The acquisition of goods and services necessary to conduct business operations is a crucial responsibility of the procurement function in any organisation. Yet, it’s worth noting that procurement also has the potential to greatly influence an organisation’s sustainability.
In recent times, there has been a growing interest in the concept of sustainable procurement. This approach emphasises the need to balance economic, social and environmental factors when making procurement decisions, with the aim of creating value over the long term. This article will delve into the significance of sustainable procurement for organisations, examining its workings, benefits, and challenges.
Sustainable procurement entails assessing the environmental and social impact of procurement choices and implementing measures that minimise negative effects while also generating positive value. It is a strategic approach that aims to create enduring value for organisations society, and the environment by considering environmental, social, and economic factors in the procurement process.
Why does Sustainable Procurement Matter?
Sustainable procurement is critical for multiple reasons. Firstly, it can help organisations minimise their environmental impact. During the procurement process, organisations often source materials and services that can have a substantial environmental footprint, such as greenhouse gas emissions and waste. However, by adopting sustainable procurement practices, organisations can significantly reduce their environmental impact and contribute towards a more sustainable future.
Secondly, sustainable procurement can help organisations enhance their social impact. Procurement decisions can significantly impact human rights, labour practices, and community development. Through sustainable procurement practices, organisations can ensure that their suppliers adhere to ethical and legal standards and promote fair and safe working conditions.
Lastly, it can improve an organisation’s economic performance. The procurement process usually represents a significant portion of an organisation’s costs. However, sustainable procurement practices can help organisations cut costs, enhance efficiency and create long-term value for stakeholders.
How does Sustainable Procurement Work?
Sustainable procurement involves several key steps:
- Assessing the environmental, social, and economic impact of procurement decisions
Organisations aiming to implement sustainable procurement practices should begin with a thorough evaluation of their existing procurement processes. This assessment should encompass an analysis of the impact of sourcing decisions on the environment, society, and the economy. By conducting a comprehensive assessment, organisations can identify potential areas for the integration of sustainable procurement practices that can generate long-term value.
Among the primary factors to consider in the assessment is the environmental impact of procurement decisions. Organisations should examine their carbon footprint, waste generation, and other environmental effects linked to the materials and services being procured. This information can be utilised to recognise opportunities for reducing environmental impact by sourcing more sustainable and eco-friendly materials or services.
- Prioritising suppliers with strong environmental and social performance
This involves selecting suppliers that have a strong environmental and social track record. This can include suppliers that have implemented sustainable practices, such as reducing greenhouse gas emissions, conserving natural resources, and promoting fair labour practices. Through optimising procurement and supply chain solutions with SAP Ariba from a trusted partner like CJV Partners, organisations have the ability to leverage their supplier management to help them profile and prioritise suppliers with a strong environmental and social performance so businesses can balance environmental factors in the procurement process to create long-term value.
- Monitoring and reporting on sustainability performance
Organisations aiming for sustainable procurement practices must monitor and disclose their sustainability performance. This process allows them to gauge their progress towards sustainability objectives and exhibit their commitment to sustainability to stakeholders. The implementation of sustainability metrics and key performance indicators (KPIs) enables organisations to track and report on their sustainability performance in various areas, including supplier sustainability performance, energy efficiency and waste reduction.
A crucial advantage of tracking and reporting sustainability performance is that it helps organisations recognise areas that need improvement. By monitoring sustainability performance, organisations can identify where they fall short of their sustainability goals and take remedial measures. Such measures could include launching new sustainability initiatives, collaborating with suppliers to enhance sustainability performance or investing in innovative technology that enhances their sustainability performance and provides long-term benefits to the organisation.
Challenges of Sustainable Procurement
Organisations may encounter various hurdles when attempting to adopt sustainable procurement practices. One of these hurdles is the limited awareness and comprehension of sustainable procurement principles among procurement professionals, leading to a lack of buy-in and support for sustainability initiatives. Additionally, measuring and reporting on sustainability performance can prove to be a challenge. Assessing the impact of sustainable procurement practices can be intricate and resource-intensive while conveying their value to stakeholders who may not entirely comprehend their benefits can also be difficult. Moreover, some organisations may find it challenging to implement sustainable procurement practices due to additional short-term costs. Nonetheless, it is vital to recognise that sustainable procurement practices have the potential to generate long-term benefits for both organisations and society and as such, they should be seen as an investment in the future.
By fully integrating SAP Ariba solutions, we believe that organisations can create a sustainable future for themselves, their stakeholders, and the planet.
