Sustainability in Procurement

August 18, 2021

Posted by Home (ENG)

Sustainability in Procurement

By Lauren Webster

Defined by CIPS, sustainable procurement refers to the act of including social, economic and environmental factors in addition to the usual price and quality considerations into the organisations handling of procurement processes and procedures.

Typically, sustainable procurement practises include compliance with environmental laws and targets, the removal of hazardous materials and waste in the supply chain and the thorough vetting of suppliers for fair labour practices.

 

Many organisations create a ‘mission statement’ detailing the commitments they are making, usually in the coming years. Sustainable procurement allows trust to be built between customers, partners, and the business themselves. CIPS details four key areas of benefits to sustainable procurement.

‘Risk & Reputation’

By ensuring sustainable methods of procurement are used, businesses can maintain a good reputation in the market – high levels of pollution or child labour can contribute to a businesses reputation or lack thereof. Consumers are becoming increasingly aware of sustainability pledges by businesses and may be more likely to purchase from a sustainable business rather than one that shows no dedication.

‘Cost reduction’

Costs can be reduced in many ways through sustainable procurement. Energy-efficient resources can lower sourcing and manufacturing costs, for example, transport, technology, lighting, heating and buildings. Building running costs can amount to 85% of total lifecycle costs, so although a more energy-efficient building may cost more to build initially, the long term reduction in cost will significantly outweigh the initial spend. Not only this, but waste reduction can also cut costs. Naturally, if waste is reduced by ensuring products are produced and shipped correctly, sourcing more local produce or placing orders in advance to avoid air shipping and making use of full container loads to reduce wasted space.

‘Revenue growth’

With consumers taking steps to reduce their carbon footprint, including purchasing from sustainable businesses, loyalty to particular brands is more likely to play a part in their purchasing decisions. If consumers are aware of an organisations commitment to sustainability, they may be more likely to repeat purchasing patterns when they know a business is trustworthy. Organisations can also save money by utilising sustainable procurement partners.

‘Future Proofing’

By ensuring their procurement processes are sustainable, businesses allow themselves the security of maintaining their relationships with suppliers for any future challenges such as lack of supply and changes in social, economic and environmental factors.

In a 2016 article by McKinsey & Co, it was stated that the typical consumer company’s supply chain accounts for more than 80% of greenhouse-gas emissions and more than 90% of the impact on air, land, water, biodiversity and geological resources. By focusing on supply chains, consumer companies can massively reduce their environmental impact and become more sustainable in the long run.

One of the biggest challenges to becoming more sustainable as a business is a cost associated with making the changes. Sustainable options are usually more expensive, although the long-term effects of making such adjustments is incredibly positive, after the turbulent 18 months of 2020 and the first half of 2021, maximising profitability is likely to be a number-one priority.

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To learn more, contact Lauren Webster – lauren.webster@executivenetworkgroup.co.uk