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Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Sustainable Procurement – The Ultimate Guide 2024
Table of content
- Definition
- Importance in Procurement
- 3 Pillars
- Sustainability in Procurement
- 2 Approaches
- Benefits
- Sustainability in Supply Chain
- Sustainable Logistics
- Purchasing Sustainability
- Sustainable Sourcing
- Analysis
- Policy
- Requirements
- Procurement Operations
- Sustainable Manufacturing
- Sustainable Packaging
- Supply Chain Consulting
- Sustainable Procurement Day
- 7 Real-Life Examples
- Sustainable Supply Best Practices
- Sustainable Business
- Businesses Examples
- High Profitability
- Statistics
- Sustainable Supply Chain Courses
- Procurement Expert’s Insights on Sustainable Procurement
- Conclusion
- Frequently asked questions
Key take-aways
- Sustainable procurement integrates environmental, social, and governance factors into procurement and supply chains, helping build a circular economy.
- Sustainability in procurement improves finances and processes, reduces carbon footprint, and adheres to corporate social responsibility.
- Sustainable procurement can be approached through product-based or supplier-based.
Sustainable procurement is becoming vital as demands continue to rise. Of course, it is no secret that the world is focused on sustainability. Everyone wants to be assured that the goods or services they need are accessible with no inconvenience. However, what is sustainability?
If you are in the procurement industry, it is important to know the latest news in procurement, especially sustainability as most companies are switching to this kind of approach.
Once you are done reading this article, you will gain in-depth knowledge about sustainability in procurement that will help you create sustainability in your procurement and supply chain processes.
Whatis Sustainable Procurement?
✔ Sustainable procurement is the practice of adopting environmental, social, and governmental factors while also considering the price and quality of materials that an organization will acquire.
✔ Sustainable procurement, also known as green procurement, is the process of integrating environmental, social, and governance goals into the procurement and supply chain.
✔ In simple terms, sustainable procurement refers to how businesses can identify and reduce the environmental and social impacts in their supply chain.
✔ It typically integrates responsible business practices and sustainable corporate behavior into the procurement processes, decisions, and policies. Thus, it balances meeting stakeholder requirements, profitability, and sustainability. Corporate social responsibility is often brought up when companies talk about sustainable procurement.
✔ Corporate social responsibility is the commitment of businesses to behave ethically and contribute to economic development while considering the quality of life of their workforce as well as their surrounding communities and caring for the environment.
✔ Sustainable procurement is a strategic decision that goes beyond the requirements of economics. It considers the expectations of stakeholders if their performance is fair and acceptable.
✔ It helps build a circular economy that aims to reduce adverse social, environmental, and governmental impacts of the acquired goods and services of a company.
Whyis Sustainability Important in Procurement?
Sustainable procurement is vital to all sizes and every sector of business. It helps organizations by improving their finances and processes against a range of challenges that can disrupt the supply chain.
Consumers are becoming aware of their part in society nowadays. Thus, their concern about how their purchasing affects the environment is increasing. Thus, it is very crucial for every business to reduce its carbon footprint to help combat climate change and retain its customers.
Although the trend in procurement is to find sustainable and renewable resources, innovation will have a big part in achieving sustainability goals.
Sustainable procurement is a huge factor in corporate social responsibility. We cannot deny that the effects of the population, global warming, and food scarcity on earth can be attributed mainly to industry.
Nonetheless, sustainable procurement allows organizations to lead in reversing the damage done to the earth. It shows that organizations are aware of their future impacts and consider them before making purchasing decisions.
The3 Pillars of Sustainable Procurement
Sustainable procurement takes a 3-dimensional life cycle approach against the economic-focused approach.
The 3-dimensional approach does not mean that it takes three times longer. Rather, it means that it undertakes the 3 pillars of sustainable development to achieve sustainable procurement.
