Sustainability is a bigger concern that ever, and that’s unlikely to change in the near future. Consumers are raising their expectations in terms of both environmental responsibility and ethical practices, and to ignore these factors is to risk losing reputation and business. With the prevalence of the internet and social media, it is very easy for consumers to discover a company’s practices and to spread the word about them. Businesses need to step up their focus on these issues or risk being left behind, and procurement decisions play a substantial role in putting sustainability into practice.
Measurable effects of sustainability
Studies show that sustainable practices have a measurable impact on success. EcoVadis notes that 76% of companies that implemented sustainable procurement polices saw an improvement in brand reputation. In line with that, the World Economic Forum has found that sustainable supply chain practices increase an organization’s brand value by 15%-30%. While reputation is obviously not the only reason to introduce such practices, it is worth noting that this extra effort can bring financial benefits as well as ethical ones.
There are several different aspects of sustainable procurement. Environmental sustainability involves measures such as using biodegradable packaging, reducing shipping and transportation impact (by decreasing the amount and weight of shipments, for example), switching from paper documents to electronic ones, and using suppliers with processes that minimize pollution.
Another aspect is sourcing from small businesses and local companies. This supports the local economy, and also makes it easier to monitor and control ethical practices throughout the supply chain. If a supplier is based halfway around the world, in a country with very different labor laws, it can be difficult to determine whether employees are being treated fairly or whether safe and sustainable materials are used.
Sourcing from organizations in developing countries can still be sustainable and ethical, however. It provides valuable jobs in areas that need economic support. This does require extra care when selecting suppliers, though, to avoid the aforementioned issues. Procurement needs to be able to see its partners’ practices in order to be confident that it is working with ethical organizations.
How sustainability affects brand reputation
The most obvious way that a reputation for sustainability benefits a company’s brand is in the behavior of consumers. As awareness of and interest in ethical practices rises, more people are examining an organization’s practices before deciding to become a customer. Many of them are willing to pay more for the same product or service if it comes from a sustainable company. Likewise, the revelation of poor environmental or social practices can spread quickly and be very damaging to a company’s image.
However, this is not the only advantage of having visible sustainable policies. Relationships and business deals with other companies are also affected. As more organizations begin to make sustainability a priority, they will also be looking for sustainable partners. This can result in higher-quality supply chain partners and better deals. It can even improve credit rating and funding terms when the company is transparent about its supply chain and has strong policies in place.
Finally, a focus on sustainability also lowers risk in terms of product quality and safety. For example, a company that is not in touch with its suppliers may be unaware that paint used in its products contains lead, or that food products are being made or packaged in unsanitary ways. This raises the risk of product recalls and lawsuits, which can be extremely damaging to brand reputation. If a company knows in detail how its products are made and what they are made with, it is easier to identify and prevent these issues.
Regardless of whether the primary motivation is economics, ethics, or reducing risk, there are many benefits to be found from implementing sustainable procurement practices. And as consumer expectations become higher and stricter, it is in an organization’s best interests to pay close attention to its sourcing and procurement strategy.