What is Sustainable Procurement? 

Sustainable procurement (also known as green sourcing and green procurement) encompasses a thoughtful approach to purchasing goods and services. Rather than solely focusing on cost and quality, it underscores the importance of environmental, social, and economic impacts in procurement decisions. This approach ensures benefits not only for the organization but also for the environment and society as a whole, aiding present and future generations alike.

In essence, it’s procurement with a conscience – a deliberate choice to purchase goods and services that align with ethical, sustainable principles.

This conscientious approach to procurement isn’t just theory – it’s increasingly being put into practice by businesses. According to a study by McKinsey, industry leaders with robust ESG credentials enjoy a competitive edge, showing 10-20% higher growth and valuations, and reducing costs by 5-10% through operational efficiency and waste reduction. Furthermore, these strong ESG performances help mitigate transition risks amid changing regulations and stakeholder sentiment.

In this article, we will walk you through the landscape of sustainable procurement by covering the following topics: 

1. The 3 Pillars of Sustainability in Procurement: Planet, People, Profit
   
2. Scope 3 Emissions and How to Curb Them
   
3. Economic Benefits
   
4. Environmental Benefits
   
5. Social Benefits 

The 3 Pillars of Sustainability in Procurement: Planet, People, and Profit 

Sustainability is commonly defined as the “development which meets the needs of current generations without compromising the ability of future generations to meet their own needs.” (Brundtland report, 1987)

Sustainability rests on three essential dimensions – or pillars – commonly referred to as:

• Planet (also known as environmental)
• People (also known as social)
• Profits (also known as economic)

This distinction, often referred to as the Triple Bottom Line, highlights the importance of an organization’s impact on the world beyond just financial gain. 

Next, we will break down what these pillars signify for you and how they form the foundation of sustainability in procurement.

• Planet: The first pillar, Planet (or environmental), speaks to the environmental responsibility of organizations. In the context of procurement, this translates to green procurement practices that minimize negative environmental impact. This can involve choices such as opting for suppliers who prioritize renewable energy, investing in sustainable packaging solutions, or focusing on supply chain sustainability to reduce carbon footprints.
  

• People: The People (or social) pillar emphasizes social equity and ethical sourcing. It’s about recognizing and safeguarding the rights and well-being of those involved in the production process. Sustainable procurement, therefore, means that goods and services are sourced from suppliers who adhere to ethical labour practices, promote fair trade, and demonstrate a commitment to workforce welfare.
  

• Profit: The third pillar, Profits (or economic) while traditionally concerned with financial gain, carries a broader meaning in the context of sustainable procurement. The goal here isn’t merely to cut costs, but to generate economic benefits that are sustainable and fair. Sustainable sourcing strategies can lead to long-term cost savings, greater supply chain resilience, and better risk management, contributing to a healthier bottom line.

When you learn to integrate these three pillars you will shift towards a model of sustainable procurement that drives not only business success but also a more equitable and environmentally friendly world. 

Scope 3 Emissions and How to Curb Them

Perhaps, one of the most challenging aspects of sustainable procurement is managing greenhouse gas emissions, particularly those categorized as Scope 3 emissions. To fully understand their impact, we will first clarify what Scope 1, 2, and 3 emissions mean in the context of procurement.

Scope 1 emissions are the direct emissions that result from an organization’s activities, like fuel combustion in company vehicles. Scope 2 emissions, on the other hand, are indirect emissions generated from the electricity, heat, or steam that an organization purchases.

Scope 3 emissions encompass all other indirect emissions that are not covered in Scope 2 and occur in the organization’s value chain, including both upstream and downstream emissions. In procurement, these can stem from the extraction, production, and transportation of goods before purchase (upstream), and the use and end-of-life disposal of these goods after purchase (downstream).

Curbing Scope 3 emissions might seem like a daunting task, given their vast and varied sources. However, with strategic planning, sustainable procurement practices can tip the scale in tackling this challenge.

For example, you can opt for sustainable sourcing and responsible sourcing by choosing suppliers committed to minimizing their carbon footprint. This might involve selecting vendors that rely on renewable energy sources or employ energy-efficient manufacturing processes.

Another effective way of reducing Scope 3 emissions is to purchase goods that are recyclable, made of recycled content, or have been produced with lower-emission processes. For instance, when you choose suppliers that use sustainable packaging, you can indirectly reduce your own carbon emissions associated with waste.

Last but not least, you can foster ethical sourcing by working with suppliers who provide fair wages and safe working conditions. 

Therefore, while managing Scope 3 emissions may be complex, adopting these strategies can make sustainability in procurement an achievable goal.

Economic Benefits of Green Procurement 

Embracing sustainable procurement can deliver substantial economic benefits, many of which can significantly impact your company’s bottom line.

Here is how the economic benefits can materialize for your business:

1. Better spend management by adopting a Total Cost of Ownership (TCO) approach to life-cycle cost. Instead of only considering the initial purchasing price, this approach factors in all the costs incurred throughout a product’s life cycle, including usage, maintenance, and disposal costs. For example, you might find that a certain energy-efficient appliance, although more expensive up front, will cost you less in the long run due to lower energy and maintenance expenses.
   

