Sustainable Procurement Requirements — The Ultimate Guide

Why Invest in a Sustainable Procurement?

1. Cost reduction

Businesses of all sizes need to save money and reduce costs as much as possible. Saving money enables them to invest more which allows them to scale and earn higher profits. 

Sustainability in procurement helps reduce the total cost of ownership through the reduction of energy costs, minimized consumption, over-specification, and environmental and social compliance cost.

2. Risk reduction

Risk is linked with all the suppliers of an organization it chooses to partner with. But, relationships with your suppliers who engage in bad practices may have a financial impact on brand value. 

Also, there is a risk associated with the economic cost of sustainable procurement disruptions due to non-compliance with industry environmental regulations. 

Investing in sustainable procurement practices ensures that you are working with suppliers who have the same objectives and comply with environmental regulations.

3. Revenue growth

When we talk about sustainability in procurement, it focuses on giving back to the environment and society. 

Sustainable procurement brings additional revenue through the innovation of eco-friendly products and services, price increases for premium products and services, and income from recycling programs. 

According to the World Economic Forum, implementing sustainable procurement practices in the processes of a business provides a 15% to 30% increase in brand equity which creates revenue growth. 

Requirements For Sustainable Procurement

Sustainable procurement requirements are strategic visions tied to a company’s culture and policies that affect the decision-making level. Importantly, we know that sustainable procurement must be a strategic initiative and not just a reporting document. 

Below are the following requirements of a sustainable procurement:

• Understanding local, regional, and global actions
• Support from culture, strategy, mission, and people
• Corporate social responsibility leadership
• Implementation of operational and strategic decision-making
• Measuring the performance of suppliers
• A well-thought risk management approach
• Transparent communication
• Making sustainability the opportunity for innovation

Measuring Sustainable Performance

The requirements for sustainable procurement are continuously changing. Due to this, key performance indicators must be developed as well. Companies must assess the suppliers’ commitment and performance. 

There are many factors to consider in knowing that you have a successful sustainable performance tracking. This includes industry knowledge, reliable data, and analytical competence. 

Additionally, procurement practices must have the ability to communicate performance and enable change in the organization. 

The company must identify which areas of spend have the highest ESG impact and opportunities for improvement. Additionally, it can focus its primary efforts on key suppliers and risk categories where it can make the most impact. 

Furthermore, the best way to know the continued relevance of sustainability is through reporting. Using formal standards keeps your reporting transparent and organized. 

Best Practices in Sustainable Procurement 

Many businesses are implementing CSR policies as well as established requirements to fulfill their commitments. These policies are utilized internally to raise awareness among employees and externally with suppliers and other partners. 

Here are some of the best practices for ensuring a sustainable procurement:

• Define the company’s corporate social responsibility criteria
• Initiate the creation of procurement requirements
• Select suppliers with the same corporate social responsibility
• Avoid putting unnecessary pressure on suppliers that might impact your workers
• Think about the effects of the prices that you set
• Give reasonable time for suppliers to address areas of non-compliance and provide support in order to help them improve
• Help your major suppliers to share good practices by creating benchmarking groups
• Implement a life cycle and overall financial basis into procurement processes. 
• Paying attention to product labels
• Raise awareness among other teams in your company

Blending sustainable procurement, corporate social responsibility, and compliance is entirely within reach and can lead to substantial gains in an organization.