benefits of sustainable procurement are clear, but the key to choosing the right measure is doing your research, says Lazar Armianov. Here’s what to look for…
Sustainability is no longer a tick-the-box exercise: companies are realising when sustainable practices permeate the business and supply chain, it can lead to real, tangible business value. The World Economic Forum asserts value creation from sustainable procurement practices can raise revenue by 5-20%, reduce supply chain costs by 9-16% and increase brand value by 15-30%.
Responsible practices lower operational risk, often cost less in the long-run and meet end-market expectations for sustainably sourced products and services. The business case for better vetting of potential suppliers on sustainability criteria is clear – but that doesn’t mean the process is easy.
When evaluating suppliers’ sustainability performance, factors to consider include energy usage, waste disposal, packaging materials, employee working conditions, ethical behaviour and human rights.
Whether businesses decide to evaluate sustainability through next-generation ratings, legacy self-assessment questionnaires (SAQs), or other forms of assessment, measuring supplier sustainability is a priority.
There are also long-term societal benefits – such as the profound impact on the environment and the effect on brand reputation. According to a CDP 2019 Global Supply Chain report, a company’s supply chain contains on average 5.5 times as many greenhouse gas emissions as its own operations. This alone has driven many companies to encourage and collaborate on better, responsible practices with their suppliers and create shared values.
For example, coatings and paint experts at AkzoNobel teamed up with tyre-maker Black Bear to produce a more sustainable source of carbon black, using old tyres. And Microsoft recently invested more than $1m with one of its manufacturing suppliers to reduce energy consumption.
Legacy methods – such as supplier SAQs or collecting data from suppliers through greenhouse gas reporting programmes (GHGRP), certificates or corporate social responsibility (CSR) company-generated reports – identify risks of non-compliance, but rely on honest feedback from suppliers and don’t offer actionable insight on where suppliers can improve. One alternative is ratings, where a supplier’s overall sustainability is evaluated to identify risks beyond compliance issues before offering feedback and results.
When choosing a ratings programme, common questions include:
1. How do I go about finding the right ratings programme?
Start by examining the work by the Sustainable Purchasing Leadership Council’s (SPLC) Rate the Raters report. There are also collaborative initiatives in industries such as pharma (Responsible Health Initiative), chemicals (Together for Sustainability), and rail transport’s Railsponsible, which aim to raise sustainability standards.
2. What should I look for in a ratings programme?
A ratings method should cover and be tailored to each industry and the geographic breadth of the supply chain. Questions should be customised to the specific business being evaluated. This means the programme takes into account relevant local laws, industry standards, regulations and more, which gives buying organisations better quality and actionable data. Also look for ratings that can be scaled and shared across the global business.
3. How do I get the most from the chosen programme?
Data needs to be analysed in order to become useful information. Ratings analysed by a team of experts offer industry benchmarks – and can help create key indicators of best practices.
For organisations to identify the best opportunities for innovation, mitigate risk, and form long-term relationships with the right partners, it’s essential to assess performance. In turn, companies can establish themselves as sustainability leaders and experience the business growth that comes with it.
Lazar Armianov is regional manager, business development – UK, Ireland & MEA, at EcoVadis