Sustainable Contracts — Embracing Sustainability in Procurement
Sustainable contracts allow companies to oblige their suppliers to practice sustainable and ethical practices once they sign them. However, what is it?
In this article, we will discuss what sustainable contracts are. We will tell you its importance for you to achieve sustainability. Additionally, our founder will share his experience to give you some tips on managing contracts.
Once you are finished reading this article, you will have a deeper insight into what sustainable contracts are. Additionally, you will be able to manage the contracts well by using the tips that we shared with you.
What Are Sustainable Contracts?
In procurement, contracts are documents to procure the needed services or products. It is an agreement where the buyer and supplier bind themselves to manage a project.
Using a procurement contract will make the supplier give the needed materials and services based on what you agreed upon in terms of payment, quality, quantity, and payment.
Thus, when you integrate sustainability in your procurement contracts, it adds economic, social, and environmental aspects to the negotiation to ensure that all the processes are inclined with sustainability.
Furthermore, sustainable contracts allow companies to oblige their suppliers in following their sustainability standards once they sign them.
What is Its Importance?
Sustainable contracts are important because they help to promote environmental and social responsibility and ensure that resources are used efficiently.
Additionally, sustainable contracts can help reduce waste. For example, a company may put in the contract that they require a certain percentage of waste to be recycled, or that waste be disposed of responsibly.
It can promote social responsibility by requiring suppliers to follow certain labor and ethical standards to support local communities and to ensure that the employees of the supplier have a safe working environment.
Furthermore, it is an important tool to promote responsible and ethical practices within the procurement process.
Tips on Managing Contracts by The Founder of Procurement Tactics
The contracting phase is the final opportunity for you to achieve sustainable procurement results together with your suppliers. But just because the negotiation is ending does not mean that you will be complacent.
Managing contracts is often perceived as boring because it comes directly after the most exciting part of the procurement process which is the negotiation phase.
Now, it is time to put all your agreements and deals into paper. Due to the fact that it is an integral part of the sustainable procurement process, the contracting phase should be done efficiently.
I am going to help you by telling you how I did this in my time as a procurement manager.
The first step after the deal is developing the contract. Once I was finished with planning and scoping the content of the contracts, I developed them. This is where details of the contracts are written and discussed further.
Next is the negotiation and signing of the contract. Once I finished developing and planning out their contracts, it was time for more negotiations about how to put the deal on paper and later, the signing of the contract.
Once again, I generally had to come together for one last negotiation for the details of the contract. If there are details that need to be ironed out, these were discussed thoroughly.
I want to share a personal example of how I speeded up the contract phase after I came to a deal with a supplier. When I came to a final agreement, I directly produced the first draft agreement via email. Not the hour after closing the deal, but directly after coming to an agreement, with everybody in the room.
By doing this, I saved myself hours of discussion after closing the deal. Especially when dealing with large, 100 million-dollar suppliers, it often took me months to come from a face-to-face deal toward a signed contract.
After closing the deal, we went on to the next step which is negotiating what we agreed upon.
Save yourself time and effort in moments you have the opportunity to wrap up the made deal directly when all negotiating people are still in the same room. I did this by sharing my screen on a monitor while writing my wrap-up email. I sent that email to the supplier, which directly after sending it, confirmed it with a reply to my email.
Once I agreed to the contract, the signing stage or phase was next. It’s basically just both parties signing the contract. For traditional companies, the contracts are still based on paper.
However, give yourself time and effort in moments when you have the opportunity to wrap up the deal directly when all negotiating people are still in the same room. I did this by sharing my screen on a monitor while writing my wrap-up email. I sent that email to the supplier, which directly after sending it, confirmed it with a reply to my email.
Once I agreed to the contract, the signing stage or phase was next. It’s basically just both parties signing the contract. For traditional companies, the contracts are still based on paper. However, modern procurement teams are using automated procurement platforms or software to take care of the contracting phase. Therefore, all contracts are saved on the database and are kept there for safekeeping.
Once the contract has been awarded, this is the stage where the sustainable procurement process cycle restarts to RFl and RFQ again, especially if you have closed short-term contracts. Depending on the length of your deals, there is also always the end of the contracts to observe.
Normally, most automated procurement systems come with a feature where the program itself will check for every contract used during the procurement process.
Once all contacts are collated, the program will give an alert regarding an incoming end-of-a-contract opportunity. If you have not automated this, please make sure to create your own file to keep track!
Furthermore, your sustainable procurement goals may change. Thus, you must incorporate all your goals in all new negotiations with suppliers. This will allow them to know what are your expectations and what sustainability requirements they need to meet for them to be awarded the contract.
Be a Sustainable Procurement Expert
Do you want to learn more about sustainability? Then try our Sustainable Procurement Course! Our course will teach you everything that you need to learn about sustainability and strategies that you can use in your procurement processes. So what are you waiting for? Enroll now and be a sustainable procurement expert!
+ What are procurement contracts?
These are agreements where the buyer and supplier bind themselves to manage a project.
+ What are sustainable contracts?
These are binding agreements that add economic, social, and environmental aspects to the negotiation to ensure that all the processes are inclined with sustainability.
+ Why is it important to have sustainable contracts?
It is important as it helps to promote environmental and social responsibility and ensure that resources are used efficiently.
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