How to Put Sustainability at the Center of Your Procurement Strategy
By Hugo Britt | February 17, 2022
As more companies around the world commit to sustainability goals, net-zero, and carbon-neutrality, one thing is becoming clear: businesses cannot reach their sustainability targets without the procurement function taking a leading role.
Sustainability at the center of your procurement strategy
Show the business benefits of sustainability
Strong environmental, social, and governance (ESG) credentials can drive down costs by 5 to 10% by increasing the focus on operational efficiency and waste reduction.
Ramping up sustainability can help companies stay ahead of regulatory changes, satisfy environmentally-conscious customers, meet the requirements of investors, and attract and retain) values-driven talent.
Pay attention to scope 2 and 3 emissions
Under the Greenhouse Gas Protocol, emissions are broken down into three categories:
Scope 1: Direct emissions
This refers to the activities of an organization that are under its control across company facilities and fleets.
Scope 2: Indirect emissions
Scope 2 refers to the emissions created during the production of any electricity purchased by an organization. A company that sources electricity from a coal-fired plant, for example, will have high scope 2 emissions.
Scope 3: All other indirect emissions
This refers to the activities of an organization that they do not own or control, including waste, water usage, business travel, and (importantly) procurement.
In other words, you might work in an energy-efficient, low-emissions office and drive an all-electric company car, but unfortunately scope 1 isn’t enough. Where is your electricity coming from? What are your suppliers’ sustainability credentials, and your suppliers’ suppliers? According to McKinsey, two-thirds of the average company’s ESG footprint lies with its suppliers.
Tackling scope 3 emissions is a complex, lengthy, and difficult task, mainly because they are hard to track and your organization has less control over how they are addressed. But it’s also an opportunity for procurement experts to show their true worth. Start by estimating the emissions along the entire supply chain, prioritize where to get started (hint: start with the biggest emitters), and collaborate with suppliers to make a difference.
Have a bold plan
Procurement has an opportunity to set bold, long-term sustainability goals that will change the game for the organization. McKinsey recommends a three-step process where procurement establishes the baseline and works out how far the organization could go, establishes the core policies and metrics to get there, then makes it happen by scaling up and successfully rolling out sustainability initiatives.
Partner with your organization’s sustainability team
If your company has a class=”refLink” person or team in charge of sustainability, they should be procurement’s best friends. This is because any sustainability expert worth their salt will understand that they need procurement 100% on-board if they intend to address scope 2 and 3 emissions.
A partnership with the sustainability team can be helpful for generating attention (and funding) for green procurement initiatives, sharing KPIs, setting priorities, and for influencing product design. Some organizations may even consider taking the bold step of merging the procurement and sustainability function in recognition of where the company’s biggest sustainability challenges exist.
Set supplier sustainability KPIs
Without key performance indicators (KPIs) it can be difficult to monitor and track supplier progress towards sustainability goals. First, procurement must establish a baseline through a supplier audit or survey, then agree upon realistic and achievable sustainability improvement goals.
Sustainability KPIs will vary by sector, but examples may include:
- Percentage of product packaging made up of recycled materials.
- Direct or indirect carbon emissions.
- Percentage of water recycled/reused.
- Energy saved due to efficiency improvements or energy conservation.
Larger organizations may have the budget and wherewithal to assist their suppliers with meeting these goals; for example, by providing training programs or other assistance to help suppliers meet certification requirements.
Make use of certification programs
There are dozens of certification programs available at the local, state, federal, and international level around supplier sustainability. Rather than attempting to reinvent the wheel and spend time and money on ongoing supplier auditing, it makes more sense to rely on a trusted certification provider who can track supplier compliance in areas such as carbon emissions, waste disposal, or water usage.
Don’t have the resources to focus on incorporating sustainability into your procurement strategy? Partnering with a GPO will help you save procurement costs, time, and effort, and allow you to focus on making a positive difference. Get in touch with Una today to learn more.