2. Regulation compliance assistance: averting potential penalties and fines. For example, many jurisdictions have regulations mandating companies to take responsibility for the disposal of their electronic waste. When you choose suppliers who follow such regulations, you can ensure compliance and avoid related legal repercussions.
   

3. Supply continuity and security assurance. When you rely on a diverse set of suppliers, you can mitigate the risk of supply chain disruptions. Moreover, sourcing key components from multiple suppliers across different regions can safeguard your business against unforeseen supply shortages due to regional disruptions.
   

4. Risk management. Businesses can better identify and address potential environmental, social, and governance (ESG) risks within their supply chains, which can lead to cost savings. For instance, rigorously vetting suppliers for sustainability practices can prevent future reputational damage and financial losses tied to unsustainable or unethical supplier behaviour.
   

5. Competitive advantage. As consumers and businesses increasingly value sustainability, companies with robust sustainable procurement practices can differentiate themselves from their competition. Your company might highlight its use of ethically sourced materials or its low carbon footprint in its marketing to appeal to environmentally-conscious consumers.
   

6. Reputation management and improved customer perception. When you can demonstrate a commitment to sustainability (without slipping into the trap of greenwashing), you will enhance your company’s reputation and foster customer loyalty.
   

In conclusion, sustainable procurement provides considerable economic benefits. It promotes cost savings, compliance, supply chain security, risk management, competitive advantage, and positive customer perception. 

It’s clear that embracing sustainability in procurement is not only an ethical choice but also a sound business strategy.

Environmental Benefits of Green Procurement 

Alongside its economic advantages, sustainable procurement also delivers significant environmental benefits. From enhancing local communities to creating more equitable working conditions, this approach fosters a more sustainable and resilient environment. 

Here are some ways these benefits will materialize for your business:

1. Positive contribution to the communities in which you operate. When you source from local suppliers, you help them reduce their carbon footprint due to shorter transportation routes while also supporting local economies and communities. This could be seen in a company choosing to source fresh produce from local farmers instead of importing, thus contributing to the local economy and reducing the environmental impact of long-haul transportation.
   

2. Eradication of child labour and living wage assurance. When you only select suppliers that uphold fair labour practices and decent working conditions, you can indirectly reduce poverty and improve living conditions.
   
   
3. Employee engagement in community initiatives. Companies can take advantage of their procurement power to involve employees in projects that contribute to the betterment of the community. A simple example might be a business choosing to procure supplies from a local social enterprise that employs disadvantaged individuals, thus giving employees a sense of direct contribution to their community.
   

4. Easier access to capital. Increasingly, investors and financial institutions are favouring companies with robust sustainability credentials. Therefore, companies that practice sustainable procurement are more likely to secure funding or attract investment. For example, a tech startup that prioritizes green procurement and responsible sourcing might find it easier to secure funding from environmentally conscious investors.
   
   

Social Benefits of Green Procurement 

Sustainable procurement practices extend beyond environmental and economic benefits; they also significantly contribute to social well-being. 

Here are some ways these benefits will materialize for your business:

1. Waste reduction and resource efficiency. When you favour suppliers who utilize efficient manufacturing processes and sustainable materials, you can help decrease the waste generated in their supply chains. Opting for suppliers who prioritize recyclable materials and minimal packaging in their products can considerably reduce your own waste generation.
   

2. Carbon emissions reduction and energy consumption decrease. When you work with suppliers who leverage energy-efficient production processes and renewable energy sources, you can lower your carbon footprint. For example, a company might choose a supplier that uses solar or wind energy for manufacturing, thereby indirectly reducing its own carbon emissions.
   

3. Limitation of negative impact from non-certified source purchases. For example, you might only source from suppliers certified by Fairtrade or Rainforest Alliance, thereby promoting responsible practices in your own supply chains.
   
   
4. Assurance of compliance with environmental guidelines. When you align your purchasing decisions with internationally recognized environmental standards, you can contribute to social betterment. This might manifest in a company choosing to source office furniture made from sustainably harvested wood, indirectly supporting the preservation of forest ecosystems and the communities that depend on them.

Conclusion 

Nowadays, sustainable procurement has grown beyond a mere buzzword, becoming an integral business practice that has far-reaching impacts on a company’s environmental, social, and economic footprint. 

This approach is not just about buying green or ethically sourced products. It encompasses a holistic view of purchasing decisions that consider the broader implications on the planet, people, and profit.

From curbing Scope 3 emissions to managing costs more effectively, sustainable procurement will empower your business to operate responsibly and maintain resilience in an ever-changing market landscape.

Whether you’re just beginning your journey to sustainable procurement or looking to enhance existing practices, remember that each step you take contributes to a larger, global effort towards sustainability. No effort is too small, and each action can collectively lead to substantial change. After all, sustainability in procurement is about more than just purchasing – it’s about making choices that benefit us all.