“In March of 2020, Prime Minister Scott Morrison pledged that all procurement by Australian Government agencies will factor in environmental sustainability and the use of recycled content when determining value for money.”
This statement may have appeared in the news, but the initiative wasn’t news to anyone. Because ethical and responsible procurement, in Australia at least, had long become a fundamental consideration within the sourcing and buying processes of leading organisations within both the public and private sectors – and for many excellent reasons.
What is Sustainable Procurement?
In a world where everything’s connected, Sustainable Procurement considerations extend far beyond the issues of recycled materials, waste reduction and landfill.
At its most basic, Sustainable Procurement describes using a whole-life cost approach to purchasing. The aim is to make sure what an organisation purchases:
- Achieves its current business objectives
- Future-proofs its long-term objectives
- Delivers sustainable value and benefits for the broader economy, society and environment.
Examples of Sustainable Procurement practices
Typical practices include compliance with environmental laws and targets, the removal of hazardous materials and waste in supply chains, and the thorough vetting of suppliers for fair labour practices.
More broadly, procurement professionals, working in tandem with their suppliers, have the ability to foster commercial environments intolerant to criminal conduct such as modern slavery, corruption and bribery, and minimise or eradicate harmful environmental impacts on air quality and waterways. They can ensure labour conditions for overseas workers in their supply chain are improved, and human rights are safe-guarded.
The bigger picture is to ensure a better result and increased business returns for everyone involved in the production and supply chain, from buyers and distributors to workers.
Why is Sustainable Procurement important?
Governments and consumers are increasingly aware of sustainability issues and are supporting, and sometimes actively demanding, that businesses act to implement ethical sourcing programmes. So by implementing Sustainable Procurement within your organisation, you’re positioning yourself as a committed part of the sustainability solution. And from a purely balance-sheet perspective all, modelling shows that for every $1 spent, Sustainable Procurement pays back a $4.12 return.
What are the benefits of Sustainable Procurement processes?
The flow-on effects are significant and wide-ranging. Outcomes include (but are not limited to):
- Growth in revenue, brand equity and customer loyalty due to the increasing consumer preference of supporting organisations that embrace sustainability.
- Long-term cost savings and efficiencies, such as through the lower consumption of energy. Cost savings also allow re-investment into your organisation.
- The development, growth and strengthening of the local economy by the enlistment of SME suppliers.
- The cultivation of supplier innovation.
- Improved workers’ rights and conditions.
- Cultivation of local employment.
- Reputation for fairly and ethically produced goods.
- Ability to attract higher-quality talent.
- Reducing resource wastage.
- Reducing emissions.
- Reducing over-consumption.
- Developing sustainable procurement practices also enables an organisation to better future-proof itself against scarcity in supply and changes in social, economic and environmental factors, both local and global.
The opportunities you miss by not procuring sustainably
- Optimising your procurement contracts so they take full advantage of your buying power.
- Taking advantage of new governmental guidelines designed to foster Sustainable Procurement.
- Minimising wastage of global resources – for instance, transitioning to the use of low carbon-emitting vehicles and continuing with those still reliant on fossil fuels.
- Reducing costs due to inefficient consumption. By identifying your organisation’s needs accurately, you create the ability to eliminate wastage in terms of both expenditure and the production and stockpiling of unnecessary, unused procured items.
- Discouraging or eliminating unscrupulous practices such as low wages for workers or the use of harmful chemicals.
- Growing the reputation of your organisation and its brands. These face significant financial risk if they become associated with undesirable practices like unsafe labour conditions or habitat pollution.
Does Sustainable Procurement drive up costs?
It will usually save you costs if you’ve defined your needs accurately and use Life Cycle costing throughout a contract.
Does Sustainable Procurement increase the procurement cycle?
Not necessarily. Of course, if you’re doing something new and innovative and setting a new benchmark, things can take longer. But it doesn’t usually need to. Use tried and tested tools and standards, liaise with experienced peers and stakeholders, and delegate to the market so they can innovate and come to you with new solutions rather than believing you have to create everything from scratch.
6 best practices to introduce Sustainable Procurement into your organisation
1. Develop a Sustainable Procurement policy.
2. Link it with your organisation’s existing policies and procedures.
3. Identify what the priorities are for your organisation, then work within those parameters.
4. Have your policy endorsed by senior management to cultivate a top-down approach to adoption.
5. Commit to making Sustainable Procurement a standard part of your organisation’s standard procurement process.
6. Research and evaluate the procurement tools and resources currently available.
Take your purchasing to the next level and make your procurement sustainable
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