Sustainable procurement refers to procurement which takes into consideration

fundamental economic criteria (price, quality, timeframes, etc.) as well as the

concepts of sustainable development and social responsibility.
Procurement approaches are constantly required to meet fundamental criteria such
as price, quality, delivery timeframes and service levels. In addition to meeting the
latter, sustainable procurement is also required to meet new criteria rooted in
sustainable development and social responsibility, in-keeping with the overall life
cycle and economic outlook.

From a buyer’s perspective, sustainable procurement primarily consists of

balancing three essential concepts:

1. Environment: eco-friendly concerns, energy performance, waste reduction,

product lifespan, protection of resources, etc.
2. Ethics and society: respect for human rights, working conditions,
inclusivity, diversity, etc.
3. Economy: cost, product quality, delivery timeframes, etc.

However, the key benefits of sustainable procurement are easier to identify:

1. Improves risk management;

2. Reduces costs;
3. Promotes innovation and differentiation;
4. Increases turnover;
5. Improves procurement indicators;
6. Improves talent acquisition and retention.

McKinsey's research shows that “Strong ESG credentials drive

down costs by 5 to 10 percent, as these companies focus on
operational efficiency and waste reduction.

Category examples of sustainable

procurement
Single Use Plastics (SUP)
One new legislation impacting sustainable procurement is
the Single-Use Plastics (SUP) Directive. Its goal is to prevent and
reduce the impact of plastic products and to promote a transition
to a circular economy.
Specifically, the directive targets these products:
  Cotton bud sticks

 Cutlery, plates, straws, and stirrers

 Balloons and sticks for balloons

 Food containers

 Cups for beverages

 Beverage containers

 Cigarette butts

 Plastic bags

 Packets and wrappers

 Wet wipes and sanitary items

Plastic straws could be replaced by metal ones. While the unit
cost of a metallic straw may be higher compared to a plastic
disposable one, it will last longer and produce less waste.
Despite the low cost of plastic, eventually, metallic straws could
be more economical because they are bought less frequently
and disposed of less often.
Many airlines and restaurants prefer using rotable (re-usable)
tableware instead of disposable ones. Rotable tableware
includes the cost of dishwashing, but disposable items result in
waste disposal costs and potentially lost value in the eyes of the
customer.
Obviously, there are initially trade-offs to consider. However,
Procurement needs to figure out innovative and sustainable
solutions while working with suppliers and manufacturers. The
good news is there are already some great examples of
innovations on the market.

IT Hardware
IT hardware and computing tools is another category that has a
lot of sustainability factors to consider. For instance, say you are
buying desktop computers. These are just a few of the ways
sustainability could be...
Economic factors: Purchase price, depreciation, repairs,
maintenance, downtime, etc.
Social factors: diversity in the supply base, employee wellness,
labor conditions in manufacturing, ethical sourcing practices, etc.
Environmental factors: Energy and water use, carbon footprint,
end-of-life disposal, etc.
So how could procurement make sure their computer sourcing
addresses these concerns? For companies like Microsoft, up to
77% of their emissions are a result of upstream and downstream
scope 3 emissions (their suppliers' supplier's carbon footprint as
well as the footprint of consumers).

Cacao
Cacao is a notoriously unsustainable ingredient in many farming
systems, using too much water, disturbing ecological diversity,
and using child labor.
The chocolate maker Fazer has focused on supplier
development in order to address the root causes of
unsustainable cacao farming: poverty.
Fazer also works to carefully select suppliers and partners that
comply with its Supplier Code of Conduct. 80% of the 5 million
cocoa farmers around the world are not within the scope of any
certification program. Hence it’s necessary to ensure there are
sustainable development programs in place and alternative
methods for ensuring the responsibility of supply chains.

Why is sustainable procurement important?

Saving the planet is probably the most important reason why.
But hey, even if you didn't give a sh*t about the planet, you might
want to consider some of the many business benefits of being
green:
Economic benefits of sustainable procurement
 Controlling costs by adopting a TCO approach to life-cycle
cost

 Complying with regulations and applicable laws

 Ensuring continuity and security of supply

 Minimizing business risks

 Creating competitive advantage

 Managing reputation and customer perceptions

 Facilitating access to capital

And for those who are in it for Mother Earth, there are some
pretty clean enviromental benefits, too:

Environmental benefits of sustainable procurement

 Reducing waste and improving resource efficiency

 Reducing carbon emissions and energy consumption

 Limiting the negative impact of purchasing from non-

certified sources

 Ensuring compliance with environmental guidelines

Social benefits of sustainable procurement

 Positively contributing to the communities in which they
operate

 Eliminating child labor and paying a living wage

  Involving employees in community projects

 Investing in projects that improve the quality of life for

citizens

Examples of Businesses That

Embraced Sustainability
Sustainability is not a new concept and you just have to look to find
examples of it in the world around you. Here are some businesses that
you may or may not have heard of that embrace sustainability in their
fied.
1. Panasonic
Panasonic may not be recognized in the world as one of the
most sustainable businesses. However, it is included in this list due to
its efforts in reducing environmental impact.
One of its contributions towards conserving the environment for future
generations is by making eco-friendly products. Panasonic has made
some steps to stop its employees from driving to work which reduced
their carbon footprint.
2. IKEA
IKEA is one of the businesses that is recognized worldwide for its efforts
in achieving sustainability throughout its supply chain. Stakeholders,
employees, and customers are captivated by IKEA’s sustainable
practices.
IKEA sources almost half of its wood from sustainable forests which is
also the same for its cotton suppliers. IKEA and its suppliers follow the
better Cotton Standards that minimize water pollution through organic
farming practices. Additionally, the use of pesticides and chemical
fertilizers is regulated.
When you visit an IKEA store, you will already see its commitment to
sustainability as they source clean energy from solar technologies.
3. IBM
IBM has invested in environmental stewardship and corporate social
responsibility since the 1960s. Its first sustainability report in 1990
won the company an award from the European Commission.
IBM’s current smart building strategy reduces demand for natural
resources, encourages sustainable procurement, and improves water
resource management.
4. Unilever
Unilever is one of the largest multinationals in the world. It has invested
heavily in environmental sustainability and receives rewards for its
commitment to sustainability.
Unilever has a sustainable living plan which sets a sustainable
business strategy. The program ensures that all business operations
from sourcing to supply chain go according to the set goals.
Currently, Unilever is one of the globally recognized sustainable
companies. Its CEO, Paul Polman, has been awarded the Champion of
the Earth Award in 2015.
5. Nike
Nike is not well-known for achieving corporate sustainability due to its
past reputation. However, it has strived to change its story.
Its success over a short period of time is due to its commitment to ESG
reporting on production and supply chain practices. Nike’s mobile
application allows designers to check the different environmental
impacts of the fabric they may use.
Nike has redesigned its packaging and encourages customers to recycle
or reuse its products to reduce waste. It is also committed to reducing
carbon emissions by investing in energy-efficient equipment.
6. PepsiCo
PepsiCo is known as one of the leading food-processing corporations in
the world. It has adopted sustainable practices to minimize carbon
emissions. Also, one of its immediate goals is to improve human rights
and develop a diverse workforce.
PepsiCo plans to reduce sugar and fats in its beverages by 2025. Thus,
it reduces the need for the said resources and makes it healthier for
consumers. Its other plan is to create and adopt new sustainable
packaging designs that make sure that all the materials are recyclable.
7. Patagonia
Patagonia has spent its forty-seven years in businesses leading
environmentally conscious business practices. Much of their raw
materials are recycled or grown organically to reduce their
environmental footprint.
It has built the Patagonia Action Works to help consumers connect with
local activist groups in their community. Patagonia has gone beyond by
involving politics in achieving sustainability. It encourages its
consumers to elect leaders who are environmentally responsible.
8. Adobe
Adobe was the greenest IT company in Newsweek’s 2014 rankings. The
company has obtained LEED certification for almost all of its
workspaces which includes the retrofitting of a historic building in San
Francisco.
Also, Adobe has ambitious goals which involve getting to net zero
energy consumption and reducing its packaging to reduce carbon
emissions and plastic pollution.
Another commendable sustainability practice that adobe has done is
the reduction of water usage. It has consistently tried to use less water
since 2000 which reduced its water usage by more than 60%. It has
achieved this through installing eco-friendly fixtures and landscaping
with native plants.

Conclusion
In summary, sustainable procurement is gaining traction as an essential
practice for businesses aiming to reduce their environmental impact
and contribute to a circular economy.
The significance of sustainability is emphasized, not only as a
commitment to corporate social responsibility but also for regulatory
compliance and performance measurement.
The showcased examples serve as inspiration for businesses looking to
align their operations with global sustainability goals, fostering a more
environmentally conscious and socially responsible business landscape.