The following are the 3 pillars and their examples of sustainable procurement:
1. Environmental Pillar
- Urban planning
- CO2 reduction
- Protection of ecosystem
- Pollution and waste management
- Sustainable agriculture
- Environmental resource management
- Renewable energy resources
- Water and marine resources management
2. Social Pillar
- Food security
- Access to clean water
- Human Rights
- Fair pay and labor law protections
- ‘Anti-child labor
- Fairtrade
- Child mortality
- Healthy and safety
- Gender equality
- Universal access to education
3. Governmental Pillar
- Sustainable economic development
- Emerging markets
- Value for money
- Poverty reduction
- Development of small and mid-size enterprises (SMEs)
- The total cost of ownership
- Life cycle costing
- Economic regeneration
Sustainable procurement integrates sustainability considerations throughout the procurement process. Thus it helps achieve optimum value for money in delivering the developmental objectives. Hence, sustainable procurement is strategic procurement.
What Drives Sustainability in Procurement?
Here are some things that drive sustainability in procurement.
1. Risk reduction
Organizations that follow sustainable procurement practices and decisions reduce the risk of facing a financial impact on their brand value. This can arise from bad supplier practices such as local pollution and child labor.
Organizations can also be saved from the economic costs of disruptions in sustainable procurement such as noncompliance with environmental organizations.
2. Cost reduction
When organizations follow the practices and decisions in sustainable procurement, it will lead to a reduction in the total cost of ownership. This is due to the reduced energy costs, lower consumption, and decrease in social and environmental compliance costs.
3. Revenue growth
Organizations can earn additional revenue through the innovation of eco-friendly products and services and price premiums or recycling programs by following sustainable procurement services.
2 Approaches to Sustainable Procurement
1. Product-based approach
The product-based approach examines the movement of products and services in the supply chain of your organization. It also notes down the supplier’s environmental credentials.
This approach is commonly used when the organization wants to know the impact of the product or product range for marketing or strategic purpose. Additionally, it provides a detailed version of the supplier processes.
2. Supplier-based approach
The supplier-based approach analyzes the corporate social responsibility system of your suppliers, and whether the system conforms to the law and your CSR standards. In doing this, the organization can measure the environmental and social risks that the supplier can bring.
The assessment undertaken through this approach usually helps the organization by enhancing the whole supply chain by providing incentives to other businesses to be sustainable.
Benefits of Sustainable Procurement
Sustainability in procurement is crucial for every business to keep up with the market, create customer value, and innovate with suppliers that will help them in setting ESG goals.
Here are some of the benefits that you can gain from having a sustainable procurement:
Sustainability in the Supply Chain
The sustainable supply chain is known by many professionals as the efforts of companies to take into consideration the environmental and social impacts of their products through the supply chain.
It monitors the processes in the supply chain from sourcing materials to production and delivery to consumers. This allows the company to know if it may cause a harmful impact on its surrounding community and the environment.
The aim of sustainability in the supply chain is to lessen the environmental and social harm from factors like water consumption, waste production, and energy consumption. Thus, it helps by limiting its harmful effects on the environment and communities through the processes of the supply chain.
The supply chain, as its very nature, often involves energy-intensive processes to move products around the world. Thus, it is very important for companies to integrate sustainability into their supply chain.
It is also important for companies to manage sustainability effectively in their supply chain. Not because it is already implemented does it mean that companies will enhance it anymore.
Sustainable supply chain management is put in place right from the acquisition of goods and services to the delivery of products. It drives green operations and results in cost savings and improved supply chains over the long term.
Click here to know more about the sustainability supply chain.
Sustainable Logistics
Sustainability in logistics is the processes and practices which aim to improve the sustainability of supply chain activities.
The activities in sustainable logistics range from the supply of raw materials to the management of the life cycle of products.
Sustainable logistics, also known as green logistics, is not just about lowering the environmental footprint of a company. It also considers the economic and social responsibility of the logistics processes of a company.
Sustainable logistics is becoming more relevant today due to the shifting from a linear model to a circular model of the industrial economy.
All in all, sustainable suppliers seek balance in environmental care, financial growth, and the health of the community to attain sustainability in logistics
Click here to know more about sustainable logistics.
Purchasing Sustainability
Sustainability in purchasing refers to the acquisition of materials that are made from recycled content. These products include bio-based products, energy, and water-efficient products, and alternative fuel products.
