Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

How Spend Analytics Contribute to Sustainability Agenda

Spend analytics works by leveraging the relationship between money spent and the associated social and environmental impacts. For example, for everything that you procure, there will be a corresponding impact embodied in your purchase such as the water or carbon in its creation. Thus, it relies on two outputs which are spending data and ESG impact factors. 

Mapping your spend categories to your ESG impact factors can provide visibility of the estimated footprint of the purchased goods and services of the business. Thus, it generates the following insights:

• Visibility of the company’s impacts across all categories
• Accountability of category managers and suppliers as the core drivers of impact
• Category-level targets and integration into the company’s resource planning software

KPIs to Analyze in Sustainable Procurement

Here are the KPIs to analyze in sustainable procurement.

1. Environmental sustainability metrics

Environmental sustainability is the most common area where many organizations track sustainability. This metric covers a wide range of KPIs which include:

• Carbon emissions
• Energy consumption
• Waste reduction
• Plastic reduction
• Noise pollution
• Compliance with environmental standards

2. Social sustainability metrics

Social metrics are focused on the measures regarding the well-being of society involved as stakeholders. This metric covers these areas:

• Human rights
• Work opportunities
• Workers’ welfare
• Improvement of living conditions

3. Governmental sustainability metrics

Governmental metrics are focused on the level of adherence of businesses to policy and regulations within their respective industry sector. The KPIs covered here are:

• Compliance with UN standards
• Compliance with the code of conduct
• CSR standards of suppliers

You may ask why these KPIs are necessary to analyze. The answer is also simple. ESG factors are metrics used to evaluate companies on how far they have advanced with sustainability. To simplify, it is their guide to know if they can be called sustainable. 

Together with spend analysis, all the purchases of the company will be evaluated to check if they are up to ESG KPIs. Thus, allowing companies to properly navigate their way to sustainability. 

Measuring KPIs in Sustainable Procurement

Now that we know what metrics and KPIs to include in your procurement plan, we will provide you now with indicators that will enable you to measure your performance and identify aspects you need to improve to balance the three areas of action of sustainability which is the ESG framework. 

1. Conformity of your sustainable initiatives to international standards

The first indicator to measure the company’s sustainability initiatives is by knowing how good it is at complying with national and international standards when it comes to sustainability. 

For example, a measurable indicator will be the number of fines incurred by the company due to infractions. With these, you will know if you are compliant and where you are now in your sustainability goals. 

2. Use of materials

The second measure you can use is to know the number of resources and raw materials that you used in their business operation. Also, companies must know the amount of waste and emissions they generate. 

By knowing this, companies can evaluate both the environmental, social, and economic parts of a company for defining sustainability. This is due to the fact that a business cannot achieve sustainability when it produces more waste and pollution in the environment. 

3. Impact of the company 

The impact of the company is a crucial measurement of sustainability. A company must know how it can affect the environment with what it produces. Additionally, it must take into consideration the regulations they have for protecting its employees. 

By knowing these things, companies will have a clearer idea of their social and economic impacts. This is due to the fact that you cannot achieve sustainability if you produce too much waste that will severely impact the environment. 

4. Business operation

When you want to measure sustainability in your company, it is important to take note of the whole product life cycle. It is crucial to know if your suppliers use renewable energy sources, the ethical standards it abides by in manufacturing what you need, and the number of carbon emissions by producing and moving the products.

All these factors are significant to know if you are meeting sustainability in your company. You must know that your product affects the environment from how you produce it to how you dispose of it. 

It is also important to take note that your suppliers must also be compliant with all these measurements. Why? Because they are the ones that support you to achieve sustainability. If the people that surround your company do not care about their impacts on the environment, then the company can never achieve sustainability in its business operations. 

Conclusion

In conclusion, sustainable procurement analysis involves collecting and analyzing data to drive sustainable value and enhance operations through informed decision-making. This article explores the concept, emphasizing the importance of timely, accurate, and actionable sustainable business insights.

Closed Loop Spend Management (CLSM) is presented as an approach that injects resilience and responsibility into business operations, aligning with sustainability initiatives. Spend analytics, a crucial component of CLSM, contributes to the sustainability agenda by leveraging the relationship between spending and social/environmental impacts.

Key performance indicators (KPIs) in sustainable procurement cover environmental, social, and governmental sustainability metrics, providing insights into a company’s adherence to sustainability goals.

Measuring KPIs involves assessing conformity to international standards, resource use, company impact, and the entire product life cycle, ensuring a holistic evaluation of sustainability in business operations.