Benefits of Sustainable Procurement

Nowadays, sustainable procurement is not only an ethical obligation but
also a strategic choice for organizations to thrive in the long run. Let's
consider its key benefits:
Positive social and environmental impact
The first and most obvious benefit is that companies with sustainable
procurement practices promote fair labor practices, reduce greenhouse
emissions, and minimize waste and pollution. Thus, they contribute to
achieving the UN Sustainable Development Goals, such as reducing
poverty, mitigating climate change and environmental degradation,
promoting health and well-being, ensuring responsible consumption and
production, and much more.

Realized cost savings

While it is true that some sustainable products and methods may have
higher upfront costs, sustainable procurement practices can ultimately help
companies save money. For example, if a company invests in energy-
efficient equipment, such as LED lighting or HVAC systems, it may incur
higher upfront costs compared to traditional equipment. However, these
energy-efficient products will help the company reduce its energy
consumption over time, resulting in lower energy bills. Similarly, if
organizations choose products and suppliers that prioritize waste reduction
and recycling, they reduce their waste disposal costs.

Improved reputation among consumers

Consumers are increasingly concerned about the environmental and social
footprint of the products and services they purchase. By demonstrating a
commitment to sustainability, companies gain an advantage over their
competitors in the world market. In 2019, 72% of consumers in 11 countries
across North America, Europe, and Asia reported buying more
environmentally friendly products than they did five years ago, and 81%
said they expected to buy even more over the next five years. In 2022 a
survey of over 1,000 US adults revealed that 66 percent of consumers and
80 percent of young adults (ages 18-34) are ready to pay more for
sustainable products versus less sustainable competitors.

Better risk management

Sustainable suppliers that prioritize ethical and responsible practices reduce
the risk of supply chain disruptions. This can ensure supply continuity and
security, helping companies to maintain stable operations and meet
customer demand. In addition, sustainable procurement practices help
companies avoid legal liability by ensuring compliance with regulations and
laws related to environmental, social, and labor standards. Thus,
organizations avoid costly fines, lawsuits, and reputational damage that can
result from non-compliance.

Increased employee productivity

Creating a healthier and more positive work environment can improve
employee productivity in the following ways:

 Companies that prioritize sustainability tend to have improved air

quality, use healthier and safer materials and equipment, and
employees are less likely to be exposed to harmful chemicals.
Employees that are physically healthier are more likely to do a
better job and stay with the company.
 Procurement leaders can improve employee satisfaction by
promoting ethical business practices, for instance, paying fair
wages and conducting employee training and development
programs to foster career growth. These practices motivate
employees to work more diligently, appreciate their workplaces,
and build their careers in the company rather than hopping from
one organization to another.
  The organization's demonstrated social responsibility and
commitment to environmental protection help its workers value
and respect it more, encouraging them to stay with the company
and contribute to the positive changes it brings to our world.

Fostered innovation
Sustainable policies also have the potential to drive innovation in a
company's products and operations in several ways, which include:

 Creation of a new revenue stream through the circular economy

model by finding ways to repurpose and reuse waste or
byproducts.
 Implementation of sustainable product design using energy-efficient
components or manufacturing processes, renewable materials, or
those that can be easily recycled or composted.

 Close cooperation with suppliers to develop new sustainable

products or processes, which lets a company tap into the expertise
of its partners.

Drivers for Sustainable Procurement

 Cost Reduction: Reductions in the total cost of ownership are linked to reduced
energy costs, reduced over-specification, reduced consumption, as well as reduced
social and environmental compliance costs.
 Risk Reduction: Financial impact on brand value from bad supplier practices, such
as child labor or local pollution and the economic costs of sustainable procurement
disruptions, like non-compliance with environmental regulations.
 Revenue Growth: Additional revenue through new eco-friendly products and
services, price premiums, or income from recycling programs.

Why Choose Sustainable Procurement?

 15-30% measurable brand value increase: Sustainable procurement practices result
in brand equity (source: World Economic Forum: Beyond Sustainable Procurement)
  90% have lower cost of capital: 90% of studies show that effective sustainability
standards lower the cost of capital for companies (source: Oxford/Arabesque)
 9-16% sustainable procurement cost reduction: Sustainable procurement practices
can reduce procurement costs by 9-16% (source: World Economic Forum: Beyond
Sustainable Procurement)

Benefits of Sustainable Procurement:

 Minimizes risks in a company’s business practices;
 Enables compliance with environmental and social legislations;
 Enhances consumer perception of the brand;
 Controls costs by adopting a wider approach to whole life costing;
 Creates markets for new products and services;
 Reduces waste and improves resource efficiency;
 Provides a competitive advantage in world markets;
 Facilitates access to capital and increases valuation.

Sustainable sourcing policy examples

General Mills — Sustainable and responsible sourcing website

Food giant General Mills has a tremendous ability to impact and influence change.
Fortunately, they use their position to improve working conditions and protect the
environment. Their sustainable and responsible sourcing website provides a lot of detailed
information about their practices. For example, you can learn how they source ingredients as
well as how they support the farms that provide them.

Bain & Company — Sustainable Procurement Policy

As a firm that offers procurement consulting, it makes sense that Bain and Company would
have a public-facing sustainability statement. On their website, you’ll find a lot of excellent
resources. Bain & Co. break their goals into four categories including, environment, business
ethics, labor and human rights and community development. Additionally, you can download
their supplier code of conduct and sustainable procurement policy.

Unilever — Sustainable and regenerative sourcing

As the parent company of brands like Ben and Jerry’s, Dove and Seventh Generation,
Unilever is a massive organization. Additionally, most of their companies create a physical
product, which means they source a lot of goods and materials. Accordingly, they have an in-
depth procurement sustainability policy that includes information on their environmental
policies, supplier diversity, human rights, climate change and more.
Sustainable Procurement: Benefits and Best Practices

Precoro

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February 14, 2023

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As the world continues to shift toward sustainability and responsible buying, it

becomes increasingly important for businesses to align their procurement strategies
with the evolving values of shareholders, customers, and employees for the sake of
business longevity.

It's no secret that nowadays customers want to know where the products they
purchase come from and what they are made of, business partners want to work with
reputable organizations, and employees tend to seek jobs with safe and comfortable
working conditions.

According to McKinsey's research, top ESG (environmental, social, and governance)

performers enjoy faster growth and 10-20% higher valuations than other players in
their sector. In addition, strong ESG credentials drive down costs by 5-10%, as these
companies focus on operational efficiency and waste reduction.

In this newsletter, we'll explore why sustainable procurement matters and how to
implement environmental and social responsibility in your organization's workflow.

What Is Sustainable Procurement?

Sustainable procurement is a business practice of integrating the aforementioned
principles of environmental, social, and governance into procurement and decision-
making processes.
Taking on this corporate responsibility means going beyond just financial and
economic considerations in business decisions by also taking steps to promote
positive outcomes for society, and minimize environmental impact.

Sustainable procurement includes but is not limited to the following practices:

 Sourcing suppliers who are fair trade and environmentally friendly

 Procuring goods that are located in close proximity to support the local economy and
reduce transportation-related emissions
 Reducing waste by reusing and recycling materials
 Maintaining a healthy work environment where employees feel respected and valued

What Are the Benefits of Sustainable Procurement?

There are many ways in which sustainable procurement adds value to an
organization, from improving brand reputation to reducing the overall cost of
ownership. Let's delve deeper into the ways your company can benefit from
prioritizing environmental and social standards.

Decreased Costs

In 2021 the industrial sector accounted for 33% of total energy consumption in the
US, and this number was expected to increase even further. But in 2023, inflation and
the energy crisis triggered by Russia's war in Ukraine may put businesses in a tough
spot and force them to look for ways to cut back on their energy usage.

Sustainable procurement is an effective way to reduce both energy consumption and

waste and can result in lower energy bills. Plus, by focusing on sustainable products
and services, businesses can also benefit from reduced costs by using fewer
resources, sourcing better quality materials, and reusing materials such as product
packaging.

Revenue Growth and Customer Retention

Nowadays, more and more people have become eco-conscious and are seeking out
ethical products and organizations. According to First Insight's recent report, nearly
90% of Gen X customers said they are willing to pay an extra 10% or more for
sustainable products, a notable increase from just over 34% in 2019.

Additionally, three-quarters of surveyed consumers prioritize product sustainability

over the brand name, while 94% of retailers believe the brand name is more valuable
to customers. This stark opinion difference demonstrates a profound knowledge gap
on the part of businesses.
Procuring materials and services more responsibly helps businesses reduce their
overall environmental impact and thus attract and retain customers who value
sustainability. Businesses that don't keep up risk being left behind by their more
responsible competitors.

