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Sustainable Procurement — The Ultimate Guide of 2023
Sustainable procurement is becoming vital as demands continue to rise. Of course, it is no secret that the world is focused on sustainability. Everyone wants to be assured that the goods or services they need are accessible with no inconvenience. However, what is sustainability?
If you are in the procurement industry, it is important to know the latest news in procurement, especially sustainability as most companies are switching to this kind of approach.
This article will discuss:
- Sustainable Procurement
- Sustainability in Supply Chain
- Sustainable Logistics
- Purchasing Sustainability
- Sustainable Procurement Policy
- Sustainable Procurement Requirements
- Sustainability in Procurement Operations
- Sustainable Supply Chain Consulting
- World Sustainable Procurement Day
- 7 Real-Life Examples of Sustainability in Procurement
- Best Practices in Sustainable Supply Chain
- Examples of Sustainability in Businesses
Once you are done reading this article, you will gain in-depth knowledge about sustainability in procurement that will help you create sustainability in your procurement and supply chain processes.
Whatis Sustainable Procurement?
✔ For starters, sustainable procurement refers to the approach of adopting environmental, social, and governmental factors while also considering the price and quality of materials that an organization will acquire.
✔ Sustainable procurement, also known as green procurement, is the process of integrating environmental, social, and governance goals into the procurement and supply chain.
✔ in simple terms, sustainable procurement refers to how businesses can identify and reduce the environmental and social impacts in their supply chain.
✔ It typically integrates responsible business practices and sustainable corporate behavior into the procurement processes, decisions, and policies. Thus, it balances meeting stakeholder requirements, profitability, and sustainability. Corporate social responsibility is often brought up when companies talk about sustainable procurement.
✔ Corporate social responsibility is the commitment of businesses to behave ethically and contribute to economic development while considering the quality of life of their workforce as well as their surrounding communities and caring for the environment.
✔ Sustainable procurement is a strategic decision that goes beyond the requirements of economics. It considers the expectations of stakeholders if their performance is fair and acceptable.
✔ It helps build a circular economy that aims to reduce adverse social, environmental, and governmental impacts of the acquired goods and services of a company.
WhyIs Sustainability Important in Procurement?
Sustainable procurement is vital to all sizes and every sector of business. It helps organizations by improving their finances and processes against a range of challenges that can disrupt the supply chain.
Consumers are becoming aware of their part in society nowadays. Thus, their concern about how their purchasing affects the environment is increasing. Thus, it is very crucial for every business to reduce its carbon footprint to help combat climate change and retain its customers.
Although the trend in procurement is to find sustainable and renewable resources, innovation will have a big part in achieving sustainability goals.
Sustainable procurement is a huge factor in corporate social responsibility. We cannot deny that the effects of the population, global warming, and food scarcity on earth can be attributed mainly to industry.
Nonetheless, sustainable procurement allows organizations to lead in reversing the damage done to the earth. It shows that organizations are aware of their future impacts and consider them before making purchasing decisions.
The3 Pillars of Sustainable Procurement
Sustainable procurement takes a 3-dimensional life cycle approach against the economic-focused approach.
The 3-dimensional approach does not mean that it takes three times longer. Rather, it means that it undertakes the 3 pillars of sustainable development to achieve sustainable procurement.
The following are the 3 pillars and their examples of sustainable procurement:
1. Environmental Pillar
- Urban planning
- CO2 reduction
- Protection of ecosystem
- Pollution and waste management
- Sustainable agriculture
- Environmental resource management
- Renewable energy resources
- Water and marine resources management
2. Social Pillar
- Food security
- Access to clean water
- Human Rights
- Fair pay and labor law protections
- ‘Anti-child labor
- Fairtrade
- Child mortality
- Healthy and safety
- Gender equality
- Universal access to education
3. Governmental Pillar
- Sustainable economic development
- Emerging markets
- Value for money
- Poverty reduction
- Development of small and mid-size enterprises (SMEs)
- The total cost of ownership
- Life cycle costing
- Economic regeneration
Sustainable procurement integrates sustainability considerations throughout the procurement process. Thus it helps achieve optimum value for money in delivering the developmental objectives. Hence, sustainable procurement is strategic procurement.
What Drives Sustainability in Procurement?
