What is Sustainable Procurement?

Sustainable procurement is the adoption and integration of Corporate Social Responsibility (CSR) principles into your procurement processes and decisions while also ensuring, they meet the requirements  of your company and its stakeholders.

Sustainable Procurement integrates requirements, specifications and criteria that are compatible with the protection of the environment and the society. It is not simply about not using child labor or illegal chemicals that can damage the environment and peoples’ health.

Commitment in sustainable procurement ensures values which are core to the business are integrated through a company’s supply chain into the life cycle of the company’s products and services. Best practice would be to future proof your company’s supply chain and investments with sustainable policies in order to increase the viability for the long term. If you would like to learn more on how to build a business case of sustainable procurement, please download our 5-Step Guide.

Sustainable Procurement guide

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Policies and strategies for sustainable procurement developed by companies are based on the need to future proof themselves primarily around scarcity in supply and ability to cope with the demand of emerging markets, pressures brought upon by cost and ability to reduce this through reductions in energy consumption and waste reduction. Also the need to protect brand reputation, taking sustainability in procurement seriously demands risk management and addressing of weakness areas that could bring about scandals and bad publicity. Lastly, differentiation of their brand with the view of procuring sustainably  for creation of opportunities that entail developing services & products that are more innovative and sustainable that are also relevant to their markets and customers.

Drivers for Sustainable Procurement

  • Cost Reduction: Reduction in total cost of ownership linked to reduced energy costs, reduced over-specifi cation, reduced consumption and reduced social and environmental compliance costs.
  • Risk Reduction: Financial impact on brand value from bad supplier practices (e.g., child labour, local pollution); economic cost of supply chain disruptions (e.g., noncompliance with environmental regulations)
  • Revenue Growth: Additional revenue through innovation of eco-friendly products/services, price premium or income from recycling programmes.

 

Tip: Examples of these can be found in this paper on “The Value of Sustainable Procurement Practices” by INSEAD and EcoVadis.   

Values of sustainable procurement practices

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Why?

  • 15-30% measurable brand value increase: Sustainable supply chain practices result in brand equity (Source : World economic forum : Beyond supply chains)
  • 90% have lower cost of capital: 90% of studies on the cost of capital show that sound sustainability standards lowers the cost of capital of companies(Source:Oxford/arabesque)
  • 9-16% Supply chain cost reduction: Sustainable supply chain practices can reduce costs linked to supply chains by 9-16% (Source : World economic forum : Beyond supply chains)

Benefits of Sustainable Procurement

  • Minimises risk in a company’s business practices
  • Compliance with environmental and social legislations
  • Enhance consumer perception
  • Control costs by adopting a wider approach to whole life costing
  • Creates markets for new products and services
  • Reduce waste and improve resource efficiency
  • Competitive advantage
  • Facilitate access to capital and increase valuation

Getting started?

Want to know more about sustainable procurement in detail and how EcoVadis helps companies with its practices and challenges?

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