Reduced Risks

Unsustainable supply chains pose environmental risks that can harm the planet in
many ways, including air and water pollution, loss of biodiversity, deforestation, to
name a few. By sourcing materials and suppliers that emphasize sustainability,
businesses can reduce their carbon footprint and the amount of waste they produce,
minimizing the company's environmental impact.

Sourcing irresponsibly might also lead to legal and regulatory risks, such as violation
of environmental, labor, and other regulations; any of these can result in the loss of
operating licenses. Similarly, adhering to responsible purchasing practices prevents
costly fines and penalties and helps protect an organization’s long-term reputation.

Loss of customers isn't the only potential downside of a bad corporate image;
operating in a way that violates ESG principles with discrimination, poor working
conditions, etc., might also make it hard to keep or hire employees.

Better Reputation and Brand Recognition

In today's highly competitive global market with an increased sense of responsibility

and self-awareness, it is no longer enough to simply offer products.

People are looking to buy from companies that share their values and make them
feel their purchase has a positive, or at least not harmful, impact on society and the
environment. Being able to demonstrate that your practices, including procurement,
are sustainable will help your company build a long-lasting emotional connection
with customers and gain their trust.

Improved Compliance

For a business to operate and be secure from possible lawsuits, compliance with
required environmental and social regulations is a must. Businesses can also take
extra steps for sustainability beyond what is legally required by partnering with social
entrepreneurs and sponsoring environmental and social initiatives that address
climate change, homelessness, poverty, etc.; doing so will boost brand recognition
and set it apart from competitors.

3 Pillars of Sustainable Procurement Strategy

In order for a company to be considered sustainable, it must develop a
comprehensive strategy that includes well-planned supplier management, a low-
waste inventory approach with optimized logistics, and data availability. Let's go over
how to build these.

Well-Planned Supplier Management

Organizations that want to adopt sustainable procurement must consider a few

critical factors when it comes to their supplier management process.

First, develop a consistent approach to supplier selection. You have to be able to

share your sustainability criteria with your suppliers in the sourcing and onboarding
phase. This includes communicating the sustainable procurement policy, mission,
and targets to the suppliers, as well as creating clear guidelines for supplier selection.

Second, identify strategic and critical suppliers using supplier segmentation, and
evaluate their ability to meet your organization's sustainability goals. This assessment
should include environmental and social impact, labor standards, and ethical
business practices. In addition, check that suppliers comply with the purchasing
contracts they entered into with your organization, and assess their ability to make
deliveries on time and provide you with high-quality products.

Finally, develop an open channel for communication with suppliers and ensure you
have visibility into their performance. To achieve this, implement a tool for supplier
management. For example, Precoro offers a Suppliers Portal, where vendors are able
to receive POs, send invoices for received orders, attach additional documents and
notes, and engage in the RFP process.

Moreover, Precoro provides all the necessary tools for managing suppliers by
allowing users to:

 Import an unlimited number of suppliers and keep their information in one place.
 Customize registration forms and adjust mandatory fields such as legal address,
account number, etc.
 Store suppliers' catalogs.
 Order items directly from Precoro.
 Send POs to suppliers in just a few clicks.
 Monitor what is already sent/not sent.
 Control budgets and generate reports.
Establishing such a supplier management system comes with the added bonuses of
better purchasing terms and more timely delivery, among others.

Optimized Inventory and Logistics

Sustainable inventory management and logistics bring many benefits to the business,
including less raw material consumption, lower energy use, reduced waste, and
increased savings.

To make logistics and inventory sustainable, organizations must consider how

products are sourced, stored, and delivered.

For example, businesses can significantly reduce their environmental impact by

choosing suppliers with sustainable practices, such as those that are certified by
third-party organizations, and by purchasing from local suppliers so that goods don't
have to be transported from far away; as an added bonus, this will also reduce
shipping costs. Additionally, environmental impact can also be reduced by partnering
with delivery companies that utilize green technologies such as low-emission
vehicles. Some suppliers and delivery services might even offer a "carbon-offset"
option when purchasing.

To reduce their impact, businesses can also reuse product packaging and storage
containers as well as implement a system for recycling paper, plastic, and glass.

At the same time, it's important to make sure inventory isn't too high or too low. Too
much stock is wasteful in terms of the actual product as well as the transport of it.
Utilize demand forecasting and just-in-time inventory strategies to accomplish this.
Plus, it comes with an added bonus: more financial savings!

Sometimes it may be challenging to choose which goods to buy in advance and

when, especially if a company is limited to manual processes with low inventory
transparency. On the one hand, you want to avoid stock outages; on the other,
purchasing too much of any material is also not an option because it leads to wasted
products and overspending.

Fortunately, you can maintain the proper balance by using a dedicated tool for
inventory management. Software like Precoro makes it easy to accurately track real-
time inventory levels, analyze usage data, and properly forecast demand.

Here are some of the things users can do in that regard:

 Add, update, and edit the stock balance of each warehouse within the platform and
track item history at any time.
 Create customizable reports on stock balance and purchases for a certain period.
 See ordered items and those to be received.
 Define usage patterns for different products or services and forecast inventory
consumption.
 Set parameters for the stock minimum and receive instant notifications via email as
soon as stock levels are low.
 Create an order for the low-stock items without entering the data manually. The
system automatically identifies the supplies that need to be replenished.

Transparency and Access to Data

In order to make well-informed, sustainable decisions, employees need easy access

to correct information and complete visibility of procurement and spend
management processes.

How do you decide whether key suppliers provide the desired value or whether it's
time to source new ones due to no transparency in supplier performance? How can
businesses ensure they are not overspending or procuring unnecessary or duplicate
products if approval workflows aren't optimized and spend data is scattered across
different tools?
Sustainable procurement isn't just about reusing resources. It's about having a clear
picture of who is buying what, why, from whom, and how processes can be improved
to reduce waste and increase compliance.

Businesses seeking to achieve spend and procurement process visibility should invest
in a solution where correct and up-to-date data is available in one centralized place.

For example, Precoro users can use any device to easily access procurement
information, including real-time document and budget statuses, revision history,
approval workflows, inventory levels, and much more.

In addition, Precoro allows you to not only generate a bunch of customized reports
on the platform itself but also transfer procurement information to Power BI, Google
Sheets, and accounting tools like Xero and QuickBooks Online. Users can even set up
automatic report generation to save extra time on filtering and exporting.
Guidelines for Green Procurement

Abiding by green procurement practices requires procuring products with:

 Greater energy efficiency

 Utilizing clean energy source or technology
 Controlled use or absence of toxic substances
 Improved recycling ability
 Minimal packaging needs
 Extended durability
 Reduced water and other natural resource consumption
 Opting for products with minimal or eco-friendly packaging
 Giving preference to products that have obtained certifications or meet
recognized environmental standards
 Procuring products that are designed to conserve water or have water-saving
features.
 The need for sustainable business practices is just as urgent today as it was
10 or 20 years ago. Global carbon emissions rose at a greater rate between
2001 and 2010 than between 2011 and 2020. So why has sustainability
become such an important topic in public discourse over the past few years?
 Advances in technology made it easier to measure business impact on the
environment. Consumers, led by Generation Z, are increasingly vocal about
their preference for ethical consumerism. Businesses have responded by
 investing in ESG and sustainability initiatives, and key among them is
sustainable sourcing and procurement.

 WHAT IS SUSTAINABLE SOURCING

AND PROCUREMENT?
 In short, it’s a strategy for purchasing goods and services from suppliers
who demonstrate a commitment to sustainability, ethical labor practices, and
environmental protection.
 This approach seeks to support an organization’s social responsibility goals
while simultaneously ensuring profitability.
 Sustainable procurement also helps to reduce environmental impacts by
increasing the use of recycled materials. This explains the rise in businesses
adopting circular supply chain practices.
 Sourcing and procurement teams are in a unique position to lead their
companies’ ESG efforts by adopting sustainable sourcing policies.
 From leveraging supplier data to reducing environmental and carbon
footprints, sourcing and procurement teams can help companies reach their
sustainability goals.
 Below, we explore 13 ways these teams can lead the ESG charge from
within their organizations.
 1. Leveraging Supplier Data to Assess Sustainability
Performance
 Aim to leverage supplier data to assess how your suppliers are performing in
terms of sustainability. This can include tracking metrics such as waste
production, water usage, and energy consumption.
 This can help you identify potential areas for improvement while facilitating
accurate ESG reporting.
 2. Contracting Suppliers with Robust ESG Programs
 As part of your sustainable sourcing strategy, you should ensure that your
suppliers have established robust environmental, social, and governance
(ESG) programs in place.
 This will ensure that all suppliers are committed to reducing their
environmental footprint and fostering positive workplace cultures. It is also
important to select vendors who are willing to reinvest resources into their
own ESG initiatives and infrastructure.
 3. Driving Innovation with Sustainable Sourcing
 Innovation is always a good thing, particularly now in the supply chain. By
working with forward-thinking suppliers leveraging the latest technologies
and processes, you can ensure the material used in the production process
are environmentally friendly.


