What is Sustainable Procurement and Why it is Important for Businesses?

What is Sustainable Procurement and Why it is Important for Businesses

The progressive world of business is more concerned about social and environmental responsibilities than ever before. Businesses are more complaint and willing to understand the importance of environmental, social, and governance (ESG) problems, and for good reason. Sustainable procurement practices are beneficial for not only the environment but the businesses themselves with competitive advantages like none other. Some of the most common CSR projects nowadays concentrate on challenges like these.
 
For years, forward-thinking companies have focused on these challenges from the standpoint of brand value, but they are now equally important in the eyes of customers.
 
People are increasingly interested in purchasing environmentally friendly goods. They need to know the environmental effect of their purchases and use. Many customers primarily base their buying decisions on a company’s efforts to reduce its greenhouse gas emissions and the resulting influence on global warming. Such customers purchase goods while trying to have the smallest carbon footprint possible and consume products of companies with similar objectives.
 
The best way to ensure that company’s value chain has a positive impact on the environment and society is to adopt sustainable procurement practices.

What Is Sustainable Procurement?

Sustainable Procurement

Sustainable procurement is the procurement of goods and services for the fulfillment of company needs and supply chain, in an environmentally friendly manner. It includes the incorporation of CSR concepts into a company’s procurement procedures and decisions while ensuring a long-term plan for meeting functionality demands.
 
Sustainable procurement incorporates specifications and criteria that are based on responsible sourcing, waste reduction, and activities that are beneficial for economic development.

Sustainable procurement guarantees that a company’s key sustainability values are upheld throughout the product and service life cycle. Future-proofing a company’s sustainable purchases and investments by creating sustainable policies that boost its long-term viability is the best approach.

Top 5 Amazing Benefits of Sustainable Procurement

Setting up a sustainable procurement strategy and adhering to more sustainable purchasing procedures have various advantages for firm. As an added benefit, establishing long-term supply networks benefits everyone. A company’s direct and upstream suppliers become more sustainable and appealing partners as a result of the advantages that the company gets from the change.
 
Sustainable procurement offers 5 major advantages to companies for implementing a sustainable buying strategy.

1. Sustainable Procurement Reduces The Risk of Supply Chain Failures

It is natural to concentrate on the continuity of product supply or the cost of each unit when analyzing supplier risk. However, as a company begins to focus on sustainability objectives, it must examine its suppliers more closely. The odds are that the suppliers aren’t mostly too keen on internal control in other aspects of their company if they are intentionally disposing of garbage inappropriately or producing excessive pollution.
 
Ultimately, the business may have to bear the brunt of the impact when things go wrong and would need to explain disruptions to its customers, not to mention the potential financial implications.

Read More: – What is Source to Pay – A Guide to Source to Pay (S2P) Process

2. Sustainable Procurement Safeguard Reputation

Many companies have suffered the effects of sourcing products or services from suppliers with unsustainable and damaging practices. Ultimately, the company that receives any service is partially or fully accountable for long-term environmental effects as well as other factors. Any company must ensure that all such suppliers understand and enhance their environmental, social, and governance (ESG) indicators, locate new suppliers, and take action to either improve or replace their current suppliers. Having sustainable procurement procedures can safeguard a company’s repute and provide protection against all potential lawsuits and governmental prohibitions.

3. Saving Money By Reducing Employee Cost

How frequently do Chief Procurement Officers (CPO) get to the bottom of procurement costs?

Many companies continue to have relationships with suppliers that are damaging to both their repute and profits without recognizing the losses. Working with your suppliers in the pursuit of a sustainable procurement strategy means that companies can reduce waste and save money in the process. When companies consume less to produce more, it requires a smaller workforce and results in higher returns

What is Sustainable Procurement

4. Provide The Groundwork For Increased Earnings

Many organizations have previously been deterred from adopting a sustainable procurement life cycle because of the high cost involved.
 
Modern consumers, on the other hand, are ready to pay extra for a product or service that has a transparent supply chain and can be shown to be environmentally friendly and long-lasting. Sustainable energy, water and product sources including recyclable products are easier to replicate, scale and develop. While initial costs may seem comparatively high, the long-term difference in higher profits, advantageous revenue, and recurring customers makes companies with such procurement stand out.

Read More:- What is Procure to Pay – A Guide to Procure to Pay (P2P) Process

4. Supply Chain Is More Secure

By focusing on sustainability, companies can almost immediately decrease their carbon footprint sufficiently. If a sustainable sourcing strategy is poorly implemented, it may not show any results in record time but the security of the supply chain alone makes it worth implementing, even if on a smaller scale.
 
The supply chain is better protected from potential interruptions by concentrating on these challenges. For example, a company system built while considering sustainability is not at any risk of the supply chain facing shortages. Trade conflicts, currency rate instability, and even COVID-19 are much more likely to affect traditional and older sources like oils but solar energy is free from such scenarios. Therefore, all suppliers that provide services based on sustainable sources and environmentally friendly practices are secure and affect against unexpected workflow obstacles.

