Sustainable Procurement: What it Is and Why it Matters

environment, sustainability

Most Businesses, large and small, have a greater impact on their community than they realize through the procurement decisions they make on a daily basis. Organisations have a great responsibility to recognise how they indirectly impact their network and partners with the social and environmental ramifications within the supply chain being highlighted in recent years. Emphasizing sustainable procurement and developing programs that support such practices benefit the company as well as the wider community.

What is Sustainable Procurement?

Sustainable procurement takes into consideration the social, economic and environmental factors, while not compromising on price and quality, in the organisation’s purchasing processes and decisions.

More than just meeting compliance programs and maintaining corporate social responsibility, effective sustainable procurement strategies ensure that organisations are not only capitalizing on benefits, but reducing negative repercussions as much as possible. For companies that are either about to establish their first sustainable initiative or planning to expand an existing one,  incorporating their supply chain processes is integral to achieving sustainability goals.

The Pillars of Sustainable Procurement

1. Environmental – This deals with minimising the impact on the environment from purchasing practices. Compliance with local and/or national environmental laws concerning CO2 emissions, maintainance of  minimal carbon footprint, as well as the elimination of hazardous materials and waste are just some examples.

2. Social – Considering the social impacts of purchasing decisions such as ensuring worker health and safety, upholding employee rights and fair compensation, as well as ensuring consumer safety and child labour prevention, to name a few.

3. Economic – The cost of shifting to sustainable products and services also needs to be justified. Some investments might cost the company in the beginning but provide significant returns or cost of ownership reductions over time.

Benefits of Sustainable Procurement

With goals such as improving the quality of the environment, communities and the economy it can be easy to see the benefit companies will reap in the process.

  • Risk and reputation – Now more than ever, businesses are expected to be responsible and have a legal and moral obligation to ensure that the way they conduct their operations is above reproach. Consumers and other entities will have no problems doing business with companies that take steps toward reducing or eliminating injury to people or damage to the environment.
  • Cost reduction – An effective sustainable procurement strategy will ensure cost reductions for a business in terms of improved supply chain efficiency, lower energy consumption and minimal waste, among many others. The savings can be used to make further changes to the company to improve productivity and performance and can result in increased profits over time.
  • Revenue growth – A strong corporate social and environmental responsibility program builds brand value and gives a competitive advantage. The Global Sustainability Study 2021, conducted by Simon-Kucher & Partners, has revealed that consumers are more likely to trust firms that have a reputation for sustainability, which can lead to more business. Of over 10,000 respondents across 17 countries, 85 percent have stated that they have shifted toward being more sustainable over the past five years.
  • Future-proofing – Organisations that have established and continued to strengthen sustainable procurement policies are more likely to future-proof themselves against supply scarcity, price volatility as well as social, economic and environmental changes.

Establishing and implementing a sustainable procurement program can be challenging, but the benefits cannot be overstated. The advantages presented by such policies have motivated numerous firms to ensure sustainability within their supply chain to impressive results.

This is because consumers and other businesses choose entities that have ingrained sustainability into their value chain, which is substantiated by a 2020 report showing that companies with better sustainable investment profiles consistently outperform those without. The continued growth in sustainably invested assets worldwide is evidence that it works and that it is here to stay.

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