 4. Collaborating with Suppliers for a More Sustainable

Supply Chain
 To achieve sustainability goals together, it is important to start an open
dialogue with suppliers about sustainable practices within their operations.
 Involving them early in decision-making will foster cooperation and help to
introduce more sustainability-focused practices throughout the entire supply
chain.
 Engage stakeholders from every level of your supply chain and introduce
sustainability programs through contractual agreements. This will help you
avoid risk while simultaneously improving upon ESG performance.
 5. Reducing Risk through Sustainable Supply Chain
Management
 Sustainable sourcing increases legal compliance when it comes to ESG
initiatives. Environmental and labor standards and regulations are becoming
stricter.
 Forward-looking companies are pre-empting the risk of penalties or fines by
proactively adopting sustainable procurement and sourcing policies today.
You should consider following suit.
 6. Encouraging Supplier Adoption of ESG Practices
 One particularly effective method for boosting ESG impact is by guiding
suppliers to adopt sustainable supply chain strategies, such as responsible
waste management.
 This is most easily done through long-term contracts and relationships with
suppliers that share your company's vision and goals.
 By using rewards programs, you can incentivize suppliers to adopt a
sustainable mindset. As a result, you can guide them to transition to
renewable energy sources or responsible waste management.


 7. Improving Corporate Reputation

 Your company's reputation with stakeholders, employees, and consumers is
increasingly impacted by your ESG practices.
 Consumers are increasingly aware of ethical issues in the marketplace, so
engaging in sustainable practices can be an effective way to signal a
commitment to corporate social responsibility (CSR).
 Having credible third-party certifications to back up these claims is an even
better way of showing dedication to sustainability.
 8. Providing Visibility into Corporate Sustainability
Goals
 Companies need to provide transparency in their sustainability goals and
objectives when it comes to sustainable sourcing and procurement
activities.
 An effective way to do this is by developing detailed reports about supplier
performance against goals like reducing carbon emissions or water use.
 This information can then be shared publicly through both internal and
external channels to maintain a positive brand image.


 9. Achieving Cost Savings through Sustainable Sourcing

 One great benefit of sustainable sourcing is the potential for achieving cost
savings along the entire supply chain.
 For example, sourcing from local suppliers may yield lower transportation
expenditures, or choosing organic materials can result in higher quality
products with fewer environmental risks associated with them over time.
 By evaluating inputs based on sustainability criteria like resource
conservation or less packaging usage, businesses can reduce costs while
 remaining compliant with ecological standards by industry or government
regulations.
 10. Creating Brand Affinity and Customer Loyalty
 Sustainable sourcing is an effective tool for creating stronger brand affinity
and customer loyalty, as it demonstrates that your company puts
sustainability at the forefront of its decision-making process.
 The more your customers understand and appreciate the thought and care
you put into sustainable sourcing, the more they’ll feel connected to, and
loyal to, your brand.
 11. Boosting Employee Engagement and Workplace
Morale
 Sourcing from more sustainable suppliers can have positive impacts on
employee engagement and morale.
 Your employees will be proud to be part of a company making a serious
commitment to sustainability through its procurement decisions. This type
of pride fuels commitment, passion, and proactive participation in the
workplace.


 12. Attracting Top Young Talent to Procurement

 Sustainability is often seen as an integral part of employer branding for
young professionals and job seekers.
 By demonstrating your company’s dedication to sustainability through
sustainable sourcing and procurement practices, you have a greater potential
to appeal to younger generations looking for employers who share their
values.
 13. Preparing for Future Legislation & Reporting
Requirements
 Sustainable sourcing helps your company prepare for stricter environmental
regulations or reporting requirements in the future.
 You’ll inevitably need to report on the material aspects of ESG performance
in the years ahead—and having already implemented sustainable sourcing
 policies will make this process much simpler and quicker when it comes
time to do so.

 FINAL WORDS
 Sourcing and procurement teams are well-positioned to drive ESG
initiatives that create economic, environmental, and social benefits for
companies and the communities they serve.
 From leveraging supplier data to reducing environmental and carbon
footprints, procurement can help companies reach their sustainability goals.
 As younger consumers age, pressure on brands to adopt sustainability
measures will certainly grow. Adopting sustainable procurement and
sourcing practices is an effective and strategic way to future-proof your
business.

Two-thirds of the average company’s environment,

social, and governance footprint lies with suppliers.
Procurement leaders who take bold action can make
a decisive difference in sustainability.

Two-thirds of the average company’s environment, social, and governance footprint lies with
suppliers. Procurement leaders who take bold action can make a decisive difference in
sustainability.
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Companies have many reasons to focus on environmental, social, and governance (ESG)
issues. They may want to satisfy their consumers, who are increasingly choosing brands with
strong ESG credentials, even if the prices are higher. Or they may be seeking to stay ahead of
ever more stringent regulations. Others react to pressure from banks and investors, want to
improve employee engagement, or feel a need to better attract and retain talent. For most
organizations, the answer will be a combination of these factors, which together add up to a
need to understand and manage environmental impact through every part of the business—in
real time.

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Leading players are already capturing real benefits from their efforts. Our colleagues’
analysis shows that top ESG performers enjoy faster growth and higher valuations than other
players in their sectors, by a margin of 10 to 20 percent in each case. Strong ESG credentials
drive down costs by 5 to 10 percent, as these companies focus on operational efficiency and
waste reduction. Furthermore, ESG excellence reduces transition risk by helping companies
stay ahead of changes in regulation and stakeholder sentiment.

ESG leadership begins at home, but it can’t stay there. That’s where procurement’s role
becomes so critical. Many companies are already running highly successful initiatives to
optimize resource consumption within their operations or engage with their local
communities, for example, but the environmental and social footprint of a business extends
far beyond its own walls. For most products, 80 to 90 percent of greenhouse-gas emissions
are “Scope 3”: indirect emissions that occur across the company’s value chain, such as
embedded emissions in purchased goods and services, employee travel and commuting, and
the use and end-of-life treatment of sold products. Of these emissions, two-thirds are usually
from the upstream supply chain. Tier-n suppliers are also more difficult to monitor,
increasing the risk that poor environmental or labor practices go unnoticed.

Willing, but not ready

As the primary interface with the upstream supply chain, the procurement function has a
decisive role to play in shaping an organization’s ESG footprint, both directly through
purchase decisions and indirectly by influencing product design. When we speak with chief
procurement officers (CPOs), it’s clear that they understand the significance of their position,
but most companies are still struggling to turn that understanding into a clear vision or
sustainability strategy for procurement. In a recent survey of 20 CPOs at large European
companies, for example, 60 percent knew where they wanted to be but had no aligned
sustainability strategy. Only 20 percent said their organizations used sustainability measures
as primary criteria in sourcing decisions or supplier reviews. And less than 10 percent said
that sustainability was included in category strategies.

When we asked these CPOs why they haven’t built ESG into the organization’s sourcing
DNA, it became clear that most felt they lacked the necessary tools, skills, and data. Seventy
percent of our sample said their organizations didn’t understand where Scope 3 emissions
were generated in their value chain, for example. Ninety percent told us they had difficulty
identifying the right actions to move the needle on ESG topics, and almost three-quarters
didn’t know what ESG targets to set.

Toward the sustainable procurement function

CPOs accept that significant work is required to create the sustainable procurement
organizations they need. We believe, however, that many organizations, especially those with
mature procurement capabilities, already have robust foundations in place. Most importantly,
procurement functions already have rich data on the upstream value chain. They know
exactly how much a company buys, where it comes from, and who makes it.

A procurement organization can build on these foundations by taking a holistic approach to

the development of new ESG-focused data, processes, and capabilities. Such an approach
would involve three basic steps (Exhibit 1), which together make sustainability (and ESG as a
whole) simply part of the way the company does business, starting with what it procures and
ending with what it sells and how it supports its customers.

Exhibit 1

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1. Determine the baseline and how far to go. Understand and quantify the organization’s
current ESG footprint. Identify the most significant risk areas and improvement
opportunities. Determine what matters most in the context of the company’s overall
ESG agenda. And set goals and targets for sustainable procurement.
2. Establish the core and drive value-creation initiatives. Define ESG metrics and
policies that will be integrated into the organization’s standard supplier selection,
procurement, and supply-management processes. In parallel, select a number of top-
priority ESG themes and address them via in-depth cross-functional innovation and
improvement initiatives, such as collaborating with value-chain partners to
decarbonize emissions-intensive areas of the supply chain.
3. Shift the organization. Scale up and roll out successful initiatives. Integrate
sustainable purchasing practices into the organization. Continuously train the
procurement community on sustainable procurement principles and their application.
Track performance against targets.