‍How To Introduce Sustainable Procurement Processes To A Business?

All of the above-mentioned advantages, as well as many more, have proven to be the key factor in the success of companies using them at scaleA company can get off to a strong start with sustainability procurement by using the following guidelines:

Understanding The Timeline

Understanding the starting point and the idea thoroughly started is the first step in any journey. The following points must be considered while building a sustainable buying strategy

  1. Understand how sustainability fits into the broader company objectives and how that affects the strategy, KPIs, and targets to be used there.
  2. Comparing procurement sustainability efforts with those of competitors, and industry leaders. It’s still possible to acquire a notion of how a company stacks up against the competition by gathering the industry expertise of stakeholders, suppliers, and other relationships.
  3. Analyze and comprehend the degree to which environmental, social, and governance (ESG) and CSR footprints are influenced by direct and upstream suppliers. If the company exists in a different sector, this might be much higher or lower than the quoted two-thirds average.

‍Setting The Groundwork For The Plan is Critical

A thorough work-through and analysis of all systems involved in the procurement are necessary for the much-needed groundwork. The best concept should be followed while setting corporate goals. Specific, measurable, achievable, realistic, and time-bound goals should be set as part of a project’s objectives.
 
A crucial task is to go back to the prior benchmarking work. For example

  1. Which businesses’ sustainable purchasing practices are to be emulated?
  2. Which standards should a company match?
  3. Where are sustainable procurement processes in the business, lacking and observing the opportunities and options needed to become the industry leader? They must be sought out and implemented.
  4. To develop new cross-industry procedures or standards.

The most important thing is to make sure the established goals have a clear value in terms of the sustainability advantages they may provide.

Outlining A Plan For Achieving Goals:

Setting forth a plan for success is next. A two-step procedure is the most effective method to do this.

First and foremost, any company should develop fundamental rules that can be shared throughout itself, with the suppliers, and, if required, with authorities in the countries where the suppliers are located. For maximum cross-pollination in the policies, it’s important to grasp the distinct regulatory requirements in each area. For example, an environmental regulator in Southeast Asia may have a different set of overall standards than an environmental regulator in Europe. Even so, there are likely to be several parallels that will assist all businesses in developing rules that are applicable across all regions and business partners.
 
The second thing to do is to set out the essentials and the most important projects. These may include

  1. New suppliers must be carbon-neutral, and current suppliers must agree to meet this goal.
  2. To ensure that a certain amount of garbage is recycled or repurposed.
  3. Zero-tolerance for poor working conditionsviolations of basic human rights, and compliance with all ethical and corporate moral regulations.

Continually Develop Sustainable Supply Chain and Make It Happen

At this point, a company may begin to implement sustainable supply chain vision. Even if it takes years, a clear path and a strategy for continuous improvement are guaranteed if the following process is implemented.
 
The policies and expectations must develop in tandem with the changing global environment and the demands of the market.
The details are:

  1. It’s important to make sure that the procurement process is consistent with company values, rules, and non-negotiable standards.
  2. Focus on making these themes part of supply chain culture rather than just another checklist is crucial.
  3. Scale-up of the implementation of policies and processes to guarantee sustainability across all levels of the supply chain and procurement process.
  4. For environmental reasons, working with suppliers in a particular manner and considering them as partners in your firm.
  5. Be on the lookout for any discrepancies between the goals and the outcomes anticipated, and have a strategy in place for dealing with the situation if the results don’t meet the expected standards.

Why Is It Important to Have A Sustainable Procurement Supply Chain?

Green Procurement

Sustainable procurement is critical for every firm, regardless of size or sector. A supply chain is only sustainable if it is well-managed. When it comes to making buying choices, no company can fully control the actions of its suppliers, but it can choose who to partner with and how to analyze risk and sustainability.
 
While discussing the financial metrics and future-proofing advantages of sustainable procurement, the fact is that concentrating on sustainability will help avoid interruptions and maximize the possibilities provided by the value chain. Environmental, social, and governance (ESG) activities may also benefit from the flexibility it provides. To concentrate on in-house activities a company must know that suppliers are doing their best to decrease the carbon footprint of the company and business as a whole.

Final Thoughts:

Consumers are more concerned than ever before with environmental issues, in addition to financial ones. Companies must understand that customers are influenced by the latest trends. As an example, a business that uses eco-friendly bamboo and hemp in its products may be very environmentally friendly right now. Consumers may begin to doubt previously unquestionable eco-credentials if businesses fail to innovate and explore new possibilities. Therefore, these practices can make or break a business at any level. With the details stated, any company can benefit from sustainable procurement with proper implementation. 

Procurement does not need to be complicated and confusing. Simfoni allows you to optimize your business for social responsibility, social impact, and sustainable development. Contact us now to get the procurement solution your business not only needs but deserves.

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