Sustainable purchasing assesses the goods and services beyond their price. It finds ways to maximize value and lessen the social and environmental impacts throughout a product’s entire life cycle.
Purchasing sustainability is concerned with all the materials that a company will acquire. It checks if the materials that it procured will not have negative social and environmental impacts.
This approach is utilized by many companies as it conserves more resources and reduces carbon emissions due to sustainability initiatives.
Click here to know more about sustainble purchasing.
Sustainable Sourcing
Sourcing and procurement are still functioning at normal levels. Thanks to modern technologies that companies utilized to incorporate sustainable sourcing.
According to many procurement experts, sustainable sourcing is the process of sourcing supplies that are sustainable at its core. Thus, it does not hurt the environment and the materials can be renewed through natural means.
Sustainable sourcing is also defined as the acquisition of materials, products, or services from suppliers in a manner that is environmentally and socially responsible.
Sustainable Procurement Analysis
You must gain insight about actionable sustainable business and procurement insights in order to effectively implement sustainability in your procurement process.
Thus, sustainable procurement analysis allows you to collect and analyze data that will allow you to make informed decisions regarding sustainability.
One of the common types of sustainable procurement analysis is spend analysis. Spend analysis allows businesses to analyze procurement spending data from internal and external data sources.
Sustainable Procurement Policy
Sustainable procurement policies are the general guidelines of a company to ensure that all stakeholders know its initiatives in creating a sustainable procurement.
It is put in place to help businesses to acquire their needed goods and services. It is also the basis for selecting the products based on their social and environmental impacts.
Without a sustainable procurement policy, businesses will have a hard time ensuring that all their acquired products can contribute to meeting their social and environmental responsibilities.
The following are the key components of a framework for sustainable policy:
- Defining the vision and key principles of the company
- Identify and prioritize the issues and core procedures of the company
- Identify opportunities for improvement
- Evaluate the existing resources for improvement
- Determine Measurable objectives and targets
- Create processes for ongoing management and review
Click here to learn more about procurement policy and how to create your own policy to achieve sustainability.
Sustainable Procurement Requirements
Sustainable procurement requirements are the strategic visions that are tied to the company’s culture and policies. Thus, it heavily affects the decision-making level or personnel of the company.
Although these requirements are tied deeply to the company, it is continuously changing based on the trends that are happening today. Hence, the company must develop its key performance indicators as well.
Additionally, these requirements will help you know which areas of spend have the highest ESG impact and opportunities for improvement.
Sustainability in Procurement Operations
In sustainable procurement operations, the company checks the sustainability of its suppliers, materials, and processes in the procurement and the entire supply chain.
Sustainable procurement operations allow the company to find the best suppliers that align with its corporate social responsibility. Also, it enables companies to reduce their carbon footprint by implementing sustainable processes.
For you to be able to successfully streamline your operations, a sustainable procurement policy must be put in place to guide you with your overall processes.
You must take note that it is important to align environmental, social, and governance (ESG) goals to ensure that your operations are compliant with the standards to achieve sustainability.
Sustainable Manufacturing
Businesses are formulating ideas to make their products eco-friendly to achieve sustainability.
Sustainable manufacturing or green manufacturing refers to the process of making goods with a primary focus on decreasing its negative environmental, social, and economic impacts.
Sustainable manufacturing helps businesses to make their products more eco-friendly due to the rising pressure of consumers and government regulations.
Sustainable Packaging
Creating sustainable packaging is becoming a trend nowadays as it can reduce the negative impact of businesses on the environment.
Sustainable packaging is a type of eco-friendly material used to ship, store, wrap, or keep a product. It is made to reduce the environmental footprint of traditional packaging.
However, you must take note that a label that says “eco-friendly’ does not constitute that it is sustainable already. Additionally, labeling something as sustainable does not mean that the process of making it is ethical.
Thus, many businesses need to identify a lot of factors before they try to create sustainable packaging.
Click here to know more about sustainable packaging
Sustainable Supply Chain Consulting
Sustainable supply chain consulting are firms or businesses that source materials or services for companies that are not able to find what they need.