Design cost-effective, carbon-abated products with resource cleansheets

Read the article

Determining the baseline: How good could we be?

You can’t start a journey unless you know where you are, and where you want to go. For
procurement organizations, there are several ways to address these key questions. To
understand the ESG footprint of the supply base, companies can take an internal approach,
asking suppliers to provide detailed information on their own ESG impact, both overall and
by category. Alternatively, they can use the external data sources offered by specialist ESG
analysis and rating companies. Such analyses will inevitably be incomplete, but a top-down
evaluation of the supplier base helps procurement organizations take the lead in identifying
the most significant risks and improvement opportunities in the upstream value chain.

Benchmarking can reveal hidden ESG strengths within the value chain, as well as show
companies where they need to improve to match or outperform industry norms.

Many companies also find it useful to benchmark their ESG performance against those of
competitors and players in other industries. This can reveal hidden ESG strengths within the
value chain, as well as show companies where they need to improve to match or outperform
industry norms.

Alongside these top-down analyses, organizations that are serious about sustainable
procurement will want to take a deeper dive into the ESG performance of their most
important value chains. This can be done by working with key suppliers to conduct an “ESG
teardown” of the supply chain, looking at the environmental and social impact of activity
through every supply-chain tier.

Using data and analytics, companies are also building upon and evolving practices already
used by high-maturity procurement and product development organizations, employing new
approaches to look at the impact of their products and services. For example, procurement
experts have long been familiar with cleansheet analysis of component and raw-materials
costs. “Resource cleansheets” build on that foundation, creating a granular assessment of both
monetary cost and carbon footprint for every component and manufacturing step involved in
building a product. Over time, this approach generates a common language that the
engineering and sustainability organization can use to quantify and evaluate materials and
technology for their cost and emissions trade-offs (Exhibit 2). Such exercises require good
data sources and skilled analysts, but they are a powerful way to pinpoint and reduce major
sources of greenhouse-gas emissions.

Exhibit 2

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Building the core, and driving value-creation initiatives

Once procurement leaders understand the ESG footprint of their organization’s value chain,
they can begin to implement new practices that seek to address risks and capture value-
creation opportunities. Many of these procurement practices can be integrated into the
organization’s standard sourcing and supplier-management processes.

Reinforce that ESG always matters. One consumer products company, for example, decided
to take action when it uncovered unfair labor practices at an overseas component supplier.
Not only did these practices present a reputational risk to the company, they also threatened
the stability of its supply chain, since switching to an alternative supplier created significant
delivery delays. The company responded to this issue by introducing a requirement that all
potential suppliers provide documentation of their ESG practices as part of its standard RFx
(request for x) process. The first time the exercise was run, only seven out of 12 candidate
suppliers were able to fulfill the request. Since the cost of mitigating ESG risk through
regular checks and audits would outweigh any potential savings offered by suppliers without
strong ESG systems, the company included the presence of such systems in its primary
supplier-qualification criteria for all future sourcing projects.

Other companies consider carbon emissions as part of the RFx process, weighing suppliers
according to carbon intensity and their impact on the company’s Scope 3 emissions, in
addition to criteria such as cost, quality, and delivery performance. More mature companies
even apply “internal carbon pricing,” creating a profit-and-loss penalty for business units that
source products with high carbon emissions.

Core sustainable-sourcing practices should also include demand-side efforts. Simply making
internal customers aware of the carbon emissions generated by products and services can
encourage lower-impact behavior in areas such as business travel or indirect purchasing.
Requiring business units to measure, report, and reduce their Scope 3 carbon footprint can be
even more effective in reducing a company’s ESG footprint from procured materials and
services.

Build sustainability as a standard. Including “sustainability as standard” in procurement

processes is an effective way to reduce ESG-related risks and spot opportunities for
incremental improvements. It can also help to ensure that procurement teams and their
internal customers are aware of the environmental and social impact of purchasing decisions.
Where an organization has ambitions to make meaningful changes to its ESG footprint,
however, it needs to go beyond the best currently available choices. That requires innovation:
sourcing different materials or different manufacturing processes, and collaborating with
suppliers in new ways.

Leading procurement organizations are achieving big leaps in sustainability by focusing time
and effort on targeted value-creation initiatives. Often beginning with small pilot projects,
these initiatives allow teams to explore all of the available options, develop and test new
approaches, find out which ones matter most, and then apply them at scale across the entire
enterprise and its supply chain—to lasting impact.

At one major consumer goods manufacturer, for example, procurement now orchestrates
purchases of electricity from renewable sources for more than 200 offices and production
facilities worldwide. The company entered into new power-purchase agreements with
renewable-energy suppliers across the globe, securing beneficial pricing by bundling demand
from multiple sites. In the next phase of the initiative, it is addressing its Scope 3 emissions
by working with major tier-one suppliers to encourage them to make the same transition. As
part of that process, it allows those suppliers to source their power through its energy
procurement platform.

At another consumer goods player, the procurement organization used an agile sourcing
approach to reduce the company’s reliance on virgin petroleum-based feedstocks. In a series
of weeklong “sprints,” procurement teams first conducted a market scan to identify candidate
feedstocks produced from alternative sources including recycled plastics and agricultural
waste. They then evaluated the economic, environmental, and technological maturity of the
most promising candidates before finally developing a detailed business case, cost models,
and go-to-market approach for four possible new feedstocks. The effort identified
opportunities to reduce annual carbon emissions by around a million tons over a one- to five-
year time frame.

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Other procurement teams have made significant sustainability gains through expanding
collaboration with suppliers. One global retailer pursued a multipronged strategy with
agricultural suppliers in emerging markets, which included the introduction of longer-term
contracts to encourage capacity investments, and support for the adoption of technologies
such as hothouses and drip irrigation. After several years, the effort generated annual savings
of more than $300 million as suppliers increased their yields while reducing input costs. At
the same time, reducing consumption of water and fertilizer helped to cut risks associated
with spikes in commodity prices or water scarcity.

Another company, this time in the pharmaceutical sector, worked with its end customers and
distribution partner to replace single-use secondary packaging with a durable, returnable
container for temperature-controlled shipments. Careful, user-centric design of the packaging
and returns process helped the organizations to achieve a 98 percent return rate, well above
their initial target of 80 percent. The project eliminated 500 tons of packaging waste and
generated savings of almost $4 million.

Shifting the organization

The final step in the development of a sustainable procurement function is a set of actions
that embed strong ESG practices into the organization. Procurement teams will need to learn
how to evaluate the ESG credentials of potential suppliers, for example, and how to use
carbon accounting principles to compare the impact of different supply options. Scaling up
flagship sustainability initiatives into company-wide policies may require investment in new
technical skills for supplier development teams, which can then engage with suppliers to
educate, evangelize, and address specific capability gaps.

The procurement function will need new tools and data sources, too, to enable ESG supply
chain teardowns and resource cleansheeting, or to facilitate the identification of suppliers
with favorable ESG footprints or novel technologies that could help the organization achieve
its sustainability goals.

Finally, companies will need to track sustainability alongside other targets, and adapt their
incentive and performance-management systems to ensure the efforts of procurement teams
and internal customers are aligned with the organization’s sustainability goals.

As companies seek to reduce the negative environmental and social impact of their activities,
they are discovering that many of the biggest risks and opportunities are found in the
upstream supply chain. That puts the procurement function at the front line of the transition to
sustainable business models. Ambitious CPOs should act now to ensure they have the tools,
data, and capabilities needed to support this shift.
To test your readiness, try listing the three ways that the purchasing function could have the
largest impact on your company’s ESG footprint. What would take to achieve that impact?
How could procurement become a primary driver of sustainability within your organization?

Benchmarking can reveal hidden ESG strengths

within the value chain, as well as show
companies where they need to improve to match
or outperform industry norms.

