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Sustainability in procurement: A seven-step roadmap

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Guide
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Words by Saleem Rizvi and Chris Taylor

Historically, sustainability in procurement has often been overlooked or only included as a tick-box exercise without achieving real impact. But this is rapidly changing. What actions should senior business and procurement leaders be taking to make tangible sustainability impacts?

“Sustainable procurement” – baking sustainability into all procurement practices and activities – is often no longer an offshoot of procurement, but rather is becoming a new normal. Organisations are under mounting pressure from different directions to show a commitment to sustainability: regulatory changes are upping reporting requirements and stakeholders are looking for strong sustainability credentials. Procurement is uniquely positioned to revolutionise the supply chain, so shifting to a new modus operandi will be vital for organisations to meet their sustainability targets.

So, whether you are looking to introduce sustainable procurement into your organisation or check that you are on the right path, this step-by-step guide sets out a roadmap for making sustainability in procurement a reality.
 

1) Know your objectives

The ESG landscape can feel dauntingly broad, and it can be tempting to try to address everything at once. But quality over quantity is the preferred approach: a focussed strategy to tackle your organisation’s core issues will be more impactful than addressing a large number of issues only superficially.  For instance, an organisation heavily involved in the agricultural industry may prioritise water concerns, while a professional services firm will likely deliver a bigger impact by reducing business travel-related emissions.

So, be sure you’re clear on your company’s commitments and prioritise your actions accordingly. Segment your objectives based on their importance to the business – with the highest priority given to external commitments – and the potential for procurement to drive change.
 

2) Connect with your organisation’s sustainability leads

Too often, sustainability is treated as a vertical, with minimal horizontal integration across different business functions, including procurement. Procurement  and sustainability teams have traditionally had different objectives, but breaking down siloed ways of working is a must for aligning the two functions.

Regular face time with sustainability teams allows procurement teams to align with their objectives and understand where they are best placed to provide support. This establishes a bidirectional feedback channel for subject matter expertise and also allows teams to align short-term objectives (like annual procurement pipelines) with longer-term sustainability planning (such as for 2030 and 2050 goals). 

3) Empower your procurement team

Although intent is typically in the right place, procurement teams often lack the time, expertise, and incentives to rigorously pursue the sustainability agenda. Their organisation’s policies and methodologies tend not to prioritise sustainability in procurement, sidelining this in favour of cost and service considerations.

Senior leaders should provide buy-in and clear objectives, such as a target number of suppliers with science-based targets (validated by the Science-Based Targets initiative, or SBTi), to give Procurement the mandate it needs to focus on sustainability improvements and prioritise their activities accordingly.

Training and upskilling must be at the core of a sustainability transformation; make sure to equip procurement professionals with the skills and knowledge to respond appropriately to a more sustainability-focussed business as usual. Procurement teams need the ability and freedom to think outside the box to pull on less commonly used levers, such as collaborating more closely with existing suppliers and making joint investments to encourage suppliers to push for sustainability improvements.

4) Embed sustainability in Procurement’s BAU activities

Once policies and methodologies are updated to reflect the organisation’s sustainability goals, it is key to put these new ways of working into practice. This can take many forms, from incorporating sustainability-focussed criteria into RFP evaluation methodologies to gathering supplier-specific data, and much more. It will take some time for procurement teams to shift from a two-dimensional approach of cost and quality to a three-dimensional one incorporating sustainability. That said, if done correctly, sustainable procurement builds on, rather than completely overhauling, existing processes, which means the transition may be smoother than you expect.

5) The key to sustainability in procurement lies in Supplier Relationship Management

Understanding your supply base can be challenging at the best of times; information and data are not always available, supplier fragmentation increases the workload, and supplier engagement often gets deprioritised in favour of more pressing matters. 

To help you focus your resources on the right suppliers, segment your suppliers based on a simple two-by-two matrix measuring their strategic importance to your business and their sustainability readiness.  Based on this matrix, create a tailored supplier engagement approach per cluster, with greater handholding for key strategic suppliers with low sustainability maturity. Including sustainability in SRM sessions helps your team to better understand your suppliers’ challenges and how your organisation can support them as well as demonstrating the importance of sustainability to your business. 

6) Don’t let the data stop you

Procurement teams commonly ask: what if you have incomplete data? While it is important to understand current baselines and how changes will be tracked, don’t let imperfect data hold you back. Teams can run successful projects that are headed in the right direction without being derailed by an inability to measure sustainability improvements perfectly. Kicking off with projects like rolling out electric vehicle fleets (even if you can’t fully quantify the emissions reduction) can serve as compelling sustainability success stories for the business.

As the business matures, the data landscape will typically evolve in tandem. Less granular emissions calculation methodologies, such as spend-based approaches, can be gradually replaced by supplier-specific data or activity data. This enhanced data can then be used for tracking and reporting on KPIs – feeding back into the planning process – and teams will more quickly be able to identify their burning platforms.

7) For lasting impact, share your procurement team’s knowledge

Knowledge erosion is a challenge in many organisations, and sustainability expertise is no exception; it is all too easy for best practice to be lost or passed over.

To capture the good work your teams do, encourage them to create a “sustainable procurement playbook”. This should serve as a guide for your procurement team, centralising knowledge and making recommendations for the future. As with all the other actions in this roadmap, this step must be iterative, not static: teams should review the document regularly to make sure it integrates new learnings and identifies areas to address next.

From cost and quality to sustainability: A new era for procurement

Traditionally, Procurement has operated with two key objectives: minimising cost and optimising quality. But as sustainability moves ever closer to the heart of organisations’ strategies, we must transition towards a three-dimensional model which adopts sustainability as another pillar of procurement.

Organisations cannot successfully drive the sustainability agenda forward without Procurement, and Procurement can no longer ignore its role in the sustainability transition. Organisations that push sustainability in procurement up the strategic agenda will not only keep pace with change but also capitalise on new opportunities for growth.