Adopting and applying a sustainable procurement approach

As we have already established there are substantial commercial benefits to be had from implementing a sustainable procurement approach as opposed to simply paying it lip service. How though would an organisation go about adopting and embedding sustainability into their day to day operations?

I think there are six simple steps a procurement organisation can follow to ensure sustainable sourcing becomes a core element of the purchasing process.

·         People

As with all change programs it is imperative that everyone’s role is totally clear and preferably that there is a singular point of contact, a “Sustainable Procurement Champion” if you will, who has the support and buy in from the senior management team and is on point to provide updates of progress, both internally and externally. Given the complexity associated with the topic Procurement will also require the appropriate level of training in sustainable procurement best practices and, to help steer everything in the right direction, be provided with clear goals and objectives for which they hold ultimate accountability.

·         A business case

Clear objectives as well as the stakeholder community and overall benefits need to be documented to provide a framework to the overall program. Ensuring that everyone is bought in to the overall goals of the project will give Procurement a mandate to help develop the overall policy, strategy, action plans and any projects that will ultimately fall under the sustainable procurement umbrella.

·         Policy, Strategy and Communication

Any objectives agreed should be embedded within every procurement strategy and policy developed by an organisation. This overall policy must be mandated by senior stakeholders and ultimately must be cascaded throughout the organisation and to the supply chain. The sustainable policy, which must interlink with the overall strategic plan, should ideally be endorsed by a 3^rd party and be reviewed on a regular basis to ensure that it is a) relevant and b) achievable.

·         Process

Everyone’s most exciting topic but it is imperative that processes are developed to ensure that sustainability is considered at all times when sourcing goods or services. As I mentioned previously the topic of sustainability is a large one but as a few examples such processes may consider the identification and reduction of supply chain risk, the material make up of products or whether a supplier can indeed support the contract for its life.

·         Suppliers

It is vital that the supply chain, through a mixture of supplier performance and relationship management, are bought in to the overall approach. Engaging them may result in sustainability targets being set for the provision of goods or services (carbon reduction, supply chain risk management, accreditation etc.) and these targets being managed through a series of KPI’s. The supply chain can also be a vital source of innovation in this area which can be used to accelerate the delivery of your own objectives or indeed other suppliers if a collaborative supplier management model is in place.

·         Benefits Realisation

At the start of the process it was important to set out a business case for sustainable procurement. It is just as important that there are various touch points at which you look to validate the benefits that have been achieved as well as identify and implement any other changes which may have a positive effect on sustainable procurement. This may involve reporting against the original goals or metrics, benchmarking against other organisations or identifying actions from feedback to improve the process.

Sustainable procurement isn’t easy and takes an enormous amount of time and effort to achieve but by identifying clear goals and objectives and by ensuring there is a high level of internal and external engagement there are extensive advantages to be had.

Mandatory carbon reporting

A slight change in tact this week for this blog away from technology to a topic I want to try and get more immersed in during the course of 2015, that of sustainability. This week I’d like to briefly explore mandatory carbon reporting and the implications and opportunities for procurement.

In October 2013 the UK Government announced that quoted companies would be required to report their annual greenhouse gas (GHG) emissions in their directors’ report. GHG emissions are categorised into three “scopes” by the GHG Protocol. Scope 1 and 2 cover direct emissions sources such as the electricity that a company purchases or fuel that is used in company vehicles. Scope 3 is more in depth and covers all indirect emissions due to the activity of an organisation.

The UK Government have provided a quick helpful summary guide as to what is included in each “scope” level:

Scope 1	Scope 2	Scope 3
Fuel combustion Company vehicles Fugitive emissions	Purchased electricity, heat and steam	Purchased goods and services Business travel Employee commuting Waste disposal Use of sold products Transportation and distribution (up- and downstream) Investments Leased assets and franchises

It is worth noting at this stage that the term ‘procurement emissions’ or ‘supply chain procurement’ is widely used as a shorthand for elements of scope 3 emissions and it is here that I think procurement can probably get most involved and add most value.

Although scope 3 emission reporting is not yet a mandatory requirement (and there is no expectation that it will be for some time) some firms are reporting on them and I expect more will continue to do so for CSR purposes. It is fair to say that at this stage the private sector is behind the public sector but the expectation is that the government will undertake a review and decide in 2016 whether to extend the regulations to all large companies, potentially adding 24,000 organisations to the already c. 1,100 that have to mandatorily report both on both scope 1 and scope 2.

So how can procurement become more occupied in scope 3 reporting and where can they add value? 

Let’s consider some of the activities that would be involved:

1.       Assess the supply chain for emission hotspots

2.       Identify resources and energy risks

3.       Identify energy efficiency and cost reduction opportunities in the supply chain

4.       Engage with suppliers and assist them to implement sustainability initiatives

5.       Purchase more energy efficient products

6.       Help companies reduce emissions from business travel and employee commuting

7.       Help identify leaders and laggards in their supply chains

At present many organisations that are attempting to report to scope 3 are doing so without procurement involvement and, as you can see from the list, the activities involved would suggest that integration with procurement departments would uncover huge benefits.

I would expect a move towards a change in procurement strategy in the coming years to reflect the changing focus in the market, both in terms of legislation and general mood towards sustainability. 

Price will continue to be important, however on-going energy costs including carbon credits, as well as the impact of carbon on CSR and reputational risk, are becoming more and more intertwined in procurement decision making.