"End-to-end sustainable procurement offers

enormous potential and has a positive impact on
the entire company as well as on customers and
suppliers

Surveys show that for most companies today, goals such as risk mitigation,
supply chain resilience, and the contribution these can make to their
sustainability targets are more important than aiming for further cost
reductions in procurement. These are all goals that can be achieved with
sustainable procurement. And more than that: Being highly cross-functional,
procurement is predestined to embed sustainability along all three ESG
dimensions (environment, social, governance) throughout the entire company,
thereby exerting an influence at all points along the value chain (see Figure 1)
and thus leveraging further potential. Not only does this engender greater
supply security through more resilient supply chains, it also serves to improve
the brand image, which in turn helps to retain existing customers and attract
new ones. Last but not least, the shared goal of sustainability also deepens
and improves business partnerships with suppliers and customers and
strengthens employee commitment.
Sustainable procurement therefore holds considerable potential, but
harnessing this for your own company will take more than just complying with
national or international regulations and laws on environmental protection,
employee rights or reporting obligations. Voluntary industry standards or
voluntary commitments that go above and beyond this and are based on the
expectations of customers and investors would be a good start. Yet, they are
rarely enough to form a basis for a well-functioning and comprehensive
concept with which to fully exploit all of the potential that exists. That is why
the pioneers of sustainable procurement go one step further and rethink their
business model to enable the concept to unfold its full effectiveness (see
Figure 2).
One such pioneer in sustainable procurement and supply chain management
is a sports equipment manufacturer from Germany: The company actively
tracks its entire supply chain, supports material suppliers and works closely
with institutions to ensure sustainability end-to-end and to introduce binding
limits on critical substances. In doing so, it indirectly contributes to the
reduction of waste and emissions at the product user's end as well, thus
reinforcing its own corporate and brand identity and bolstering the resilience of
its supply chains, especially in the face of the external challenges of the day.
Another example how to make things happen in the area of sustainability is
showcased by two major French corporates: They signed a partnership for
polymer recycling in order to cope with their target of 30% recycled content in
interior trim for vehicles.

But it's not just sporting goods or cosmetics companies with their sensitive
target groups that see an advantage in striving for sustainability beyond the
legal regulations and voluntary commitments within the industry: A German
pharmaceutical manufacturer – an industry that has certainly struggled with
the issue of sustainability in the past – is working on an internal carbon pricing
system for all its investments in a bid to significantly reduce emissions along
the supply chain. The company has also joined others in founding the
Sustainable Procurement Pledge (SPP), an international, nonprofit
organization that promotes knowledge of responsible procurement practices.
One of the founding members of the SPP is a major German consumer goods
conglomerate: Among other objectives, it has set itself the goal of basing all
procurement decisions on the three sustainability pillars of climate
friendliness, circular economy and social progress. And last but not least,
there are pioneers and also followers in the IT sector, who are committed to
reducing the environmental footprint of their data centers by e.g., creating new
businesses around supplier assessments to perform ESG-related audits or
inquiries.

There is more to it than just choosing the

right suppliers

So what should you do now if you want to introduce sustainable procurement

in your company and benefit from the advantages it brings? The first thing to
realize is that there's much more to it than just selecting the right suppliers or
intermediate products. Sustainability as a concept affects all business
processes, so comprehensive corporate targets and KPIs focused on
sustainability are a must in order to guide procurement policy. The focus when
establishing sustainable procurement should then be primarily on developing
a procurement strategy and setting up supplier management (see Figure 3).
An important part of this is establishing a code of conduct and getting
suppliers to commit to it, but also consistently applying sustainability criteria in
all tenders and in the selection of new suppliers and the monitoring of their
performance throughout the business relationship.
It is important to have as much transparency as possible about sustainability
performance, at least on tier 1 of the supply chain, not only to be able to
evaluate the effectiveness of your own commitments but also to be better in
assessing and mitigating risk. In addition, it gives suppliers greater motivation
to focus on sustainability themselves in order to be able to comply with the
contract terms. Joint initiatives can be developed to drive the subject forward
and also spread to tier 2 and tier 3 suppliers. This will make the entire supply
chain increasingly resilient to disruption. The fact that legal regulations are
also being proactively implemented is another positive aspect.

An additional benefit of the transparency that this offers lies in the fact that
companies can support their suppliers in their climate protection efforts and
thus reduce upstream greenhouse gas (GHG) emissions in the supply chain.
Even though Scope 3 emissions in the European emissions trading system
are not yet officially attributed to the processing stage of the value chain, they
are increasingly being included in companies' GHG footprints because
stakeholders such as investors, customers and the general public are
demanding it. Here, too, it makes sense to go beyond the legal requirements,
for example by voluntarily offsetting greenhouse gas emissions generated by
suppliers or customers during the useful life of products.
The carbon price currently stands at around 100 euros per ton and will rise
significantly in the future (see Figure 4). It is becoming increasingly important
as a cost factor. With Scope 3 emissions accounting for 50 to 80 percent of a
company's total emissions, depending on industry, procurement has
considerable potential to bring emissions and thus costs down. Procurement
managers would therefore be well advised to develop appropriate strategies
around this issue together with their suppliers.

More sustainability at lower cost – a

contradiction in terms?

Traditionally, many companies applied the rule of three: sustainability equals

costs equals uneconomical. But this rule is long outdated: Scope 3 emissions
are only one possible direct cost effect of the sustainable procurement
concept. At least as important are the indirect effects, for example through the
reduction and mitigation of unforeseen risks that cause high, unbudgeted
costs. Further, sustainable procurement promotes the emergence of
innovations and their early integration into processes, which increases cost
efficiency (as we see, for instance, with the use of digital tools to create
transparency in the supplier base). This can even improve procurement's cost
position in the long term. Last but not least, sustainability is playing an
increasingly important role in attracting investors as well as in public tenders.
When all of these factors are taken into account, it becomes clear that, at least
in the medium to long term, a consistent switch to sustainable procurement
will in most cases result in lower costs and greater profitability.

Sustainable Procurement
U-M recognizes the importance of sustainable—and socially responsible—procurement and
its economic and environmental impact to the community. Sustainable procurement refers to
the purchasing of products and services that have a reduced effect on human health and the
environment when compared with competing products or services.
This comparison considers a variety of factors, including raw materials acquisition,
production, manufacturing, packaging, distribution, reuse, operation, maintenance, or
disposal. Examples of sustainable products include—but are not limited to—products that:
 Are made from recycled or environmentally preferable content.

 Are able to be recycled or composted in U-M waste programs.

 Contribute less overall greenhouse gas emissions than alternatives.

 Offer alternatives to hazardous or toxic chemicals.

 Use energy- and water-efficient manufacturing processes.

 Use alternate fuel and renewable energy.

 Use minimal or eco-responsible packaging.

Examples of sustainable services include—but are not limited to—services that:
 Have company-supported commitments to sustainable practices.

 Refurbish items to lengthen their use (e.g., the UManage Program).

 Reuse items to extend their lifespan (e.g., Property Disposition and the Lab Reuse
Program).
 Offer packaging and take-back programs.

 Implement efficient waste management systems that prioritize recycling, composting,

and reducing single-use items.

 Are sourced from environmentally responsible suppliers that prioritize sustainable

materials, ethical labor practices, and reduced packaging.
Units are encouraged to purchase sustainable goods and services to both achieve value and
support U-M’s sustainability initiatives.

Find Products and Services

Making Eco-Friendly Choices: Examples
of Sustainable Procurement Behaviors
 Prioritize ordering goods and services from the University-Wide contracts established
by University of Michigan Procurement Services.

 Prioritize products and services that have obtained environmentally sustainable

certifications.

 Substitute sustainable products where appropriate including recyclable, compostable,

and reusable materials.

 Refrain from the procurement and use of single-use plastic.

 Host virtual instead of in-person events whenever possible.

 Utilize alternative options to paper consumption such as embracing digital file

management solutions.

 Consider building layout efficiencies to minimize energy expenditures.

Buying Green in M-Marketsite
M-Marketsite is U-M’s online catalog ordering system that allows employees to securely
place orders from multiple suppliers.
 Read instructions for accessing M-Marketsite here.
 You can access step-by-step job aids and simulations via the My Learning &
Information Center (My LINC). Supplier catalogs are either punchout or hosted.
How you search for sustainable products may vary from supplier to supplier and
which type of catalog you are using.
Green steel, recycled plastic, and other materials with low emissions intensity are already
scarce—and will get even harder to find. Here’s how smart companies are preparing for the
squeeze.
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Companies are ramping up their climate commitments, and with them their ambitions to
source materials—such as green steel, recycled aluminum, and recycled plastic—that have
lower emissions intensity than their conventional equivalents. Production capacity for many
low-emissions materials, however, appears set to fall far short of future demand. For
example, our analysis suggests that in 2030 demand for green steel in Europe could be twice
as great as the available supply. Projections point to global shortages of recycled aluminum
and recycled plastic.

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Such market imbalances will squeeze makers of industrial goods and consumer products that
have pledged to reduce their supply chain emissions. Companies that fail to secure adequate
supplies of scarce green materials may need to pay steep premiums, or else they will fall
short of their target commitments, potentially harming their relationships with customers,
investors, and other stakeholders. Already, growing demand has pushed the prices of some
types of recycled plastic much higher than the prices of virgin resins.

