Sustainable Procurement

What Is Sustainable Procurement?

Sustainable Procurement is arguably one of the major requirements currently facing organisations. As well as pressures from environmental legislation driven by the EU 20/20/20 Directive (the EU has committed to reduce emissions to 20% below 1990 levels by 2020), commercial operations can improve market position through clear and visible Corporate Social Responsibility (CSR) policies. There can be few more visible examples of an organisation’s commitment to its role in society than buying in a way that protects the environment.

Sustainable Procurement fundamentally requires a company to give due consideration to the environmental impact of the products and services that it buys. Environmental factors are included in the purchase decision alongside the traditional elements of cost, quality, timing and risk. It requires a company to take responsibility for the environmental footprint of its activities and for the supply chain used to support these activities.

Why Consider Sustainable Procurement?

There are three main reasons for a company to consider environmental and social factors in its purchases:

To have confidence that its suppliers conform to appropriate regulations.

To maintain and enhance its reputation by demonstrating environmental and social responsibility.

To take advantage of the many opportunities where what is good for the environment is also good for the business.

In addition, the resulting improved processes, alternative products and reduced consumption all offer the chance to get better value for money and/or make bottom line savings while reducing the company’s environmental footprint.

Sustainable Procurement Strategy

Successful adoption of Sustainable Procurement requires that it becomes a key element of a company’s overall sustainability strategy and a strategic goal in itself.

You have in all probability found this page through an internet search engine. In doing such research you will have observed that the vast majority of references to the term ‘Sustainable Procurement Strategy’ relate to UK Government Departments and Local Government. In most of these cases you will have read that the department or local authority has “produced a document”. While such a document may be an essential step in adopting the approach, of course, it is far from enough. An organisation where everybody can lay hands upon their own personal copy of a strategy document is not necessarily one in which Sustainability has joined the other drivers of day-to-day procurement activities.

Many companies have developed a sustainable procurement strategy; fewer have successfully implemented it. As with all strategies, the key element of success is the ability to translate vision and objectives into real-life ongoing ways of working.
An essential lesson when implementing Sustainable Procurement is that the practices adopted to sustain our environment must themselves be sustainable. This is not a ‘flavour of the month’ where the purchasing team include environmental considerations in the supplier selection processes while the flavour is still in fashion. We are talking about a long-term, fundamental change to the way an organisation carries out a key element of its business.

Implementing Sustainable Procurement

Successful implementation requires a change project to modify existing purchasing processes and procedures to include sustainability. A key requirement of the change process is influencing key stakeholders to include environmental considerations in their business decisions. The exercise should look to achieve some quick wins where the benefits of Sustainable Procurement in action are clearly demonstrated and all parties can be encouraged by their wide communication.

A Sustainable Procurement project is not in principle different from other projects that an organisation runs to bring about change. However, some long-known key factors which will help improve the chances of success are:

Sponsorship: Active sponsorship is key to the success of any change programme and applies to Sustainable Procurement as much as to any other. There are no hard and fast rules about where a sponsor should sit in the organisation – what is important is that he or she is enthusiastic about the introduction of Sustainable Procurement and has the right level of influence in the organisation. One thing to consider when selecting a sponsor is that there are two main aspects to the project:

Changing the purchasing processes to incorporate sustainability.

Facilitating ownership of the company’s environmental targets by those involved in purchasing activities.

Team: The project team should have representation from a number of areas in addition to the Purchasing Department. These include people from areas of the business responsible for purchasing goods or services that are likely to contribute a ‘quick win’ during the project (such as travel), those bearing responsibility for environmental issues, specialists from areas that have a significant environmental impact (utilities or engineering for example) and the people who will carry out training on the topic.

Project management: A project requiring input from people in a wide range of areas within the organisation, many of whom will be working outside their own core discipline, requires formal project management, including:

Defining a project charter (or remit) with clearly defined objectives, scope and benefits.

Holding a launch meeting at which everybody fully understands and agrees the project content and their own contribution.

