1_Procurement Insights

Sustainable Procurement – A Responsible Sourcing Strategy

sustainable procurement

We all dream about a sustainable future; a future with human friendly climate; socially responsible humans and people who are conscious about their past, present and future. Everyone has to play his part to secure a sustainable future, so the procurement organisations.

Sustainable Procurement is a way of procurement in which we consider environmental impact, social impacts and ethical factors in all procurement decisions along with traditional parameters like Cost, Quality and Delivery. The objective is to reduce the negative impact of sourcing on the environment and society.

Why is sustainable procurement important?

How can we achieve Sustainable Procurement and also attain the financial goals of our company?

Sustainability is created through responsible sourcing. Responsible Sourcing isn’t just about sourcing and procuring goods and services in a more sustainable manner, but also about ensuring external suppliers are aligned and committed to the same principles and values.

As a procurement organisation, what is our impact on the environment? We may not be directly polluting our earth, but our procurement practices may very well be contributing to the pollution earth is suffering with.

sustainability

Organisations implement sustainable procurement for different reasons. Some organisations are self-motivated because they are care about the environmental and social impact of their business activities. Many organisations works to implement sustainable sourcing because they think their customers want them to do so (market demand), while others go green because they believe it helps them cut costs and become more competitive (economic factors).

Benefit of Practicing Sustainable Procurement

We will be leaving a clean earth for our coming generations. Definitely we can also Reduce Cost, Reduce Risk and add to Revenue growth.

How? When we practice sustainable procurement and all our sourcing activities are aimed at to that direction, we benefit from reduced energy costs, reduced consumption of water and other materials, and possibly reduced compliance costs as well. Sustainable procurement is always cost-effective as it is largely about eliminating waste.

Recently I come across a post at LVRG blog that says, Dell started working on reducing unsustainable plastics use in its packaging in 2015. Together with non-profit Lonely Whale, they started to collect recycled plastics from beaches and waterways, then moved on to other sources like water bottles and aerospace scrap. In 2017 alone, they prevented 16,000 pounds of plastic from reaching the ocean — and it cost them less, too!

Sustainable procurement protects us from the risk of losing our companies brand value resulting from bad supplier practices. This has lot of financial impact.

What are sustainable procurement practices?

How to implement Sustainable Procurement?

Transparency is must for implementing sustainability. Just performing detailed supplier assessments will not ensure sustainable procurement. Lack of transparency in the supply chain is the major obstacle. We need to know what’s happening with the supplier and to their suppliers and to the last point of supply value chain. Need to ensure that entire supply chain is truly sustainable.

globalisation

With globalization, supply chain networks have become very complicated.  We have thousands of suppliers scattered all over the globe. Auditing and assessing all levels of suppliers need analysis of millions of data that requires a massive amount of time and resources. To do this successfully we need a robust digital solution.

With the help of advanced technology like AI and Machine Learning and other digital solutions can help us cope with this problem.

AI-enabled software can analyze large amounts of data that is required to maintain full supply chain visibility. It will help us to make more intelligent and informed decisions to support our sustainability efforts.

How Sustainable Procurement helps in Revenue Growth?

csr

CSR has been gaining increasing importance among consumers. By offering eco-friendly products and services, businesses can grab the opportunity to increase revenue.

We don’t only save on costs that can help our business become more competitive, our business will be able to attract customers who are increasingly wanting to patronize companies that are environmentally responsible.

How to make Sustainable Procurement a Success?

To make Sustainable Procurement a live project in our organisation, we have to First and foremost, get involved all stakeholder. Senior management, suppliers, employees, government agencies, basically, we have to get our entire value-chain on board and aligned with our cause.

We have to communicate and promote the benefits of sustainability plans both internally and to our suppliers so that everyone is on the same page and committed to our cause.

We can interact with our suppliers at different levels. We can gather information from our suppliers like Greenhouse gas emissions, Carbon footprint.

We will have to work with our suppliers to identify opportunities for improvements, providing our supply chain partners with targets and incentives and even warnings of non-compliance with pre-agreed goals.

Sustainable Procumbent Strategy – On practical ground here are some sustainability areas we can look at our suppliers –

  1. Environmental impact, e.g. CO2 emission, water usage, packaging wastage, etc.
  2. Social/human impact, e.g. human rights, labour rights, workers’ health, and safety, treating employees fairly, etc.

Many companies are already maintaining a supplier scorecard system that includes sustainability parameters. We have to map our entire supply chain, so that we know that all of our suppliers’ and suppliers’ upstream suppliers are also compliant.

Sustainable Procurement in low-cost county sourcing

When we source from low-cost regions such as China, there are several steps we can take to ensure sustainable procurement across all stages of supply chain including manufacturing and shipping.

Sustainable procurement in Manufacturing

Before finalising procurement with a supplier following points need to be considered-

  1. Where they have sourced the Raw Material from?
  2. Use of resources such as water and energy during the manufacturing process,
  3. The extent of recycled material used in manufacturing and packaging
  4. What is their disposal procedure and its impact on environment.
  5. How do the suppliers invested in improving their carbon footprint
  6. Do they have set long-term goals to sustainable procurement from their suppliers?
Sustainable procurement in Logistics

Air freight has significantly larger carbon footprint than sea freight. We can place orders well in advance so that shipping via air can be avoided and our logistics can contribute to lowering emissions.

Planning our inventory in such a way that we take one big delivery (FCL shipping) instead of several small ones (LCL shipping) will also help our business become more sustainable. Besides being good for the environment, this is also great for our finances as consolidated shipments will cost less than sending several small shipments out over a period of time.

Social Impact

Sustainable Procurement considers the welfare of the workers who are involved across the entire supply chain. Procurement is done from a supplier who ensures that their workers are being paid a fair wage. They should put to work not more than a reasonable number of hours. Supplier must provide their workers safe working conditions.

To source sustainably, we must ensure that:

  1. Factories pay their workers a fair living wage to produce your goods.
  2. The working hours are not exploitative.
  3. Work conditions meet health and safety standards.
Where to seek help for sustainable procurement from low-cost countries?

We can ensure our source sustainably by working with a Sourcing Allies – reliable China sourcing agent with a team based on the ground – who can help you choose suppliers who are best kitted to fulfil our sustainable procurement needs.

Conclusion

Sustainable procurement is not just a statutory requirement now, it is the way of doing procurement that can benefit our organisation in long run and help us to make our earth a better place for living. Let us inspect every link of our supply chain and find the opportunity to reduce negative impacts of our actions on human, our society and our earth at large.

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