What is sustainable procurement – and how best should you go about it?
Generally, when someone talks of sustainable procurement, they talk of ‘how businesses can identify and reduce the environmental impacts of their supply chains’, per the Oxford College of Procurement and Supply, as well as ‘integrating specifications, requirements and criteria’ into a company’s procurement processes and decisions ‘that are compatible with the protection of the environment and society as a whole’, per the definition from EcoVadis.
More specifically, this can involve integrating CSR (corporate social responsibility) principles or ESG (environmental, social and governance) goals into your company’s procurement, purchasing and supply chain, while making sure stakeholders have all requirements met. For clarity on CSR or ESG, take this Sustainable Future News article definition.
“ESG is used internally and by investors to assess a company’s performance, tending to be more data-driven and detail-oriented, [while] CSR refers to the voluntary actions that a company takes to improve its social and environmental impact.”
Sustainable procurement pillars and the standard
It is worth noting that different resources will cite ESG and CSR with little explanation as to why one was chosen over the other, but CSR is often used as a framework on which to build because its dimensions – economic, social and environmental, with key principles of transparency, sustainability and accountability – overlap with this topic. As a resource on the ISO 20400.org website, the international standard for sustainable procurement, explains, environmental protection, social responsibility, and economic prosperity are key.
The ISO 20400, launched in 2017, is the first global sustainable procurement standard and replaces BS 8903. Organisations can take a self-assessment test, read various articles on understanding and implementing sustainable procurement, and submit their own content.
One of the more interesting case studies submitted is from the CBS International Business School around Covestro, a German provider of high-tech polymers looking to ‘materialise a more sustainable future through chemical recycling.’ The paper frequently cites the ISO 20400 sustainable procurement guidance in outlining how Covestro’s procurement arm has a ‘forward-looking, robust sustainable procurement framework’ – for instance looking at the initial stages, identifying top-priority categories, suppliers, contracts, and organisational practices to ‘direct efforts in the right direction’ through this ISO 20400 diagram:
You can read the full Covestro case study here (PDF).
Examples of projects
General examples of initiatives which can go towards sustainable procurement include identifying suppliers who are:
- Low-impact
- Fair trade or environmentally friendly
- Using production materials that have been sourced responsibly; and
- Maintaining a healthy work environment where employees feel respected and valued
Seven out of 10 (71%) organisations had experienced improved supplier relationships in the past year because of CSR initiatives
A study from Forrester Research and Ivalua in 2021, titled ‘How Procurement Can Accelerate Corporate Social Responsibility Performance’, found that seven out of 10 (71%) organisations had experienced improved supplier relationships in the past year because of CSR initiatives.
The study gave useful examples of how chief procurement officers are able to improve CSR performance. The most common, based on responses from 467 decision makers, are increasing participation in local initiatives – cited by 45% of respondents – auditing suppliers (40%), building CSR into corporate brand and strategy (37%) and redesigning products to meet CSR requirements (36%).
One specific example is UK retailer Boohoo. The company learned that a failure to effectively monitor its supply chain had led to endemic issues of poor working conditions and neglected employee rights. The retailer increased CSR transparency and ended contracts with 64 non-compliant suppliers.
Plenty of software vendors will outline why their product is the must-have to help connect the different parts of a company’s supply chain, but there are some interesting examples. For instance, Resilinc, a provider of AI-based supply chain data monitoring, has a platform which issues ‘almost daily’ alerts on environmental hazards, labour violations and other disruptions at global suppliers. The company claims that the first quarter of 2023 saw a 200% uptick in labour violation alerts compared to the same time last year.
A useful step-by-step guide
In 2021 the Australian government published a practical sustainable procurement guide (PDF) which offered five steps for Commonwealth organisations, and the questions that need to be answered:
- Plan the procurement – identifying the need for the goods or services, to identifying and prioritising sustainability outcomes, assessing risks and opportunities, before undertaking market research and engagement
- Approach the market – specifying sustainability requirements, KPIs (key performance indicators) and setting evaluation criteria
- Evaluate and engage – assessing tender responses, including value for money, and debriefing unsuccessful tenderers
- Report and manage – starting with monitoring compliance and performance, as well as disposal of goods
- Review and learn – looking for opportunities to improve, monitoring and tracking progress, as well as knowledge sharing
Conclusion
Many of the current articles which outline steps to sustainable procurement have similar themes but comparatively little in terms of unifying structure. However, like other aspects of sustainability, there are commonalities in what good looks like, whether you base it on CSR or ESG metrics, or back it up with best practice from the ISO 20400 standard.
This article features examples specifically from Covestro and Boohoo, as well as vendors in this space such as Ivalua and Resilinc, but there are more. As even the Australian government cites the Netherlands in its report as an example of how to apply sustainability to its own procurements, looking at forward-thinking organisations and bodies who have taken the first step remains good practice.