Having a plan with clearly defined activities and responsibilities.

Reviewing progress against, and maintaining, the plan as the project develops.

Change management: The Sustainable Procurement project is about changing existing purchasing processes and all the usual aspects of a business change project need to be considered: stakeholder management, communications, overcoming resistance, documenting and training on the new processes. As with all business change, the mechanics of new processes and procedures are easier to change than culture. Some people may need to be challenged, persuaded and coached towards new ways of working.

A positive start: An important early activity in the project is to classify spend categories by their level of environmental impact and the ease with which this can be reduced by purchasing activity. Based on this classification the categories that are likely to provide quick sustainability wins can be identified and prioritised. It is probably best to limit the number of categories that are initially tackled, in order to allow learning from the early stages to be applied in later ones. Another good early action is to identify current projects with potential environmental opportunity (e.g. a new building) and to engage in these projects with the aim of sharing best practice and influencing project direction to include environmental impact. In all these early stages it is suggested that opportunities that are good business as well as good for the environment are preferable; gaining company-wide commitment for these is likely to be easier.

Training: Existing procurement training practices and documentation need to be updated to incorporate sustainability as part of the project. The training should also introduce environmental and CSR principles to ensure that the goals of the exercise are understood and shared by all involved.

Another key factor in the success of Sustainable Procurement is the quality of the purchasing processes within the organisation. Adding sustainability to good purchasing is easier than adopting this approach when the existing processes are poor.

What Does Good Purchasing Look Like?

An organisation that already has effective purchasing management practices can be identified thus:

‘Buying’ is seen as a genuine profession making a significant contribution to the organisation’s performance.

The key role of buyers is that of finding and selecting suppliers and then negotiating contracts. In volume manufacturing or retail businesses the placing of purchase orders and ongoing management of these orders will be passed to material planning staff, with the buyer responsible only for the relationship between the two businesses. In a contracting or project business the buyer may well place and manage individual orders – but the key skill of buying is that of selecting and negotiating with suppliers.

Senior management give a strategic lead relating to categories of items and services being bought. A clear definition of the categories of items and services being procured and of the policies applicable to each category is essential to all sourcing and negotiating. Large companies, for example, may identify categories of raw material, services, IS solutions etc., which will be subject to corporate deals and appoint a central buyer to establish the contract for all operating units while other items will be left under the control of the individual units. The goal of true supplier partnership may be applied to some commodities, with single sourcing as a pre-requisite, whereas risk assessment may dictate that other categories must be multiple-sourced to increase the certainty of supply.

Supplier selection is based on the broad criteria of supplier capability, quality and risk as well as initial cost. Professional procurement organisations have long ago learned the lesson that the cheapest price is rarely the best long-term solution. Buyers, or the technical colleagues that they bring into the evaluation process, need to assess supplier processes, investment, quality and training standards to ensure that they are leading their organisation into a genuine partnership for the future.

True professionals have taken the lesson of ‘what you measure is what you get’ to heart. Buyers who are driven to reduce purchase spend will reduce the prices they pay – either by changing suppliers or compromising on elements of service, packaging, order frequency etc. While spend may be reduced, the inevitable outcome is increased costs in terms of shortages, quality problems, additional unpacking, difficulties in locating stock, disposal of packing materials, higher inventory resulting from larger batches delivered less frequently and so on.

Sustainability requires the purchasing organisation to be aware of both lifecycle costs and the lifecycle environmental impact associated with their purchase decision – and to add these factors into their selection of and relationship with suppliers.

Scope of Possible MLG Assistance

At MLG we have extensive project and change management experience as well as professional skills in procurement management. We can help you to successfully define and execute your Sustainable Procurement project. Depending on the skill levels within your project team we can provide a range of inputs including expert knowledge of this subject, acting as trainers and providing mentoring support for your project team in this subject and in the general issues of project and change management. We can also take active involvement in the development and execution of your plans if this is appropriate. Typically we would help structure, run and provide input to your project definition workshop, provide expert input throughout, or help manage the execution of, your project.