These supply chain consulting firms will help you to source materials that do not have a great environmental, social, and economic impact.
The supply chain consultants of the business help their clients to find their way regarding the changes across a range of areas.
As the supply chain accounts for more than 80% of greenhouse gas emissions, many chief procurement officers are now pressured to start their initiatives regarding sustainability.
Click here to know some of the sustainable supply chain consulting firms.
World Sustainable Procurement Day
Of course, as it is one big step for many procurement professionals in helping the world to become greener, many have participated in the World Sustainable Procurement Day.
The first-ever World Sustainable Procurement Day took place on March 21, 2022, and was spearheaded by the Sustainable Procurement Pledge (SPP).
The Event has provided various online sessions that are presented by the Sustainable Procurement Pledge. The aim of this event is to raise awareness among procurement professionals about their duty in protecting the environment.
It also aimed to empower and equip procurement professionals with best practices to face the challenges in sustainability.
The event’s topics ranged from social issues to environmental issues. It has also invited many renowned procurement professionals to be guest speakers and presenters.
All in all, World Sustainable Procurement Day is available to all procurement professionals who could come to the event.
Click here to know more about World Sustainable Procurement Day and the topics held at the said event.
7 Real-Life Examples of Sustainability in Procurement
Sustainable procurement may seem easy in theory. However, it is different when you are about to implement it in your own supply chain.
Integrating the corporate social responsibility (CSR) principles into the procurement process is difficult. This is done to meet the requirements of the stakeholders and to also consider the impact of your processes on the environment.
Sustainable procurement has four main aims which are:
- Reduce the impacts of goods or services across their life cycle and through the supply chain.
- Decrease the demand for non-renewable resources
- Guarantee fair contract prices and terms are respected and applied
- Promote equality and diversity throughout the supply chain
It also needs to follow a certain standard to ensure that the company is meeting the requirements of sustainability in procurement.
All in all, the 7 real-life examples will allow you to know how they have stepped up their game in order to achieve sustainability in their organization or institution.
Their commitment to helping the environment and reducing costs has made them more sustainable than they were in the past.
Sustainable Supply Best Practices
Everyone can create a sustainable supply chain but not everyone can maintain it. Thus, the need for sustainable supply chain best practices to be utilized.
Sustainable supply chain best practices will help you to maintain the efficiency of the processes in your supply chain. It will also allow you to do things easier in your processes.
There are factors affecting sustainable supply chain practices and these are:
- Technological advancements
- The commitment of the company
- Brand reputation and company culture
- Cost
- The Knowledge of stakeholders regarding sustainability
These factors affect practices in a sustainable supply chain due to the fact that it indicates if the best practices can be implemented in your supply chain.
Sustainable Business
Nowadays, many businesses strive for sustainability in their operations. This is due to the pressure of their customers to make a difference in the world.
Business sustainability or corporate sustainability is the management of environmental, social, and economic demands and concerns ensuring ethical, responsible, and ongoing success.
Investments in sustainability cost a lot of money. Thus, the reason why many businesses are still doubtful of sustainability.
However, doing so will optimize your processes and will make a huge positive impact on the environment and the surrounding community.
Click here to know more about sustainable businesses
Examplesof Sustainability in Businesses
Nowadays, many businesses strive for sustainability in their operations. This is due to the pressure of their customers to make a difference in the world.
Business sustainability or corporate sustainability is the management of environmental, social, and economic demands and concerns ensuring ethical, responsible, and ongoing success.
Investments in sustainability cost a lot of money. Thus, the reason why many businesses are still doubtful of sustainability.
However, doing so will optimize your processes and will make a huge positive impact on the environment and the surrounding community.
Click here to know more about sustainable businesses
The Shift Towards Sustainability While Maintaining High Profitability
Many businesses think that integrating sustainability will negatively affect their profitability. However, it is far from the truth.
Sustainability and profitability are closely tied to each other due to the business landscape nowadays.
Transforming your business into a sustainable business requires a great understanding of new technologies, strong engagement with suppliers, and huge investments.