1. Risk reduction
Organizations that follow sustainable procurement practices and decisions reduce the risk of facing a financial impact on their brand value. This can arise from bad supplier practices such as local pollution and child labor.
Organizations can also be saved from the economic costs of disruptions in sustainable procurement such as noncompliance with environmental organizations.
2. Cost reduction
When organizations follow the practices and decisions in sustainable procurement, it will lead to a reduction in the total cost of ownership. This is due to the reduced energy costs, lower consumption, and decrease in social and environmental compliance costs.
3. Revenue growth
Organizations can earn additional revenue through the innovation of eco-friendly products and services and price premiums or recycling programs by following sustainable procurement processes.
2 Approaches to Sustainable Procurement
1. Product-based approach
The product-based approach examines the movement of products and services in the supply chain of your organization. It also notes down the supplier’s environmental credentials.
This approach is commonly used when the organization wants to know the impact of the product or product range for marketing or strategic purpose. Additionally, it provides a detailed version of the supplier processes.
2. Supplier-based approach
The supplier-based approach analyzes the corporate social responsibility system of your suppliers, and whether the system conforms to the law and your CSR standards. In doing this, the organization can measure the environmental and social risks that the supplier can bring.
The assessment undertaken through this approach usually helps the organization by enhancing the whole supply chain by providing incentives to other businesses to be sustainable.
Benefits of Sustainable Procurement
Sustainability in procurement is crucial for every business to keep up with the market, create customer value, and innovate with suppliers that will help them in setting ESG goals.
Here are some of the benefits that you can gain from having a sustainable procurement:
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Sustainabilityin Supply Chain
The sustainable supply chain is known by many professionals as the efforts of companies to take into consideration the environmental and social impacts of their products through the supply chain.
It monitors the processes in the supply chain from sourcing materials to production and delivery to consumers. This allows the company to know if it may cause a harmful impact on its surrounding community and the environment.
The aim of sustainability in the supply chain is to lessen the environmental and social harm from factors like water consumption, waste production, and energy consumption. Thus, it helps by limiting its harmful effects on the environment and communities through the processes of the supply chain.
The supply chain, as its very nature, often involves energy-intensive processes to move products around the world. Thus, it is very important for companies to integrate sustainability into their supply chain.
It is also important for companies to manage sustainability effectively in their supply chain. Not because it is already implemented does it mean that companies will enhance it anymore.
Sustainable supply chain management is put in place right from the acquisition of goods and services to the delivery of products. It drives green operations and results in cost savings and improved supply chains over the long term.
SustainableLogistics
Sustainability in logistics is the processes and practices which aim to improve the sustainability of supply chain activities.
The activities in sustainable logistics range from the supply of raw materials to the management of the life cycle of products.
Sustainable logistics, also known as green logistics, is not just about lowering the environmental footprint of a company. It also considers the economic and social responsibility of the logistics processes of a company.
Sustainable logistics is becoming more relevant today due to the shifting from a linear model to a circular model of the industrial economy.
All in all, sustainable suppliers seek balance in environmental care, financial growth, and the health of the community to attain sustainability in logistics
PurchasingSustainability
Sustainability in purchasing refers to the acquisition of materials that are made from recycled content. These products include bio-based products, energy, and water-efficient products, and alternative fuel products.
Sustainable purchasing assesses the goods and services beyond their price. It finds ways to maximize value and lessen the social and environmental impacts throughout a product’s entire life cycle.
Purchasing sustainability is concerned with all the materials that a company will acquire. It checks if the materials that it procured will not have negative social and environmental impacts.
This approach is utilized by many companies as it conserves more resources and reduces carbon emissions due to sustainability initiatives.
SustainableProcurement Policy
Sustainable procurement policies are the general guidelines of a company to ensure that all stakeholders know its initiatives in creating a sustainable procurement.
It is put in place to help businesses to acquire their needed goods and services. It is also the basis for selecting the products based on their social and environmental impacts.
Without a sustainable procurement policy, businesses will have a hard time ensuring that all their acquired products can contribute to meeting their social and environmental responsibilities.
The following are the key components of a framework for sustainable policy:
- Defining the vision and key principles of the company
- Identify and prioritize the issues and core procedures of the company
- Identify opportunities for improvement
- Evaluate the existing resources for improvement
- Determine Measurable objectives and targets
- Create processes for ongoing management and review
SustainableProcurement Requirements
Sustainable procurement requirements are the strategic visions that are tied to the company’s culture and policies. Thus, it heavily affects the decision-making level or personnel of the company.