Anticipating these risks, careful players across value chains are now working to build the
capabilities and strategies needed to avoid supply disruptions in the near term and beyond. In
this article, we identify potential shortages and explain business practices that can help
companies cope with them. Three near-term actions—developing baseline insights on
emissions and pricing for inputs, defining a sourcing strategy to lower emissions over time,
and implementing sourcing plans at speed—could prove valuable as businesses prepare for
the green-materials supply crunch.

Shortages of low-emissions resources loom

Savvy companies know that investors, regulators, and other stakeholders increasingly expect
them to decarbonize. They also see that rising customer demand for low-emissions offerings
could allow them to widen their margins and capture large shares of growing markets.
Achieving the necessary decarbonization level means cutting not just the greenhouse-gas
emissions from their own operations (Scope 1 and Scope 2) but also the emissions from their
value chains (Scope 3). Of the more than 2,100 companies that have joined the Science Based
Targets initiative (SBTi), nearly half have made 1.5°C-aligned commitments covering Scope
3 emissions “where relevant.”1

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Scope 3 emissions account for 80 to 90 percent of the emissions associated with many end
products, and large shares of these emissions occur upstream in the supply chain as a result of
energy use and industrial processes. In response, companies are demanding ever greater
quantities of low-emissions inputs, from raw materials to highly engineered components. Our
recent reviews of requests for quotations from automotive OEMs suggest that more and more
are specifying renewable-electricity use, recycled-materials content, and even SBTi
commitments. However, the output of green materials isn’t keeping up with the increase in
demand—and the gap could widen as more companies switch to the low-emissions resources
they will need to meet their climate goals.

For example, our analysis suggests that demand for green steel in Europe will rise to 45
million to 50 million metric tons per year by 2030, if it increases at the pace necessary to
meet the European Union’s target of a 50 percent emissions reduction. Steelmakers have said
that they will have more than a dozen green-steel factories up and running in Europe at the
end of the decade, enough to provide about one-third of the continent’s flat-steel production
capacity. Even so, there could be a supply shortfall of more than ten million tons in 2030.

Steel is only one low-emissions resource that is headed for supply shortages in Europe.
Further analysis points to wide gaps between production and demand for recycled aluminum
and recycled plastic, partly because there may be too little aluminum and plastic waste
available to meet demand for recycled materials (Exhibit 1).

Exhibit 1

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Supply shortfalls ought to ease as more production capacity comes online, though it is not
clear how long this might take. Until then, companies that haven’t already locked in supplies
of low-emissions resources could face rising price premiums. Their dilemma will be whether
to pay those premiums—for the sake of meeting climate pledges and satisfying customer
demand—or to break their promises.

Now is the time to optimize sourcing for sustainability

For companies, the drive to add Scope 3 targets began accelerating in mid-2020. Some
leading businesses, including automakers and consumer goods manufacturers, subsequently
made moves to secure supplies of green resources. The longer that others wait to devise their
own strategies for procuring low-emissions resources, the more likely they will be to end up
at a disadvantage.

It’s still early days in the race to obtain low-emission resources and too soon for first movers’
approaches to be proven successful over the long term. Nevertheless, their actions suggest
that a high degree of ingenuity, along with extensive collaboration across value chains, may
be required to overcome supply constraints and lock in lower costs. Our experience with
these companies has highlighted what they are doing to manage the green-materials squeeze.
Their initiatives are typically concentrated in three areas.

Developing market insights to manage uncertainties. Because supply, demand, and pricing
will vary as market conditions change, leading companies have worked to model these factors
over time. Their modeling tools often include supply cost curves, supply and demand
scenarios, and pricing scenarios, along with projections for suppliers’ capacity buildouts, cost
positions, and emissions intensity. They also need to be frequently updated to keep up with a
dynamic market. Most companies will want to update their models at least every six to 12
months.

Taking a strategic, long-term approach to sourcing decisions. The unsettled outlook for
pricing, supply, regulation, and technology, among other considerations, has prompted
leading companies to devise long-term strategies for reducing carbon emissions in their
supply chains. These strategies generally integrate three components:

 Decarbonize suppliers’ energy use by helping suppliers shift to renewable electricity

and fuels (or by switching to suppliers that use these energy sources) and by helping
suppliers improve energy efficiency. Companies can begin implementing this practice
right away and realize benefits in the near term. In some regions, companies face
heightened urgency because of rising demand and prices for renewable energy.
During 2021, Europe saw a large increase in corporate agreements to purchase
renewable electricity, along with higher prices for wind and solar power.
 Adjust the materials mix, which can involve not only switching to lower-emissions
materials but also redesigning products to use different or less material than they do
now. Developing so-called circular products—those that are designed so that their
components and materials can be recovered easily for recycling or reuse—is one such
way to lessen demand for material. Businesses can alter some products to incorporate
low-emissions materials and components right away, but in other cases, they will
likely need a substantial lead time of up to a couple of years to overhaul product
designs and retool manufacturing processes.
 Partner with suppliers to expand production capacity for green materials or to
implement low-emissions processes. In two examples of this approach, which we
explore further below, automakers are helping finance the zero-carbon steel plants
that will supply them with the green steel they need. The time and effort involved in
building or reengineering production facilities means that companies that establish
green-sourcing partnerships now can expect them to yield benefits starting in three to
seven years.

Building new capabilities beyond supply chain management. As the practices above
suggest, reducing supply chain emissions will be a yearslong effort for most companies, and
one that requires a host of new management capabilities. Most companies will need to invest
in analytical and strategy-setting capabilities just to institute these practices. Other
capabilities may be needed as well, such as design skills to eliminate supply chain emissions
by changing products’ material requirements, or engineering capabilities required to develop
product-as-a-service business models.

To transform a business in these ways will take time, but companies cannot afford to delay
action. The green-materials shortage has begun, and leading businesses are preparing for it.
Below, we describe three near-term actions that companies can take to get ready.
Step 1: Develop baseline insights on emissions, supply, demand, and pricing for every
material input

To plan for supply chain decarbonization, companies should first understand both the
emissions generated during the manufacturing of all the components and materials they now
procure and their exposures to supply, demand, and price volatility for these inputs.

Supply chain emissions and risk exposures can vary greatly among companies, as well as
among the goods sourced by any given business. The typical automotive OEM, for example,
procures a broad array of components and materials. Of these, a few ordinarily account for a
large majority of supply chain emissions (Exhibit 2). This diversity allows OEMs to focus
first on the most economical ways of abating upstream emissions. For example, if switching
to recycled ABS,2 a type of plastic, turns out to be a more cost-effective way to eliminate
emissions than switching to carbon-free copper, a company can seek out green materials
accordingly, especially in the near term.

Exhibit 2

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On the other hand, many automotive suppliers find that most of their supply chain emissions
result from a single raw material. For some suppliers of mechanical components, steel
accounts for more than 80 percent of their embedded emissions. Suppliers of plastic parts
might find that more than 90 percent of their upstream emissions result from their purchases
of plastic granulate. Companies such as these have fewer options for decarbonizing and face
far more volatile costs.

Step 2: Chart a sourcing strategy to cut emissions over multiple time frames

We believe the shift to zero-emissions materials will play out over three time frames: the next
12 months, the two or three years after that, and the ensuing period out to ten years from now.
In the nearest time frame, companies can achieve significant reductions of supply chain
emissions—up to 40 percent for many materials—through such measures as using more
secondary material and changing to suppliers that source renewable energy.

Over the next two horizons, continued decarbonization will depend on the pace of such
developments as commercialization of new low-carbon materials, capital investment by
suppliers, and innovation for hard-to-abate materials. Production of some low-carbon
supplies, such as electric-vehicle (EV) batteries and chemically recycled plastics, is being
scaled up. Other supplies, such as inert-anode aluminum, will take longer to reach the market.
Companies should ascertain when they might be able to procure low-carbon materials that are
not yet available in mass quantities and begin planning now for how they will secure their
share.

A company may need new purchasing models for some supplies—especially if it lacks the
buying power to compel suppliers to decarbonize. To encourage investment in R&D or
production capacity, competitors in some industries may choose to form “buyer’s clubs” that
agree to buy large quantities of low-carbon materials.

Step 3: Implement low-emissions sourcing plans at speed

Green-material sourcing has already begun to disrupt traditional buyer–supplier relationships,

as CEOs at front-running companies negotiate new low-emissions procurement contracts
among one another. To keep up, other companies will need to adjust their own procurement
practices quickly. Leading players use their strategic goals for supply chain decarbonization
to define targets that procurement teams can reflect in the requirements and specifications
they send to suppliers. To reinforce this process, some companies are implementing
“shadow” internal carbon prices.

Companies will also need to gauge the progress of their decarbonization efforts by tracking
and tracing emissions throughout the supply chain. Few have mastered this new skill. Fewer
still have mapped their supply chain emissions using primary data—in part because suppliers
rarely collect this data themselves. Sourcing teams may need to help suppliers install
hardware and software to generate the emissions data they want.

