Corporate responsibility objectives have driven many organizations to consider and deploy sustainable procurement strategies in order to help manage the environmental footprint of their business. The supply chain can have a considerable impact, from the materials that are selected through to their logistics choices.
Traditionally, when sourcing suppliers and materials, buyers would focus their selection criteria on a small number of variables: Cost, Quality and Lead time. These variables, set by the business, would equip the buyer when decision making. Many businesses would weight one of these variables, often cost, as a key criteria.
This framework would allow the buyers to function and for materials to flow in and out of the business – however in the absence of further policies (unless present in the material specification) little thought was given to environmental impact of what was being bought. These days, sustainability objectives mean that this mentality must change.
However, if they are to deliver on the promise of corporate responsibility, it is imperative that business considers how to equip those with responsibility for buying (both at a tactical and strategic level).
Rethinking the procurement process
One of the first and sometimes most challenging mindsets to change is to reconfigure the cost, quality and lead time sourcing criteria. Buyers need both training and policies that develop sourcing criteria supportive of sustainable procurement objectives. Once this criteria has been developed the business needs to support it (overcoming “cost is king” mindsets within budget holders).
Business also needs to consider re-engineering key buying processes taking time to consider how the company creates buy signals and what information is utilized by the tactical purchasing team. Consider:
a) Ensuring that the buy signal includes a specification that includes sustainable procurement criteria
b) How awareness of alternative products which meet sustainability criteria can be improved
c) How compliance of key contracts that meet sustainability standards can be sustained.
d) What policies exist which the procurement team should adhere to
Material Selection
Fuelled by both consumer awareness and government legislation, the growth of products that take into account environmental concerns has grown rapidly over the last 5-10 years.
This is great news for buyers as it presents real choice in the market. Sourcing these products doesn’t have to be overly challenging either as there are now various standards and measures that are in place which can assist. Consider, for example, energy star ratings on electrical equipment and CO2 Emission measures on transportation – standards like this can be applied allowing “side by side” reviews of products.
Product knowledge remains a key issue. As part of any sustainable procurement initiative it’s imperative that buyers and commodity managers have awareness of alternatives in the market and methods of comparison. Without this the task becomes ever more challenging.
Changes in supplier selection
Aside from the material – another key determinant is the selection of the supplier. An appropriate framework that allows suppliers to be evaluated on sustainability issues is crucial. Whilst this can be ably supported by suppliers utilizing standards such as BS EN ISO14000 and BS 8903- take up is not yet fully mainstream and so while important it may not be the only factor in the decision making process.
The terms and conditions within contracts being placed with suppliers is also a key consideration. Ensuring contracts include sustainability criteria can drive results towards corporate objectives. This is great for new suppliers whilst appropriately geared communication with existing long term agreements stating that sustainability will be a key factor in the next round of negotiations can start the ball rolling early to drive the market to deliver appropriate products and services.
Summary
The procurement team can be key stakeholders in helping to deliver on corporate responsibility. This does, however ,require the right support from senior management and a recognition that processes and policies will need to change and adapt. There is significant potential. Expertise must be developed, both within the sphere of commodity management and at the front line within the tactical buying teams. Finally, and this is perhaps key, for sustainable procurement to work the wider business must be educated in its corporate responsibility objectives and that cost alone is not a determining force that drives procurement decision making.