Although these requirements are tied deeply to the company, it is continuously changing based on the trends that are happening today. Hence, the company must develop its key performance indicators as well.
Additionally, these requirements will help you know which areas of spend have the highest ESG impact and opportunities for improvement.
Sustainabilityin Procurement Operations
In sustainable procurement operations, the company checks the sustainability of its suppliers, materials, and processes in the procurement and the entire supply chain.
Sustainable procurement operations allow the company to find the best suppliers that align with its corporate social responsibility. Also, it enables companies to reduce their carbon footprint by implementing sustainable processes.
For you to be able to successfully streamline your operations, a sustainable procurement policy must be put in place to guide you with your overall processes.
You must take note that it is important to align environmental, social, and governance (ESG) goals to ensure that your operations are compliant with the standards to achieve sustainability.
SustainableSupply Chain Consulting
Sustainable supply chain consulting are firms or businesses that source materials or services for companies that are not able to find what they need.
These supply chain consulting firms will help you to source materials that do not have a great environmental, social, and economic impact.
The supply chain consultants of the business help their clients to find their way regarding the changes across a range of areas.
As the supply chain accounts for more than 80% of greenhouse gas emissions, many chief procurement officers are now pressured to start their initiatives regarding sustainability.
WorldSustainable Procurement Day
Of course, as it is one big step for many procurement professionals in helping the world to become greener, many have participated in the World Sustainable Procurement Day.
The first-ever World Sustainable Procurement Day took place on March 21, 2022, and was spearheaded by the Sustainable Procurement Pledge (SPP).
The Event has provided various online sessions that are presented by the Sustainable Procurement Pledge. The aim of this event is to raise awareness among procurement professionals about their duty in protecting the environment.
It also aimed to empower and equip procurement professionals with best practices to face the challenges in sustainability.
The event’s topics ranged from social issues to environmental issues. It has also invited many renowned procurement professionals to be guest speakers and presenters.
All in all, World Sustainable Procurement Day is available to all procurement professionals who could come to the event.
7Real-Life Examples of Sustainability in Procurement
Sustainable procurement may seem easy in theory. However, it is different when you are about to implement it in your own supply chain.
Integrating the corporate social responsibility (CSR) principles into the procurement process is difficult. This is done to meet the requirements of the stakeholders and to also consider the impact of your processes on the environment.
Sustainable procurement has four main aims which are:
- Reduce the impacts of goods or services across their life cycle and through the supply chain.
- Decrease the demand for non-renewable resources
- Guarantee fair contract prices and terms are respected and applied
- Promote equality and diversity throughout the supply chain
It also needs to follow a certain standard to ensure that the company is meeting the requirements of sustainability in procurement.
All in all, the 7 real-life examples will allow you to know how they have stepped up their game in order to achieve sustainability in their organization or institution.
Their commitment to helping the environment and reducing costs has made them more sustainable than they were in the past.
SustainableSupply Chain Best Practices
Everyone can create a sustainable supply chain but not everyone can maintain it. Thus, the need for sustainable supply chain best practices to be utilized.
Sustainable supply chain best practices will help you to maintain the efficiency of the processes in your supply chain. It will also allow you to do things easier in your processes.
There are factors affecting sustainable supply chain practices and these are:
- Technological advancements
- The commitment of the company
- Brand reputation and company culture
- Cost
- The Knowledge of stakeholders regarding sustainability
These factors affect practices in a sustainable supply chain due to the fact that it indicates if the best practices can be implemented in your supply chain.
Examplesof Sustainability in Businesses
The importance of sustainability for businesses cannot be emphasized enough due to the fact that the environment is getting affected by harmful practices and processes.
Businesses are now pressured by governments and consumers to reduce their carbon footprint. They are now seeing their responsibility in gaining profits while also considering the environment.
Sustainability can only be achieved when businesses have minimal or zero impact on the environment, society, and economy.
The part of businesses to ensure that their processes are meeting the sustainability requirements is crucial to reverse the effect of climate change.
Without the cooperation of these businesses, the world will incur irreparable damages. Thus, making the lives of everyone much harder than before.
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