A roadmap for sustainable procurement

Steps 1-4: Baseline and Build a Value Case

STEP 1: UNDERSTAND YOUR ORGANISATION'S ESG OBJECTIVES

You can’t improve everything, at least not all at once. This is especially true for a set of ideals as broad as those encapsulated by ESG. Make sure, therefore, that you know what is truly important to your organisation and where you can make a difference. Sustainability targets range in commitment levels – from internal aspirations to being externally reported and audited –  and so they require different levels of focus and rigour and will help define Procurement’s agenda and where to spend its time. Assess if your business has accurate baselines and target, as well as agreed tracking measures. If not, push for definitions, data sources, and ways to translate a % improvement into a monetary equivalent. 

STEP 2: ENGAGE YOUR SUSTAINABILITY LEADS

If your organisation has a sustainability function, then it should be setting the business-level strategy from which the procurement team derives its own strategy. It should act as the Subject Matter Experts (SMEs) to guide the rest of the organisation around policy, sustainability approaches, and requirements. Understand their key themes or ‘capitals’, and then agree those which Procurement is well-placed to drive forwards. 

STEP 3: BASELINE YOUR SUSTAINABLE PROCUREMENT APPROACH AND CAPABILITY

As the agents of change, your team needs to be equipped with the right targets, skills, and tools, so make an honest assessment of your current capability. Ask the questions:

• Does the team understand the sustainability agenda and how it can play a part?
• Do you have a clear policy and playbook to guide and support the team?
• Do you have agreed tender questions, scoring approaches, and contract terms to hand?
• Is sustainability built into the fabric of the procurement process, especially in category strategies?

STEP 4: TRIAGE YOUR SPEND CATEGORIES AGAINST SUSTAINABILITY THEMES

A key step is to triage spend against agreed sustainability themes to understand which spend areas can drive which themes. Weight these areas by spend, sustainability opportunity, and ability to impact. Ability to impact can be defined by several things but notably by the complexity or likelihood of change or improvement and the sourcing pipeline. Where (re)sourcing is not possible, you still have the option to improve through supplier relationship management (SRM) processes, including joint target setting and innovation. Build a value case just as you would a savings pipeline.

Steps 5-7: Action Change

STEP 5: IMPROVE AND UPDATE YOUR SOURCING APPROACH

Train and encourage the team to think in terms of cost, service, and ESG and, as such, to adapt sourcing methodologies to reflect this additional parameter. Implement new tender questions (refined by theme or capital), new scoring and evaluation approaches, as well as effective sign-off governance to ensure ESG is effectively considered and does not become a tick-box. Review your sourcing pipeline now, and identify where and how you will address sustainability, through what levers, and what opportunities might be available. 

STEP 6: IMPROVE AND UPDATE YOUR SRM (SUPPLIER RELATIONSHIP MANAGEMENT) APPROACH

In many ways, sustainability is synonymous with collaboration: macro goals shared by the many, distilled into multiple and sustained changes to behaviour. It mirrors a collaborative approach that seeks to deliver long-term value through better engagement with supplier partners. ESG fits neatly into this SRM world of dialogue, target setting, KPIs, and mutual innovation, so make sustainability a core part of SRM approaches. Importantly, set long-term requirements so that the supply base has time to prepare and adapt. Ensure you don’t penalise SMEs, who may have fewer resources to develop their ESG capabilities. Instead, give them longer to react. 

STEP 7: ESTABLISH CLEAR SUSTAINABILITY KPIS (KEY PERFORMANCE INDICATORS)

Sustainability improvements are hindered by an inherent lack of accurate data. Each sustainability theme should have a measure and target, even if they are crude at first while data improves. If we consider carbon, we can see a tiering process along the lines of:

• Step 1 – use spend multiplied by emission factors to find hotspots in the wider supply chain
• Step 2 – use supplier-level reporting data to compare suppliers
• Step 3 – use service- or product-level calculations to compare purchases

Wherever we can convert a KPI into a currency measure, it becomes significantly more impactful.

Steps 8-10: Embed Change

STEP 8: INVEST IN SUSTAINABLE PROCUREMENT TRAINING

Whilst there will be motivation in procurement teams to drive change, it may not be universal; it is all too easy to revert to old ways when the next cost target lands or performance reviews come, and they do not evaluate ESG value delivery. Use training to embed change. Start with the basics, and move towards a specific toolkit:

1. What do we mean by sustainability? Why is it such an important topic for Procurement? How is Procurement well placed to help?
2. Explore the key themes of People (social), Planet (environmental) and Profit (economic) sustainability, how to measure impacts, and the key opportunity levers.
3. Introduce your organisation-specific methodology and toolkit, likely to comprise baselining methodologies, sourcing, and SRM. Consider support resources, such as the Supply Chain Sustainability School.

STEP 9: BUILD A SUSTAINABLE PROCUREMENT PLAYBOOK

A playbook can serve as guide and governance to procurement teams and lay out the boundaries of what Procurement will do, how it will do it, and whom it will engage with to maximise outcomes. The more this can be built into existing processes and BAU, the better, and it also needs to be owned and kept alive. The sustainability landscape is developing quickly, and we need to absorb best practices as we find them.

STEP 10:  COMMUNICATE YOUR SUSTAINABLE PROCUREMENT POLICY

Finally, make a statement of intent. Make the effort and aspiration real by communicating it broadly within your organisation – both to customers and to the public – allowing Procurement’s activity to be held to account. Focus on specific commitments that the procurement team can confidently defend and demonstrate. Generalisations and buzz words only add to the growing murkiness of greenwashing. Clear commitments show suppliers, partners, and customers alike that Procurement can and will make a real difference.