Sustainable Practices in Procurement- What You Should Know

Sustainable Practices in Procurement- What You Should Know

Sustainability is becoming key to the way organizations focus on their operations. Essentially, it refers to living within the means available to us in our natural environment, without setting off any harmful repercussions to the environment, society or economy in the value chain that we are a part of[1]. On a broader level, this term indicates the extent to which we can attempt to maintain and/or enhance the environment, society or economy while maintaining a business as usual status. In order to be truly successful, sustainability needs to get to the core of all practices in an organization and its people.

What does sustainability in procurement or responsible sourcing really mean? Beyond reducing costs, curbing waste, improving competitiveness and building a brand’s reputation[2], it is the consideration of what the products are made of, where they have come from, who made them and transported them and how their disposal was managed. It means all the following and much more[3]:

  • Building viable relationships with vendors/suppliers
  • Encouraging ethical practices in the dealings with the stakeholders
  • Ensuring organic consumption using locally available, renewable, easily recyclable, cost-effective and energy-saving materials
  • Focussing on and negating any environmental concerns arising out of the organizational processes
  • Reducing any internal and external wastages that arise from the utilization of people, material and processes, while reducing the carbon footprint                            

Apart from the obvious implications, organizations also need to bring in sustainable procurement practices into their supply chains and find ways to optimize them[4]. As supply chains begin to expand globally, the factors such as balancing lower costs with greater capacities comes in. The risks that are associated too are multitude – disruptions in the supply chain, volatility in cost and material availability, location-specific regulations, etc. In order to maintain the continuity of supply chains, organizations need to closely monitor not just their own but also the practices of their other stakeholders, who could be located anywhere around the world.  The challenge is greater for small businesses as their supply chain may not give a lot of leeway for economies of scale, and a lot of their efforts towards sustainable procurement are driven by their individual management interests, as compared to the concerted efforts of dedicated procurement personnel towards this.

To mitigate these risks, they need to make responsible sourcing a way of life for not just their organization, but also for their various stakeholders so that the idea of sustainability in procurement becomes a movement and not merely a practice. Their focus needs to be on[5]:

  • Developing and maintaining a viable procurement policy with a systematic supplier, transporter/logistics provider and material selection process[6]
  • Defining sustainability objectives and benchmarks in the policy
  • Basing procurement decisions on integration of sustainable practices in the organization
  • Calibrating and maintaining the same set of standards for all stakeholders, especially the suppliers – giving suppliers with environment-friendly products and practices the priority
  • Building in sustainability criteria into the evaluation process to include quality, technical capabilities, delivery times, their capabilities in Design for Environment (DfE), green image, etc.
  • Regularly monitoring systems and processes used for the procurement of raw materials and the terms used to negotiate with suppliers
  • Maintaining a strict mechanism for reporting any deviations from the specified practices
  • Developing a validation mechanism to measure the impact on the organization

One of the steps that businesses can take, apart from building in the sustainability criteria into their procurement policy, in addition to signing contracts with local suppliers having environmental-friendly practices, is to go in for Extended Producer Responsibility (EPR). This could set up a system where the vendor would collect the used/waste raw material and take care of final organic disposal. This practice could work for plastic, laminates, Styrofoam as well as some electronics. This should come easier for small businesses that do hot have a large geographical or vendor footprint.

As per a recent study, 97 out of every 120 supply chain professionals are giving serious consideration to sustainable procurement[7]. Today, organizations are revisiting their procurement practices, while simultaneously focussing on the bottom-line. It is essential thatthey also reflect upon the environmental footprint that they would leave behind[8].