The focus on environmental sustainability through green sourcing and procurement is changing to embrace social responsibility as well. Organizations are taking a more holistic approach where the organization, people, communities, and earth prosper through collaborative, sustainable procurement strategies. - BY CECIL PERANG

Sustainable procurement practices refer to the process of purchasing goods and services in a way that minimizes negative environmental, social, and economic impacts. It is a critical function for achieving ESG goals. Sustainable and eco-friendly procurement includes sourcing products from suppliers who use sustainable materials and production methods, reducing waste and emissions throughout the supply chain, and ensuring fair labor practices. Sustainable procurement practices can also involve considering the entire lifecycle of a product, from its production to its disposal, and choosing options that have the least impact on the environment, people, and communities. These practices support long-term business success by influencing the sourcing and use of natural resources and the ability of suppliers, people, and communities to prosper.

On the Path to Sustainable Procurement

Numerous sustainable procurement practices today support social responsibility and economic health. Setting clear sustainability goals is therefore a vital first step for two reasons. One is ensuring environmental goals support social and economic goals, because sustainable procurement benefits society as a whole. The second is that the goals provide the foundation for assessing current sourcing and procurement practices and infrastructure through an ESG lens. Each organization should establish criteria for evaluating and choosing suppliers. Criteria can include things like labor standards, sources and uses of renewable resources, environmental impact, product life cycle, supplier diversity, and supplier ethical practices. One challenge in developing a sustainable supply chain is deciding how to address the move towards more sustainable procurement with existing suppliers. There are several approaches. One is establishing a sustainability code of conduct and assessing each supplier's suitability to meet the code, which includes sustainability goals. Suppliers not following environmentally and socially sound standards are eligible for replacement. Another approach is to transition the supply chain as existing supplier contracts end or when purchasing new items. Both approaches could create more opportunities for minority and women-owned suppliers to enter corporate supply chains.

Establishing a Decision Framework for Holistic Sustainability

Developing a decision framework is necessary. A good beginning is utilizing the ISO 20400 international standard for sustainable procurement. To achieve certification, the organization assesses its current practices, which helps identify the most viable and achievable sustainability goals. It also helps the company improve the energy usage of more renewable resources. The program provides guidelines for building strategies for developing sustainable management policies for supply chains, engaging procurement teams and other employees, and improving the procurement infrastructure.

The ISO 20400 emphasizes the holistic corporate sustainability agenda: environmental responsibility, economic viability, social equity, and ethical governance. This is a critical concept because it means sustainable procurement is not only about selecting suppliers based on their carbon footprint. It also reducing waste, investing in renewable energy, engaging in community development, and buying and creating products with longer lifespans from suppliers with smaller carbon footprints and ethical policies.

There is an available platform implemented by Action Sustainability Community Interest Company Ltd, a UK-registered social enterprise building a voluntary global community of practice around ISO 20400 and sustainable procurement. It is an opportunity to share learning experiences, self-assess, benchmark organizational practices, and learn from experts, including the Steering Group of ISO 20400 experts worldwide. The information on the platform also helps procurement organizations align their sustainability practices with the United Nations Sustainable Development Goals (SDGs).

Case Study: The Real Challenge is Developing a Successful Strategy

An ISO20400.org “green case study” tracks Covestro procurement strategies to become more sustainable. Covestro is a global polymer company. The report says, “Sustainability continues to be a key driver of the procurement processes, with greater prominence on CPOs to put sustainable procurement on the agenda of every team and within the whole procurement strategy, apart from cost reduction. The journey — from setting up a dedicated Sustainable Procurement team, to driving the agenda, to Category strategies and finally towards Supplier engagement — is driven by developing and executing a thoughtful and effective Sustainability strategy. That is where the real challenge lies.” Covestro accepted the challenge. The organization’s procurement function is globally responsible for providing timely materials and services that have the right quality for the best value. The procurement team was tasked with generating a competitive advantage by driving sustainable value-creation sourcing, innovation, and commercial excellence. A supplier sustainability management model was developed after developing a clear road map and targets. It consists of increasing supplier awareness with a supplier Code of conduct, supplier nominations based on spend, category, and country risk, sustainability performance evaluation, initiatives, and a supplier development action plan. Some of the changes made to increase sustainability in the supply chain included developing a sustainable solution for packaging that led to working with suppliers to develop a more sustainable polyethylene bag with better performance. The solution led to value generation in cost, reliability, and sustainability through CO2 reduction and innovation.

In the long term, Covestro is pursuing a Circular Economy. The company uses raw materials from sustainable sources as much as possible, including waste, biomass, and CO2. It has developed new recycling technologies and moved beyond Tier I suppliers. Using artificial intelligence and other technology solutions enables the company to collaborate and increase visibility into a large number of Tier 2 and Sub Tier suppliers and subcontractors. Covestro has ambitious goals for 2025. They include ensuring 100 percent of suppliers are compliant with sustainability requirements, achieving net zero emissions by 2035, improving the living conditions of 10 million people in underserved markets by 2025, increasing the added value of carbon used in manufacturing products through a carbon productivity initiative, and aligning 80% of R&D projects with the UN SDGs.

It’s Still All About People

Sustainable procurement takes procurement to a new level to minimize negative environmental effects through supplier selection. But in its fullness, it embraces more than considering products made from renewable resources. It also embraces utilizing ethical suppliers, guaranteeing fair labor conditions, supporting human rights, supporting local communities, and including diverse suppliers.

Developing and implementing a holistic approach to procuring sustainably may seem complex, but starting with even simple, sustainable practices can lead to value generation, like recycling and utilizing technology to reduce travel-related emissions. Sustainable procurement is a way of doing business to make meaningful contributions to the world’s future. It is really about people.