Sustainable Procurement Strategy

How to Make Your Next Procurement Project More Sustainable

International sourcing is being widely adopted by companies across the world who want to grow and expand at a global scale, and while this development has been fruitful economically for low and middle-income countries thanks to huge volumes of business flowing in and generating employment, there is a growing need for a sustainable procurement strategy in every sourcing project being carried out and implemented. Businesses across the globe are recognizing the need for sustainable procurement strategies when it comes to international sourcing and sourcing products from India, and these also include various stakeholders such as employees, corporate boards, and shareholders. A study conducted by NYU’s Stern Center for Sustainable Business reported that about 50% of the growth of consumer packaged goods came from products that were marketed sustainably, while products that were marketed as sustainable grew 5.6 times faster than the products that weren’t. Moreover, major businesses have been swift to respond to this growing need for ethical and sustainable procurement practices, and an astounding 93% of the 250 biggest companies globally are actively reporting on sustainability. The sustainability market is set to have a net worth of $150 billion by the end of 2021, and here are a few ways through which companies can make their next procurement project more sustainable: 

  • Laying a Strong Foundation of Commitment

To ensure ethical and sustainable procurement, the first step is laying a strong foundation of commitment across the organization, especially the board and departments that concern procurement and sustainability before engaging with suppliers to discuss issues concerning the same. An overarching and holistic target-setting approach is crucial and can help answer important questions like how to include sustainability in the procurement process with more ease and accuracy. Collaboration and mutual understanding between the sustainability department and the procurement department are non-negotiable for achieving science-based targets effectively. 

  • Smart Pre-Selection of Suppliers to Make Engagement Manageable

While researching requirements and expenditures by studying available data and past practices, it is also crucial to understand the current specifications and research for alternatives through a preliminary market analysis that can help in identifying key products and services that can be leveraged to develop a sound and sustainable procurement strategy. The smart pre-selection of suppliers is crucial, and those with the biggest carbon footprints should be eliminated from the list to ensure that sustainable procurement practices are integrated into the sourcing and procurement process more seamlessly and effortlessly. Reviewing and auditing suppliers, and short-listing the ones that are already drivers of sustainable procurement can save time, money, and a considerable amount of human effort. Moreover, the lesser the number of suppliers a company has, the more manageable the engagement with them is in the long run. 

  • Creating a Strategy That Works Specifically for the Business

Procurement organizations and teams can differ in size according to the requirements and needs of various companies, and hence, there is no generic or one-fits-all approach towards adopting sustainable procurement practices when it comes to international sourcing. Companies and executives need to create a sustainable procurement strategy that takes into account the priorities, key goals, high-risk areas, and roadblocks. Being realistic with the goals while keeping in mind how the functions and operations of the organizations will be affected by the sustainable procurement strategy to reduce overall turbulence during implementation. Moreover, a detailed plan can also help in tracking progress and performance in the long run, and optimize processes effectively. 

  • Ensuring That There Is Open Communication With Suppliers

Ensuring that there is direct, open, and honest communication with suppliers that have been screened and shortlisted is essential to align sustainable business goals and lay important groundwork for ethical processes and practices. Shortlisting vendors and suppliers with strong credentials for sustainability is only the beginning- it is important to collaborate and communicate with them about sustainability and related practices to put the detailed plan into action. Understanding the stakes and position of suppliers can help in making ethical and sustainable procurement more valuable and marketable to them. Moreover, businesses can also emphasize the benefits that come from business continuity and supply security. Other initiatives to ensure that suppliers too are drivers of sustainable procurement is to incentivize them through awards and recognition based on their overall initiatives and participation. 

  • Sustainability-Oriented Contracting and Implementation

When it comes to contracting and implementation, the sustainable procurement strategy that has been formulated can be implemented and integrated into the performance clauses to ensure that they are taken seriously and the predetermined sustainability goals are being met timely. This can be included during the preparation and the finalization of the supplier contracts to achieve these important goals through sustainable procurement practices. Some sustainable procurement examples include asking vendors to deliver goods in bulk to save on transportation resources, delivering goods outside peak hours, and reusing packaging materials on the suppliers’ end. 

  • Working In Collaboration to Meet the Common Goal

Collaboration between the organization and suppliers is key to meet the common goal: sustainability. Suppliers can be targeted in a host of different ways to align them with the sustainable procurement strategy developed by the organization, while their expertise can also be levied to rectify and refine existing processes. Developing long-term relationships is undoubtedly the best way to ensure that this collaboration is meaningful and fruitful. Moreover, 70% of companies claim that multi-stakeholder collaborations are crucial to implementing ethical and sustainable procurement practices in the long run, and this also gives important insights to optimize existing processes to work towards a common goal collectively. 

  • Transparency in the Supply Chain

Finally, a good sustainable procurement strategy must include initiatives and plans that focus on increasing the overall transparency in the supply chain for better tracking and management. Sustainable procurement practices can only be implemented when organizations have complete visibility of their tier 1 suppliers and make it mandatory for these suppliers to maintain the same levels of visibility with their subsequent suppliers. According to a report by EcoVadis, 45% of the organizations only have visibility with tier 1 suppliers. What’s more concerning is that an appalling 28% claim to have no visibility into their supply chains at all. Hence, to make ethical and sustainable procurement a reality, organizations need to dive deep into the inner workings of the supply chain and strive to increase overall transparency. 

Change takes time, and when it comes to international sourcing, the monumental scale can make it an exhausting process. However, through these small and incremental changes, organizations can be crucial drivers of sustainable procurement and encourage ethical and sustainable procurement to pave the way for a significant, positive, and powerful impact.

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