Sustainable procurement (also called responsible procurement or green procurement) is an integral part of the materiality matrix of a company’s environmental Social Governess (ESG) or corporate social responsibilities (CSR). Sustainable procurement involves responsible procurement of products or services for the business rather than buying products or services from the company based on price, delivery time and durability. Green procurement along with these factors also comprises of environmental, social and governance sustainable factors throughout the life cycle of products or services.
Responsible procurement in the supply chain is a vital part for the companies who are focusing on reducing the greenhouse emissions (carbon reduction) especially scope 3 emissions which is the biggest percentage in any company operation i.e., more than 70 % of any company operations comprise of scope 3 emissions.
What does sustainable procurement mean?
Sustainability means meeting the needs of the present generation without compromising the need of future generations whereas procurement means buying a product or services for the business in the same context sustainable procurement (primary) means sourcing the product or services for your business that have the lowest impact as much as possible on the environment and high positive impact on social.
Sustainability procurement encompasses the people, planet and profit which is also known as the triple bottom line or 3Ps. This means that companies with sustainable procurement will go beyond the financial performance and also consider the positive impact on people and the environment in their supply chain.
What are the 4 elements of sustainable and responsible procurement?
The sustainable procurement best practices ensure the benefit to the companies in all three pillars of Sustainable procurement irrespective of many barriers to sustainable procurement i.e., Environment Conservation, Social Responsibility, Economic Viability and Risk Mitigation. Moreover, the main objectives of sustainable procurement are as follows
- Environment Conservation: The core objective of green procurement is to make sure the minimizing the effect on the environment. This involves the selection of a supplier or a product which have a lower carbon footprint, efficient and renewable energy use, prioritized eco-friendly process and has the plan or follows the international standard to reduce its environmental footprint for environmental conversation.
- Social Responsibility: Sustainable procurement aims to ensure that suppliers adhere to fair labour practices, safe working conditions, and ethical standards. By doing so, it contributes to the well-being of workers and communities associated with the supply chain, fostering social equity and responsibility. Socially responsible procurement presents the opportunity for the company to have supplier diversity along with local supplier utilization which in return ensures the quality employment of the local community.
- Economic Viability: Sustainable procurement involves the companies having the best purchasing decision by having local competitors which promotes the involvement of the local community in economic growth. Moreover, sustainable procurement ensures the community’s well-being, anti-bribery and fair business among the competitors.
- Risk Mitigation: By diversifying suppliers and considering the resilience of supply chains, sustainable procurement helps organizations mitigate risks associated with disruptions, such as natural disasters, political instability, or supply shortages.
Why sustainable procurement is important?
Responsible procurement holds immense importance for businesses in today’s world, where environmental, social, and ethical concerns are gaining prominent recognition. whereas procurement success factors present a very good opportunity for brand positioning, building reputation, marketing the brand as ecofriendly and gaining the trust of customers and partners. The importance of green and responsible procurement is as follows:
- Financial Stability: Sustainability in procurement reduces the operating cost of the business thereby increasing the operating income by procuring efficient and sustainable goods and services. Responsible procurement will develop the market capacities for Sustainable Solutions which will increase market competitiveness in the market. Market competitiveness will serve to bring the winning side more revenue.
- Risk Management: Sustainable and ethical procurement presents diverse options from different suppliers which provide the business flexibility of sourcing the products or services to mitigate the worst-case scenario. Diversifying suppliers and incorporating sustainability considerations into procurement decisions can help organizations mitigate risks associated with supply chain disruptions, regulatory changes, and reputational damage.
- Innovation and Competitiveness: Collaborating with sustainable suppliers encourages innovation. Organizations can develop unique products, processes, and services that align with emerging market trends and consumer preferences.
- Supply Chain Transparency: Responsible procurement encourages transparency in supply chains. This transparency helps organizations and consumers make informed decisions about the products they choose to support.
How can sustainable and ethical procurement be implemented?
Implementing sustainable or green procurement involves a strategic approach that integrates environmental, social, and economic considerations into every stage of the procurement process. It begins with obtaining leadership commitment and conducting a baseline assessment of current practices, followed by stakeholder engagement to ensure a holistic approach. Clear guidelines and evaluation criteria are established to assess suppliers’ sustainability performance, fostering collaborative relationships with those sharing similar values. Training and awareness initiatives educate procurement teams and stakeholders about sustainable principles, while decision-making tools like life cycle assessments aid in identifying environmentally friendly options.
Sustainability clauses in contracts, KPIs, and data tracking mechanisms ensure transparency, accountability, and continuous improvement. Collaborating with industry networks and leveraging technology streamline efforts, while integration with CSR strategies ensures alignment with broader goals. This comprehensive approach transforms procurement from transactional to strategic, minimizing environmental impact, supporting social responsibility, mitigating risks, fostering innovation, and enhancing the organization’s reputation while contributing to a more sustainable future.
Sustainable procurement practices
Sustainable procurement practices involve adopting strategies that prioritize environmentally, socially, and economically responsible sourcing of goods and services. These practices encompass a range of actions, starting with the assessment and selection of suppliers based on their environmental performance, ethical practices, and social responsibility. Embracing a lifecycle approach, organizations consider the entire product journey, from raw materials to disposal, and opt for products designed for durability and recyclability. Collaboration with suppliers to develop innovative, sustainable solutions is key, encouraging joint initiatives that align with sustainability goals.
Responsible procurement requirements emphasize transparency and traceability, necessitating the clear mapping of the supply chain and disclosure of supplier practices. Circular economy principles are applied, favoring products that can be reused or recycled. Energy and resource efficiency are sought through the selection of energy-efficient products and streamlined digital procurement processes. Local and sustainable sourcing is promoted to reduce transportation emissions and support local economies. Measurement, reporting, and continuous improvement form the backbone, with defined KPIs tracking impacts and progress shared with stakeholders. Ultimately, ethical procurement practices not only align with an organization’s sustainability objectives but also drive operational efficiencies and a positive reputation.
Sustainable and green procurement examples
Examples of sustainable and green procurement practices across various industries:
Green Energy Procurement: Organizations can source renewable energy for their operations, such as solar or wind power, to reduce their carbon footprint and support the transition to clean energy sources.
Eco-Friendly Office Supplies: Purchasing office supplies made from recycled materials or products that are recyclable or biodegradable can minimize waste and promote responsible resource usage.
Fair Trade Products: Procuring products that are certified as fair trade ensures that workers in developing countries are paid fair wages and work in safe conditions, while also supporting environmentally friendly farming practices.
Locally Sourced Food: Restaurants and catering services can prioritize sourcing ingredients from local farmers and producers to reduce transportation-related emissions and support the local economy.
Low-Impact Construction Materials: Construction projects can opt for sustainable building materials, such as reclaimed wood, recycled steel, and low-emission concrete, to decrease the environmental impact of their projects.
Energy-Efficient Appliances and Equipment: When procuring appliances, machinery, or equipment, organizations can choose products with high energy efficiency ratings to reduce energy consumption over their lifecycle.
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