Why Sustainable Procurement is a Burning Issue for Business

A major challenge to procurement is the rapidly rising interest in sustainability. The age of the ‘triple bottom line’ is upon us where the assumption is that profit should no longer be at the expense of people (the social dimensions) and planet (the environmental dimension). The pressure on business to deliver economic returns from greener goods is mounting and corporate social responsibility is no longer something that can be dismissed as a fad for environmental fanatics or ‘tree huggers’. The planet’s resources are in decline and the climate is changing, placing increasing pressures on companies to reduce carbon emissions, recycle or re-use, and to develop green technologies. Sustainable development is here to stay and only shows signs of gaining even greater momentum for the foreseeable future.

In today’s business world we face an array of difficulties whose scope and complexity can make them intractable. Sustainability has become a burning issue to all in business. And yet if we think carefully through the trends affecting procurement and supply chain management today and focus on using resources productively, sustainability needn’t be one of them.

As the boundaries of our economy expand, we become ever more reliant on longer and more complex supply chains. As a consequence we see the debate around sustainable procurement especially, becoming more complicated, and never has it been more important for us to understand what is going on, why it happens and what works in a commercial environment.

Corporate Social Responsibility (CSR) policies - things have moved on.  The impact of the tragedy and on-going crisis in Japan has brought home what many had already started to realize: that without robust sustainable procurement practices, many organizations are in danger of severe disruptions to their business. 

Managers are increasingly looking to improve the social and environmental impacts of their supply chains but say they feel blocked by forces beyond their control. Efforts to boost the sustainability of supply chains are hampered by cost, complexity, lack of information and know-how, and the sense that some of their principle stakeholders are not deeply concerned about the issue. Many sceptics focus on financial factors. This may be a response largely due to the weak economy. It also shows that people aren’t convinced by academics, consultants, and others who argue that improving sustainability won’t necessarily cut into profits, and may in fact help the bottom line. And yet it seems that a consensus of opinion reflects concern about sustainability and Supply Chain performance.

Sustainable procurement takes into account a range of environmental, social and economic consequences of a whole range of production methods and services, such as design, non-renewable material use, manufacturing processes, service delivery, logistics and transportation options, maintenance, recycling and disposal, and not forgetting each tier of the supplier base. The driver is not ‘just’ CSR anymore, but a range of influences from statutory, through to political and social, and of course commercial.  Implementing processes that truly meet the demands of good sustainable procurement practice means each level of supplier is required to do the same.

There are four core areas that impact on the sustainable debate. These are:

Ethical and sustainable trading - Where once it seemed the world had unlimited resources, now it’s all too obvious that increasing populations and ecological challenges, means the world is no longer able to replenish those valuable resources.

To date, retailers and other directly consumer-facing businesses have borne the brunt of societal and business scrutiny, with criticism of unethical employment practices amongst suppliers hitting the headlines for companies such as Primark and Nike.  Not understanding how suppliers conduct their business can lead to reputational damage that is hard to shake off, and increasingly business customers as well as consumers are looking deeper into the provenance of products.

Waste - Landfill is no longer an option and costs of disposal are increasingly expensive. By cutting waste, production costs are reduced and processes become more streamlined.

Carbon emissions - According to the Carbon Disclosure Project, supply chain report 2011, 50% of an average organization’s emissions come from the supply chain.  So, if organizations do not put their house in order, they will soon be forced to by legislation. For instance, the Carbon Reduction Commitment’s Energy Efficient Scheme in the UK is the first mandatory carbon trading scheme and targets those producing higher emissions.

Energy use - Declining reserves of fossil fuels, and rising costs of those fuels, means everyone has the responsibility to make best use of those resources.

Clearly, businesses cannot afford to ignore sustainability. By incorporating social and environmental dimensions into their business practices, companies can realise tangible benefits - not only to the wider society but also to the bottom-line of their business.

You can read more about Gerard Chick’s perspective on sustainability in his new book, The Procurement Value Proposition, co-authored by Robert Handfield.