Introduction:
In today’s world, measuring sustainable performance is crucial for any organization committed to responsible practices. Procurement plays a key role in this by ensuring that the company’s buying decisions align with its sustainability goals. Effective measurement of sustainable performance helps organizations monitor progress, make informed choices, and engage stakeholders. This guide delves into essential Key Performance Indicators (KPIs) and metrics for assessing sustainable performance, highlighting how these tools can enhance environmental and social responsibility in procurement.
Process for Measuring Sustainable Performance
Companies should consider the economy, environment, and society, not just internal stakeholders. The best method to assure relevance is to utilise a formal standard for organised, transparent reporting.
Sustainability tracking and reporting has no universal standard. The GRI Standard is adopted by 73% of the 250 biggest corporations in over 100 countries.
The modular GRI Standards include the Universal Standards, Sector Standards, and Topic Standards. Each Standard begins with a lengthy use description.
Standardisation will simplify comparisons and promote openness.
What are sustainable procurement KPIs?
Each company chooses metrics depending on their business and industry priorities.
Sustainable procurement might entail assessing CO2 footprint or reducing modern slavery. Read our comprehensive Sustainable Procurement 101 if you’re unsure.
Let’s examine some useful performance metrics:
Ecological sustainability metrics
Environmental sustainability measures dominate most organisations’ sustainability tracking. Environmental metrics encompass several climate, waste, and energy-related activities.
Sustainability KPIs involve:
- Reduced CO2 emissions in kt
- Energy use in kWh
- Water use in metric tonnes
- Waste reduction in cubic metres
- Metric-ton plastic reduction
- MIPS efficiency in material input per service
- Decibels of noise pollution
- Chemical safety compliance
- Environmental compliance
- Number of eco-audited suppliers
Energy and emissions
Carbon emissions and other pollutants from fossil fuels cause climate change.
Energy efficiency may be improved by using more renewable energy to minimise greenhouse gas (GHG) emissions. UK-based Carbon Disclosure Project (CDP) assists big firms in revealing their environmental effect.
It measures GHG emissions using carbon accounting. The International Integrated Reporting Council (IIRC) offers comprehensive business reporting to demonstrate sustainable value to investors.
Scope 1 emissions—direct emissions—are easiest to measure. Scope 2: indirect emissions from electricity, steam, heat, and cooling use. Software and sensors can reliably assess energy use for organisations.
Supply chain emissions (Scope 3) are tougher to measure and verify. Procurement can reveal supplier chain GHG emissions in Scope 3. Supplier collaboration and goal-setting are needed for reliable environmental reporting.
Water
Organisations prioritise water sustainability, particularly in manufacturing and FMCG sectors. Organisations may monitor water consumption, quality, environmental impact, and leaks and evaporation.
Leading firms are encouraging suppliers to measure and minimise water consumption to save money and the environment.
Waste
Waste companies are focusing on waste management to contribute to the circular economy.
Waste comprises food, packaging, hazardous items, trash, industrial waste, and ultimate disposals. Replace plastic packaging and single-use materials with recycled, recyclable, routable, or circular ones.
Government and social metrics in measuring sustainable performance
Employee wellbeing, diversity, and inclusion may be tracked using numbers.
Other social measures are harder to track. Data and analysis are needed to evaluate human rights goals including improving living conditions and creating jobs in impacted areas.
Anker Living Wage and Living Income Research Institute approach produces high-quality, consistent, objective living wage and pay gap data.
Wage improvement programmes in ESG initiatives are supported. Patagonia, a renowned ESG-reporting manufacturer, has estimated living wages using this technique since 2017.
Governance performance depends on your organisation and suppliers’ compliance with industry policies and laws.
Corporate social responsibility metrics:
- Code of Conduct compliance
- Following UN global conduct
- Supplier CSR audit share
- Meeting safety and security standards
- Work-life balance, hours
- People development, learning hours
- Community involvement, volunteerism
- Diversified supplier base
- Supplier self-assessment questionnaire (SAQ) completion rate DEI survey results
What can procurement leaders do?
KPIs must adapt to sustainable procurement requirements. Procurement methods and rules must examine suppliers’ environmental, social, and governance performance.
Many suppliers provide sustainability and are eager to take initiative for new business and preferred supplier status. Supply chains often lead in innovation, best practices, and industry leadership.
Success criteria in sustainability tracking
Tracking internal and external sustainability performance and communicating outcomes to stakeholders requires reliable data, efficient procedures, industry expertise, and analytical skills.
Technology, automation, and AI streamline reporting and emphasis on insights-driven action. With thousands of suppliers, procurement must identify emission hotspots and expenditure areas with the greatest ESG effect and improvement potential.
Key suppliers and risk groups are frequently targeted first. As ESG criteria, market conditions, and supplier chains change, your sustainability plan needs visibility and new data.
Conclusion:
In summary, tracking sustainable performance through KPIs and metrics is vital for ensuring that procurement practices align with broader sustainability goals. By focusing on environmental, social, and governance factors, organizations can make more informed decisions, improve their sustainability efforts, and communicate their achievements effectively. As sustainability becomes increasingly important, leveraging these performance metrics will help businesses not only meet regulatory requirements but also drive long-term value and innovation in their procurement processes. Start using these insights to refine your strategies and achieve greater impact in your sustainability journey.
