Key Considerations for Sustainable Procurement

Written by Paisley Ang Siew Boay, DPSM

by Paisley Ang Siew Boay, DPSM

Sustainable procurement has been introduced to a public and private organization for decades and it has now become a “must have” key element to integrate in business strategy for company competitive advantages and sustainable development. The survey conducted by Eco Vadis and HEC about the results attribute to Sustainable Procurement program showed 76% of the procurement leader acknowledged that adopting sustainable procurement contribute to improved brand reputation. Barometer author cited “consumers are largely driving corporate demand for sustainability and quality produced products”. Sustainable procurement undoubtedly gives a positive impact on company revenue growth and protecting brand reputation in the long run.

Sustainable Development

Sustainable development is in the news every day as the world copes with climate change, biodiversity loss, and conflict and resource scarcity. Sustainability is the foundation for today’s leading global framework for international cooperation – the 2030 Agenda for Sustainable Development and it is Sustainable Development Goals (SDGs). Each of the 17 SDGs has specific targets to be achieved by 2030. The goals and targets are universal, meaning they apply to all countries around the world, not just poor countries. Reaching the goals requires action on all fronts – governments, businesses, civil society and people everywhere all have a role to play.

Procurement Strategy Development

The procurement process can be complicated one. Strategic procurement is an organization-wide process. It requires input from all departments and functional areas for an organization. Organizations should set up a strategic procurement team. This team sets the overall direction for procurement, aligned with the business strategy. The team will then use the data from the strategic procurement process to develop and implement a strategic procurement plan. The diagram shows the 7 steps that lead to a successful procurement process.

Sustainable Procurement Process

The sustainable procurement process does not differ greatly from the traditional procurement process. It incorporates an initial stage to determine the effect of the procurement action in terms of a desired outcome that is both environmentally and socially benign, as well as an additional stage at the end of the process to monitor and assess, and if need be adjust the net effect of the desired outcome. Other sustainable interventions are incorporated throughout the various stages of the procurement process.

Importance of Sustainable Procurement Practices

Sustainability is an important part of modern society. It is all about making the most of the resources we have, and using those resources in responsible ways. That means procurement has a big role to play.As a nation, we are on track to deliver on our sustainability promises, to reduce out environmental impact while continuing on that growth towards developed nation status. However, sustainability is not simply about carbon emissions, it is about every element of our work, life and industry. Moreover, it is increasingly important for a successful business.

Sustainable procurement practices in business vary significantly according to the latest research. Lack of awareness is cited as one of the major challenges, both in terms of processes and of outcomes.

The Power of Procurement

By developing a system of guidance for best practices, measurement and recognition that can be applied to a wide array of organizations, buyers can be strategic in their sustainable purchases.By zeroing in on each of the purchasing categories that contribute most to greenhouse gas emissions, purchasers can become strategic in how their purchases affect the environment. In addition, what we are trying to do is reduce the environmental impact of organizations through the way people buy.

Advertisements
Supply Chain Ads

The purchasing power of procurement professionals has the potential to make sweeping changes in greening supply chains. According to the Sustainable Purchasing Leadership Council, reducing food waste in higher education is one of the major ways sustainable purchasing can help improve the planet.Waste seems the unlikely focus of a purchasing group, but as Pearson sees it, the goal of his organization is to “buy less and buy better.”

Three Principles of Sustainability

Sustainability is most often defined as meeting the needs of the present without compromising the ability of future generations to meet theirs. It has three main pillars: Economic, Environmental, and Social.The diagram below illustrates the three pillars that are informally referred to as people, planet and profits.

Corporate sustainability has become a buzzword in companies big and small. Corporate sustainability in investment can fall under the terms ESG (environment, social, and governance) or SRI(socially responsible investment). Wal-Mart Stores, McDonald’s Corporation, and many of the true corporate giants have named sustainability as a key priority moving forward. Corporate sustainability is a growing concern among investors who seek not only economic profit but also social good. With the growth of socially responsible funds and ETFs, corporate sustainability may ultimately add a competitive edge to a company’s bottom line.

ISO 20400 Sustainable Procurement Model

The model illustrates a procurement process flow, integrating sustainability into the procurement process. Strategic level to assess and analyses sustainability risks, opportunities, business needs and market trend in order to determine strategy. At the tactical level, the procurement team should clearly understand the fundamental of sustainability; implement it in each of the purchasing processes.

Supplier performance should be evaluated with sustainability elements inside and benchmark with predetermined Key Performance Indicator (KPIs). It is a good practice for an organization to conduct periodic audits of supplier throughout the contract life cycle.Supplier development is one of the strategies to build a close relationship with the supplier. Suppliers are invited bi-annually to provide feedback to promote understanding, conducting training course to educate them the latest best practice, knowledge and even supply them with advanced technology to ease their work.

Conclusion

Balancing sustainability approach with a business goal is not easy work, though it is an approach that is under constant development. The organization requires dedicated effort for keeping up with the new phase of sustainability procurement over a prolonged period. Adopting digital procurement to analyse complex compilation of data, increase visibility and transparency in procurement activities to automate workload. Innovating new circular products aim at minimizing waste and making use of natural resources for the organization to reduce dependence on the importation of raw materials. The investment in product innovation and digital technology can optimize sustainability procurement actualization, manage risks and uphold a corporate image.


References

Andrew Beattie. (2019). “3 Principles of Sustainability”. Retrieved from Investopedia: https://www.investopedia.com/articles/investing/100515/three-pillars-corporate-sustainability.asp, accessed 17/09/2019.

Chris Blood-Rojas. (2017). “The 7 steps of a Strategic Procurement Process”. Retrieved from FITT: https://www.tradeready.ca/2017/fittskills-refresher/7-steps-of-a-strategic-procurement-process/, accessed 17/09/2019.

Mark Halle. (2018/2019). “Sustainable Development”. Retrieved from IISD: https://www.iisd.org/topic/sustainable-development, accessed 17/09/2019.

Mickie Foong Mee Keat, PDPM. (2019). “Key Considerations for Sustainable Procurement”. Retrieved from SIPMM: https://sipmm.edu.sg/key-considerations-sustainable-procurement/, accessed 17/09/2019.

Procure here. (2018). “The Importance of Sustainable Procurement Practice”. Retrieved from Procure here: https://www.procurehere.com/the-importance-of-sustainable-procurement-practice/, accessed 17/09/2019.

Support The Guardian. (2013). “The Power of Procurement”. Retrieved from The Guardian: https://www.theguardian.com/sustainable-business/blog/procurement-professionals-sustainable-supply-chain, accessed 17/09/2019.

UN Procurement Practitioner’s Handbook. (2012). “Sustainable Procurement Process”. Retrieved from UNGM: https://www.ungm.org/Areas/Public/pph/ch04s05.html, accessed 17/09/2019.

Winky Lim, ADPMM. (2017). “Ensuring Sustainable Practices in Procurement for Effective Supply Management”. Retrieved from SIPMM: https://sipmm.edu.sg/ensuring-sustainable-practices-in-procurement-for-effectivesupply-management/, accessed 17/09/2019.

About the Author: Paisley Ang has extensive years of experience in the field of Purchasing and Procurement across diverse sectors that include manufacturing and trading sector, specifically in the Marine Industry. Paisley is a member of the Singapore Institute of Purchasing and Material Management (SIPMM). She completed the Diploma in Procurement and Supply Management (DPSM) on September 2019 at SIPMM Institute.

Top