Sustainability is growing as a priority for consumers and businesses alike. More and more customers are demanding responsibly sourced products, and it is becoming increasingly important to take the state of the environment into account when operating as a business. Aside from concerns over ethics and consumer demand, however, sustainable practices can also be more economical, and should, consequently, be taken into account when formulating sourcing and procurement strategy.
Transparency and sustainability can be a significant draw for consumers. People can be highly loyal to companies that share and act on their values, and many are willing to pay a higher price for such things. They are also more likely to trust an organization that is open about its processes and sources. In terms of costs, sometimes environmentally friendly policies are also more cost-effective. Reducing fuel use and CO2 emissions, for example, can provide significant savings.
The stats: sustainability is on the rise
EcoVadis has just released its latest report on sustainable procurement, titled “Scaling Up Sustainable Procurement: A New Phase of Expansion Must Begin.” It surveyed 120 companies in a variety of industries, as well as 360 suppliers. The study reveals that 97% of procurement organizations believe that sustainability and corporate social responsibility are important or critically important to operations. The motivation for sustainability varies by region — in the United States, the main motivator is risk mitigation, while European companies are more concerned about brand reputation.
The report also found that 76% of companies noticed an improvement in brand reputation as a result of sustainable procurement activities, and 55% had better supplier relationships. Sustainability is becoming a bigger focus for companies across the board, with the study showing an increase in sustainable activities in several areas over 2013, the year the previous version of this study was released. In order to remain competitive, companies can no longer afford to ignore this aspect of procurement decisions.
Putting it into practice
So how does a company ensure that its procurement strategy is sustainable? The process starts from within the organization. By setting an example at the highest levels of management and encouraging employee investment, it will be easier to integrate sustainability practices at every level. Soliciting suggestions and feedback from employees can bring in new ideas and increase engagement. Making sustainability part of an individual’s goals can also be effective.
Feedback and transparency are also valuable. Not only does more information increase one’s ability to make effective procurement decisions, but it also allows people to see the impact that their suggestions and efforts make, both on the company and the environment and on people around the world.
In terms of implementation, strong external reporting is essential. Without an accurate view of the supply chain and individual supplier performance, it is impossible to manage sustainability throughout the procurement process. By the same token, having a good relationship with suppliers is critical, as communication and cooperation can improve results significantly.
There are several factors to consider when establishing procurement strategy, and it can be difficult to determine what areas to prioritize (production, transportation, etc.). It is important to have a thorough understanding of the supply chain, the company’s goals, and stakeholder values. This makes it possible to narrow down the most important aspects and the ones that have the greatest impact and decide what can be ignored or receive less emphasis. By keeping all these factors in mind, it will be possible to gradually establish a supply chain that benefits both the environment and the company.