6 steps to take toward sustainable procurement

Sustainable procurement can be defined as the process of finding, sourcing, and acquiring goods and services while considering environmental and social factors.

It balances:

• Meeting business goals,

• Complying with customer and stakeholder demands, 

• Mitigating environmental impact, 

• Improving supply chain transparency,

• and doing good in the world. 

But, taking on a sustainable procurement agenda isn't easy. That's why I've compiled this list of 6 steps you can take on your sustainable procurement journey. 

Procurement's role in sustainability

Procurement is also in a unique position to affect the emissions of the entire organization significantly. Here's some evidence of why procurement is adopting sustainability: 

• Scope 3 emissions account for approximately 70-80% of the entire emissions. At Google, the number is 93%, at Shell 88%, and at Microsoft 97% (Forrester, 2021).
• Sustainability has a clear impact on revenue growth, brand value increase (15-30%+), and risk reduction (can reduce costs by 9-16%) (Ecovadis, 2020).
• Other research has found that high-performing CPOs prioritize CSR topics 13-44% more than everyone else, especially in environmental protection topics (Deloitte, 2021).
• Company-wide CSR commitments and actions increase employee satisfaction and help in getting the best talent for your organization (Greener Ideal, 2020).  

Here are 6 steps to take toward sustainable procurement

1. Define your priorities  

What is your key priority in sustainable procurement? Why do you wish to measure your sustainability performance? Do your customers/investors/suppliers require it? How about your current and future employees?

Answering these questions helps you to define the direction, method, and accuracy that is required. It could make sense to benchmark with your peers by looking into their Carbon Disclosure Project (CDP) or annual sustainability reports.

After all, the requirements are often industry-specific. With this being said, embarking on your sustainable procurement journey will require your time and resource investment - the urge to begin this journey must come from you. 

2. Build your business case

There are two steps here in building your business case: understanding your needs, but also your limitations.

First, to understand your needs, understanding how big of a challenge we are talking about is crucial. Say, you’re a company like Google or Microsoft. Most likely your scope 1 emissions (being those of your own manufacturing for example) are not high, whereas your scope 3 emissions are probably quite significant.

In terms of different categories or regions then, doing a spend analysis helps you in identifying the best way to proceed. Identifying “hot spots” and prioritizing your efforts can be useful as a major share of your spend could be assigned to a handful of suppliers. These suppliers are likely to contribute a considerable portion of your emissions as well.  

The second step is understanding your limitations. What data and resources do you have available? If you have a sophisticated procurement analytics solution in place, measuring your sustainability performance is a lot easier than by combining thousands of transaction rows in Excel. Do you have the capability to master this process yourself, or do you have the resources to acquire a solution that can help you? 

3. Set targets 

What is your ultimate goal? To become carbon neutral, to reach net zero? To engage your suppliers, understand their sustainability efforts, and become more responsible? 

Whether your sustainability strategy is supplier or category-focused (or both), setting targets and knowing what to compare to gives you a sense of purpose. It also allows you to see if you are going in the right direction.   

If you choose to go with a category-level view of your emissions, setting a baseline is important. This can be done by calculating your spend data and combining that with different emissions factors.

Doing this in-house may be a tedious exercise. Therefore, partnering with a company that manages your spend data and could combine that with emissions data would save you lots of hours (and tears).

Combining the scorecards with your procurement data helps you understand where to collaborate with high-impact suppliers. 

4. Rally people to collaborate with you 

Sustainability may be a key priority for your company, but where is the driver coming from? Your ESG function, marketing, the management?

In many cases, although procurement plays a key role in sustainability in the organization, the function is often still not the key driver for it in the organization.

Consider who you can collaborate with. Whether it be a partner outside your organization, someone from another function, or even a competitor to brainstorm with, new ways of thinking may be needed to progress and understand the full picture. 

Where the future of sustainable procurement is going can be summed up with the words: supplier collaboration. If you're not already engaging your suppliers in your sustainability plans, rally them to collaborate with you as well. 

5. Start measuring your sustainability

Although the preparing steps are important, they don’t mean anything unless you actually start measuring your sustainable procurement. For simple procurement sustainability reporting, we want  

• a handful of sustainability KPIs (such as your carbon footprint),

• which are trusted by domain experts, authorities and the public (perhaps third party verified by an audit company),

• are compatible with established reporting frameworks (e.g. the GHG protocol),

• have good coverage across spend categories and suppliers,

• and finally, deliver actionable sustainability insights to help make an impact. 

How to get accurate Scope 3 emission data:

1. Improving primary data availability and quality (for example, collecting more data from your primary suppliers and verifying it)
2. Using high-quality secondary data (industry averages for emissions factors can help in getting the big picture). Also, incorporating the manufacturing location into the secondary data provides a much more accurate view.
3. Focusing on emission hotspots in the supply chain or categories and determining which ones are the most important suppliers.

Indicators of Scope 3 emissions 

• Supplier Scorecards: as the name suggests, scorecards to assess your individual suppliers. Either the supplier assesses themselves or an external company is involved. These scorecards highlight the differences of each supplier, are helpful in assessing risks, and are critical for tactical sustainability sourcing. On the other hand, what supplier scorecards lack is achieving high coverage and getting category or product-specific views.
• Category Indicators: these show emissions for each category. In general, spend data is combined with sustainability data from providers like Ecoinvent, Exiobase, or OpenLCA to estimate emissions. This approach is especially helpful in category risk management. It highlights the overall category impact and provides a strategic sustainability view. The challenges with this approach, however, are that it requires at least the manufacturing location, and that supplier specificity can be lacking if not enough primary data is gotten.

6. Share the info (both internally and externally) 

Your findings and insights are just about as useful as buying sand on the beach if they are not utilized. How can you incorporate your results into your business decision-making?

In an ideal world, when deciding on a new supplier or changing a transportation route, we would consider the sustainability aspect in addition to the economic impacts of these decisions.

In order to be able to do that, the correct people need to have access to these insights. Utilizing sustainability analytics helps in sharing the data with the entire organization. 

In terms of external stakeholders, consider if your sustainable procurement data could be incorporated into existing annual reports, if there is a separate section you could build, and if this is something you can utilize when discussing with your customers and investors.

The time to act is now.

Sustainable procurement is a journey - not something that happens overnight. The real work begins when you start evaluating your suppliers or measuring your emissions.

One thing is certain: sustainability is not a passing trend but will be the standard of the future, and the time to act is now. 

We at Sievo can support you with combining spend data with sustainability and third-party data. Don’t hesitate to contact us for more information!