Sustainable procurement: Definition, state of play and advantages

Sustainable procurement definition
Updated on September 13th, 2022
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The use of the term ‘sustainable procurement’ may be growing within the context of the green transition and resource economics (the energy sector, for example), but what does it actually mean? Sustainable procurement refers to procurement which takes into consideration fundamental economic criteria (price, quality, timeframes, etc.) as well as the concepts of sustainable development and social responsibility. This article sheds light on what sustainable procurement means, the current state of play, how it impacts supplier relationships, and its benefits.

Defining sustainable procurement

Procurement approaches are constantly required to meet fundamental criteria such as price, quality, delivery timeframes and service levels. In addition to meeting the latter, sustainable procurement is also required to meet new criteria rooted in sustainable development and social responsibility, in-keeping with the overall life cycle and economic outlook.

From a buyer’s perspective, sustainable procurement primarily consists of balancing three essential concepts:

  1. Environment: eco-friendly concerns, energy performance, waste reduction, product lifespan, protection of resources, etc.
  2. Ethics and society: respect for human rights, working conditions, inclusivity, diversity, etc.
  3. Economy: cost, product quality, delivery timeframes, etc.

Echoing the notion of sustainable development[1] as defined by the World Commission on Environment and Development created by the United Nations, the EcoVadis global digital platform designed to rate and pool CSR performance defines sustainable procurement as ‘adopting and integrating sustainable development principles within procurement decisions and processes, while ensuring that they meet the requirements of the business and its stakeholders. This includes both sustainably developed products and materials, as well as responsibility for supplier conduct.

Sustainable procurement: state of play

According to data collected as part of a report produced by a specialist provider of consulting, outsourcing and technology solutions to procurement and supply chain, GEP, improving sustainability is one of the top three goals set by procurement managers for the forthcoming year[2].

Companies’ growing interest in sustainable development has been boosted by strengthened regulatory requirements which can be seen within daily procurement transactions.

Among the survey’s respondents, 55% confirmed their key performance indicators (KPIs) are linked to their company’s CSR strategy2. This could include average supplier payment timeframes, the percentage of suppliers subjected to a CSR audit, or the percentage of procurement expected to meet environmental, social and/or societal criteria.

This approach now forms an integral part of procurement processes and supplier assessment. Among buyers interviewed as part of the latest sustainable procurement barometer published by EcoVadis, 69% said they take suppliers’ social and environmental performance into consideration when choosing partners (up to 18 points compared to the 2019 report)[3].

Additionally, 51% of businesses have now implemented a sustainable procurement policy (up to 13 points compared to the 2019 report).

Over the past few years, focus has turned to the ethics and social aspect of business transactions. This commitment can be seen in the implementation of supplier codes of conduct, specific contractual clauses and comprehensive sustainable procurement policies.

A total of 74% of businesses implemented a supplier code of conduct (up to 10 points compared to 2019)3.

Forging sustainable buyer-supplier relationships

Procurement services are not alone in the move towards sustainable approaches; their actions are strengthened by a wide range of best practices and like-minded partners. Sustainable procurement affects all stakeholders. Suppliers and their environmental, social and societal impact are as crucial a component as companies and end buyers.

Let’s consider the distribution of greenhouse gas emissions in the context of a carbon footprint. Today, scope 3, which incorporates all emissions produced by various stakeholders (suppliers, partners, customers, etc.) represents an average of 80% to 90% of the total emissions produced by a company’s activities[4]. This means that even if a company reduces its own carbon emissions, significant impact cannot be achieved without cooperation throughout the entire value chain.

For this to happen, relationships between buyers and suppliers must undergo continual improvement. By working hand-in-hand and holding each other accountable, businesses can encourage their partners to adopt more sustainable behaviour and decision-making to provide an optimised offer with the potential to unlock new opportunities.

This approach would also have a positive impact on relationships between the various stakeholders involved. According to a study published by Forrester, 72% of businesses believe that implementing CSR-focused initiatives helped improve their supplier relationships[5]. And this is by no means the only benefit of sustainable procurement.

Benefits of sustainable procurement

Quantifying the return on investment of sustainable procurement approaches is by no means simple. However, the key benefits of sustainable procurement are easier to identify:

  1. Improves risk management;
  2. Reduces costs;
  3. Promotes innovation and differentiation;
  4. Increases turnover;
  5. Improves procurement indicators;
  6. Improves talent acquisition and retention.

Today, many businesses are prioritising the implementation of a sustainable procurement policy. For businesses faced with the expectations of all stakeholders and an increasingly demanding regulatory landscape, committing to a sustainable procurement approach is becoming the obvious choice, both from the perspective of procurement managers and suppliers.

Implementing actions to foster sustainable procurement

Businesses are implementing CSR policies in line with well-established criteria to fulfil their commitments. These policies are used internally to raise employee awareness and externally with suppliers and other partners. A virtuous cycle can be created if everyone works together.

Best practices for ensuring sustainable procurement:

  1. Define the company’s CSR criteria;
  2. Pre-empt procurement requirements;
  3. Favour long-lasting and high-quality products;
  4. Choose partners in line with the established CSR policy;
  5. Learn about suppliers and maintain a relationship of trust with them;
  6. Integrate a life-cycle and overall financial rationale into procurement processes;
  7. Pay attention to product labels;
  8. Train procurement teams;
  9. Raise awareness among other teams.

Combining sustainable procurement, CSR policies and compliance is entirely within reach and can lead to substantial gains for businesses.

[1] “A form of development that meets the needs of current generations, without compromising the ability of future generations to respond to their own needs.”

[3] EcoVadis, Sustainable Procurement Barometer 2021

[5] Forrester, Seize the CSR Opportunity, 2021