Sustainable procurement management is becoming increasingly important for businesses of all sizes.
It’s no surprise that the universe is becoming more concerned with environmental issues. Customers desire to understand where their products are made and what they are made of, and businesses want to be seen as environmental leaders. Sustainable procurement is one-way businesses can stake their claim to sustainable practices.
This article will go over Sustainable Procurement Management in detail and how it can help your business procure assets sustainably . With this guide by EcoEd, you can better understand Sustainable Procurement Management.
This blog will explore the various aspects of sustainable procurement management, including the pillars of sustainable procurement, what benefits it can bring, and how it can help organizations meet their sustainability goals.
What is sustainable procurement?
Sustainable procurement is the incorporation of Corporate Social Responsibility (CSR) principles into your company’s procurement processes and decisions while maintaining compliance with the needs of your stakeholders.
Sustainable procurement incorporates specifications, requirements, and criteria compatible with environmental and societal protection. It includes many issues other than child labour or the use of harmful chemicals that can harm people or the environment.
Sustainable procurement management and lifecycle management are two concepts that are closely linked.
The link between these two concepts is clear: sustainable procurement management helps to ensure that products are produced in an environmentally friendly manner, while life cycle management helps to minimize the environmental impact of those products over their entire life span. To know more about lifecycle management, read our blog on “Sustainability simulation.”
Principles of sustainable procurement
Sustainable procurement is built on three pillars: environmental protection, social responsibility, and economic prosperity.
1. Environmental protection
One of the primary objectives of sustainable procurement is to reduce the environmental impact of products and services over their entire lifecycle. This includes everything from raw material extraction to manufacturing to product use and disposal.
Procurers should consider factors such as a product’s energy efficiency, recycled content, toxins and emissions, packaging, and durability when making this decision.
The pandemic has brought this pillar to the forefront, with increased PPE use posing a severe environmental threat.
Businesses must be aware of recycling PPE and other materials used throughout their operations to reduce the amount of waste generated.
2. Social responsibility
Another goal of sustainable procurement is to ensure that the goods and services purchased contribute to social responsibility. This includes providing safe and fair working conditions and preventing child labour and human trafficking.
Keeping local communities at the forefront of your policies and processes will ensure that your company has a larger and longer-lasting impact on our larger society.
3. Economic prosperity
Sustainable procurement aims to boost economic prosperity by encouraging competitiveness, innovation, and entrepreneurship.
This includes assisting businesses of all sizes, including small businesses and those owned by marginalised groups, as well as putting money in research and development.
It also focuses on streamlining and making processes as efficient as possible to make the best use of resources and ultimately improve your bottom line.
Benefits of sustainable procurement management
The return on investment of sustainable procurement methods is far from straightforward. However, the key advantages of sustainable procurement are easier to identify:
1. Improves risk management
One of the critical benefits of SPM is improved risk management. By engaging with reliable suppliers who adhere to global sustainability standards, organizations can reduce their exposure to supply chain risks such as non-compliance with regulations, counterfeiting, product recalls, etc.
SPM also helps organizations build trust with their stakeholders by demonstrating their commitment to responsible sourcing.
2. Reduces costs
Sustainable procurement management can be an effective way for businesses to reduce costs and improve their bottom line.
With sustainable procurement, companies can source materials and services from suppliers that have been vetted for their commitment to ethical practices, environmental sustainability, and social responsibility.
This allows businesses to save on costs by avoiding higher-priced suppliers who do not meet these standards. Sustainable procurement also helps companies reduce their carbon footprint by reducing the amount of waste they produce and helping them become more energy efficient.
3. Promotes innovation and differentiation
Sustainable procurement management promotes innovation and differentiation in the market and encourages businesses to source from suppliers committed to environmental, social, and economic sustainability.
This helps businesses differentiate themselves from their competitors and ensures they meet corporate social responsibility goals.
Sustainable procurement also encourages research and development of new technologies, materials, and processes that positively impact the environment.
By doing so, businesses can stay ahead of the competition and remain competitive in the market.
4. Improves procurement indicators
One of the major benefits of sustainable procurement management is that it improves procurement indicators such as cost savings, quality, delivery performance, supplier satisfaction and environmental compliance.
By implementing sustainable procurement practices, businesses can ensure they make the most out of their resources while protecting the environment.
5. Improves talent acquisition and retention
Sustainable procurement management is a key component of any successful business.
By implementing sustainable procurement practices, companies can ensure that they are getting the best value for their money and that their employees are getting fair wages and working conditions.
This can help attract top talent to the company and retain them for longer periods of time. Additionally, it can also help create a more positive work environment which can lead to increased productivity and employee satisfaction.
Approaches to sustainable procurement
While there is no one-size-fits-all approach to sustainable procurement that organizations can take, the two most common approaches that are combined and used are:
1. Product-Based approach
The Product-Based Approach is one of the most popular approaches to sustainable procurement, as it focuses on selecting products that are produced in a socially responsible and environmentally friendly manner.
This approach encourages companies to select suppliers who adhere to ethical standards and use sustainable production processes, thus helping to reduce their carbon footprint.
Furthermore, this approach also looks at the full life cycle of a product, from sourcing, production and distribution to disposal. By taking into account all stages of a product’s life cycle, companies can ensure that their products are as sustainable as possible.
2. Supplier-Based approach
Another approach to sustainable procurement is the supplier-based approach. This involves selecting suppliers who have a strong commitment to sustainability, such as those who use renewable energy or have ethical labour practices.
According to the supplier-based approach, your company will examine your suppliers’ corporate social responsibility (CSR) systems to check if they comply with the law as well as your CSR standards. This allows you to quantify the environmental and social risks that your supplier poses to you.
The assessments conducted using this method frequently aid in the improvement of the entire supply chain by providing incentives to other businesses to be more sustainable.
Sustainable procurement management is essential for companies to stay competitive in today’s market. It involves the use of environmentally friendly materials, processes and services that are cost-effective, reduce waste and conserves natural resources.
Companies must also consider the social impact of their procurement decisions by taking into account the ethical implications and working conditions of the suppliers they choose.
By making sustainable procurement a priority, companies can reduce their environmental footprint while ensuring that their products meet customer expectations. EcoEd, a Chilean enterprise specialized in sustainability education, has created this module to help organizations better understand and manage their procurement processes in a more sustainable manner. The module covers topics such as understanding the environmental impacts of different products and services, assessing suppliers’ performance with regards to sustainability, and developing strategies for sustainable procurement.
You can learn more in the simulation at EDUardo, where you can put into practice the theoretical concepts and apply the newly acquired knowledge by managing a manufacturing enterprise that faces green transition.