Although it has many requirements, leading companies that adopted sustainability proved that it can create real competitive advantages that include high profitability for businesses in the long run.
Click here to know more about sustainability while maintaining high profitability
Sustainable Procurement Statistics
A lot of things happened in the world. From COVID-19 to shortages of supplies, many are now thinking of shifting to a sustainable supply chain. Companies also consider switching to sustainable supply chains and procurement due to the high carbon emissions that manufacturing companies produce.
Many companies are now integrating automation into their supply chain to make the process efficient and reduce their energy consumption. The goal of Net-zero by many countries is still ongoing, and we can see that many are committed to switching to save the world and the environment.
Procurement sustainable statistics monitor the commitment of companies all over the world to achieving sustainability in their processes.
The data allows many professionals to know whether they can reach their goals of having sustainability in their process in the year 2030.
Sustainable Supply Chain Courses
Sustainability in the supply chain is crucial to its success nowadays due to the fact that many regulations and consumers are demanding businesses to be accountable for their production and delivery of products.
Thus, many procurement and supply chain experts will be needing to invest in knowledge to gain insights and enhance their skills in sustainability.
The only problem that supply chain and procurement professionals will be facing in finding courses is what will suit them the most.
Click here to know more about sustainable supply chain courses
Procurement Expert’s Insights on Sustainable Procurement
For this article, we asked an experienced procurement expert to share her insights on sustainable procurement.
Procurement Manager, Sanofi
LinkedIn Profile: linkedin.com/in/hilce-vallenilla
1. What do most people get wrong about sustainable procurement?
Many people fail to truly understand the importance of sustainable procurement due to their inability to conduct thorough research on providers and the market. One common mistake is the failure to evaluate how new products, services, or providers align with sustainable practices at both local and global levels.
To achieve successful sustainable procurement, it is essential to have a comprehensive understanding of the entire supply chain and consider not only immediate impacts but also the long-term sustainability efforts of the providers. By prioritizing in-depth research, individuals and organizations can make informed decisions that contribute to a more sustainable future through their procurement processes.
2. From your experience, what is the most important thing you learned about sustainable procurement?
One of the most important things I’ve learned about sustainable procurement is that it requires a constant commitment to prioritizing environmental stewardship and human well-being. It’s not just a one-time decision, but a continuous effort to follow a new set of principles that recognize the significance of sustainability as a game-changing rule that will endure over time.
3. Can you give us an example of how you advocated or pushed for sustainability in procurement? I actively promoted sustainability in procurement by positioning it as a crucial element in the evaluation process, specifically within Request for X (RFX) procedures. To achieve this, I strategically incorporated sustainability criteria into the core considerations during supplier assessments.
Conclusion
Sustainable procurement is emerging as a critical practice for businesses, responding to global trends and the increasing demand for environmentally and socially responsible practices.
Various tools and strategies for implementing sustainable procurement are discussed, including analysis, policy development, and specific requirements.
The benefits of sustainable procurement are detailed across environmental, social, and governmental or economic dimensions, illustrating its positive impact on waste reduction, carbon emissions, community engagement, and economic efficiency.
Real-life examples and best practices provide tangible illustrations of successful sustainability integration, emphasizing the attainability of goals such as reducing environmental impact and promoting equality within the supply chain.
The conclusion underscores the increasing importance of sustainability in business operations and procurement processes. It emphasizes the positive impact on the environment, communities, and overall business success.
Despite challenges, the article encourages businesses to adopt sustainable practices, showcasing how leading companies have proven that sustainability can be a competitive advantage, ultimately contributing to long-term profitability.
Frequentlyasked questions
What is the definition of sustainable procurement?
Sustainable procurement is the practice of considering environmental, social, and governance factors when acquiring goods or services, while also focusing on quality and price.
Why is sustainability important in procurement?
Sustainability in procurement is vital as it helps businesses reduce their environmental footprint, attract customers, and meet corporate social responsibility goals.
How do the 3 pillars of sustainable procurement influence decision-making?
The three pillars guide sustainable procurement by addressing factors like eco-friendly practices, fair labor, and economic growth.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