And while a good portion of supply chain emissions can be reduced with near-term action, C-
suite leaders should also prepare to invest now in longer-term solutions. Some companies are
financing innovation and production-capacity increases for the low-emissions materials they
require. Mercedes-Benz and Scania, for example, have each acquired equity stakes in H2
Green Steel, a Swedish start-up that is constructing both a green-steel plant and a green-
hydrogen plant that will produce the fuel needed for steelmaking. Similarly, BMW
announced an investment in Boston Metal, a US-based green-steel start-up.

When companies establish targets for reducing Scope 3 emissions, they also accept the task
of decarbonizing their supply chains. This task comes with practical challenges, but
businesses that get it right stand to gain market share and improve their margins. By taking
near-term action to develop insights on emissions and market dynamics, plan sourcing
strategies, and create capabilities, they can achieve immediate emissions reductions and
sustain progress toward longer-term goals.

Sustainable Procurement
Statistics — 21 Key Figures of
2024
Table of content
 21 Key Figures for 2024
 What Does It Mean?
  Automation
 Net-Zero Commitments by Companies
 Shortages and Inflation
 Conclusion
 Frequently asked questions
Last updated: 29-12-2023 at 02:20

Key take-aways
 Sustainable practices in procurement processes are increasing as
demand for sustainability, especially with global companies arise.
 Companies and organizations that adhere to sustainable ethics
and practices have increasing brand value compared to those that
do not.
 Global consumers purchase sustainable products or items that
are outsourced sustainably more in comparison to those that are
not.
Sustainable procurement statistics is a topic that many
procurement professionals should know. Of course, this subject is
timely as many companies continue to commit to a sustainable
process of their company.
This article will guide you through the latest sustainable
procurement statistics available in 2024. We will discuss some
topics that will enable companies to achieve sustainability in
their procurement
After reading this article, you will have a great insight into
sustainable procurement statistics. Thus, allowing you to know
what are the things that will make the shift to sustainability
possible.

Sustainable Procurement – 21 Key

Figures of 2024
To get to know more about what is currently in the headlines when it
comes to numbers in sustainable procurement, here are 21 key figures
this year that you need to know:
1. 51% of Global Businesses Have Existing Sustainable
Procurement Practices in Place
The business industry has adapted more sustainable practices when
the Environmental, Social, and Governance has become a requirement
for businesses around the world. This is the response of governments
implementing new regulations for business to account for their impact
on the environment.
So, in a survey conducted by the Stanford Business School early in
2023, it is found that 51% of global businesses have existing
sustainable procurement policies and practices which contributes to
the resilience of their value chains.
2. BNEF Forecasts that 90% of Procurement Experts
will Require Suppliers to Demonstrate Carbon
Neutrality
Carbon neutrality means striking a balance between emitting carbon
and absorbing carbon from the atmosphere in carbon sinks; thus it
means that any CO2 released into the Earth’s atmosphere from
business activities is equated by the amount of CO2 being removed.
So, with BloombergNEF’s prediction, this sheds light to the importance
of carbon neutrality being not only a bonus, but a prerequisite for
suppliers to have before moving on with contract negotiations and
formal transactions. Moreover, it also emphasizes how important the
environmental impact reduction practices suppliers take for them to be
a core criterion in supplier assessment.
3. Only 2% of Companies in China Prioritize
Sustainable Growth
In a recent Accenture report, Chinese companies are reported to be
needing to reinvent themselves in order to drive sustainable growth.
Moreover, the Accenture China Digital Transformation Index shows that
only 2% of Chinese companies have holistic and continuous digital
transformation steps required to drive long-term sustainable growth.
Thus, it is quite the irony since Chinese companies dominate the
business industry globally. In fact, in 2022, there were 145 of them
included in Fortune’s Global 500 world’s largest corporations. So, it is an
alarming number that only over a percent of them recognize the
importance of sustainable practices to improve business operations.
4. Companies with Well-Founded ESG Credentials
Reduce Costs by 5-10%
As the world continues to lean more on sustainability and responsible
selling and buying, it becomes increasingly important for the business
industry to align procurement tactics with the changing and improving
values of shareholders, customers, and employees to ensure business
continuity over a long period of time.
Thus, it is important for companies to adhere to sustainable practices.
In fact, according to McKinsey’s research, companies with strong ESG
credentials save from 5% to 10% in costs, and top ESG performers
grows exponentially by 10-20% more in value against other
competitors.
5. Sustainable Procurement Practices Increase Brand
Value by 15-30%
More than satisfaction, customers care about being a consumer of
brands and companies that are committed to sustainable practices to
fight environmental challenges and minimize negative environmental
impact as much as possible. Therefore, companies who adopt and
adhere to sustainable policies benefit more positive brand perception.
Thus, Greenly Institute has shown results that companies with
sustainable procurement practices have as much as 15-30% increase in
brand value, meaning customers find more value in them.
6. US President Joe Biden Signs Executive Order that
Encompasses Carbon-Free Electricity Production by
2030
During the Leaders Summit on Climate, US President Joe Biden
announced that the US will continue to combat climate change and
promises to reaching net zero emissions economy-wide by no later
than 2050.
Moreover, creating a carbon pollution-free power sector to reach 100%
carbon-free electricity production by 2035 is one of the existing goals
President Biden discussed during the summit.
President Biden has signed an executive order that encompasses some
bold and ambitious commitments including 1100% carbon-free
electricity production by 2030 and net-zero emissions from federal
procurement no later than 2050.
7. Nearly Half, 45% of Public Sector Organizations
Include Sustainability Criteria in Procurement Policies
As one of the main requirements of the business industry calls for both
private and public sector organizations to acknowledge the vital
pertinence of sustainability and integrate and adhere them in their
procurement policies.
As Spend Matters reported, during the first half of 2023, about 45% of
public sector organizations recognize the sustainable practices in
procurement as vital to ensure business continuity. Thus, it serves both
a testament to the advances the industry already made and a call-to-
action for organizations who have yet to follow.
8. Global ESG Assets may Surpass $50 Trillion by 2025
Due to the trend of the increasing global ESG assets that started in
2020, Bloomberg Intelligence predicted that they may be valued at
more than $50 trillion by 2025 assuming 15% growth in total. Moreover,
the US is taking the lead with more than 40% growth since 2022 and
influences the global ESG growth results by a lot.
Furthermore, this figure highlights that organic growth will not be
hindered or discontinued, rather it will continue to improve in numbers
and statistics led by companies, development projects and central
banks.
9. By 2026, 70% of Technology Procurement Leaders
will have Environmental-Sustainability-Aligned
Performance Objectives
Gartner identified that environmental sustainability has become a top
10 business priority for CEOs which demanded that their businesses
align with environmental performance from sourcing functions.
So, they made a prediction that 70% of technology sourcing,
procurement, and vendor management (SPVM) leaders will have
environmental-sustainability-aligned performance objectives for their
functions by 2026. Moreover, 75% of global companies will increase
business with IT vendors that will have to demonstrate sustainable
goals and timelines and will see to it that they replace suppliers that do
not.
10. Amazon Business Reports 67% of Consumers to
Purchase Sustainable Products in 2023
Early 2023, Amazon Business surveyed 5, 000 enterprise employees
across France, Germany, Spain, and the UK on their companies’
approach to more sustainable purchasing. They found that 67% of
them choose to purchase sustainable products as social and
environmental considerations become a core driver to combatting
environmental challenges.
However, it was not the Gen Z to lead the shift. Rather, it was
employees aged from 55 and up to consider sustainability while making
purchasing decisions compared to the Gen Z with only 31%.
11. 70% of European Employees were Not Aware about
Their Companies’ Sustainable Guidelines and Policies
in Procurement
In the same report, only 14% of 5, 000 employees across France, Italy,
Germany, Spain, and the UK said that they felt confident about making
more sustainable procurement processes on behalf of their businesses.
To add to that, a worrying 70% were not aware of what socially
responsible purchasing guidelines exist within their companies and
41% of which are completely unaware of any guidance whatsoever.
Thus, although with the increasing importance rate of sustainability to
exist in businesses, these figures are a reflection that some do not train
or ensure that their employees adhere to such practices.

12. 58% of Global Organization Monitor Suppliers’

Sustainability Performance
As part of supplier relationship management (SRM), companies also
assess their suppliers whether their sustainability goals align with one
another. PR Newswire reports that more than half of surveyed global
companies commit to monitoring their suppliers’ sustainability
performance.
Thus, it paints a vivid picture that the 2023 penetrative reach of
sustainability in procurement processes acts as a testimony to the
trend of businesses expanding their commitment to sustainability
beyond their operational and organizational boundaries.
13. In 2023, the AI Market is Valued at $136 Billion and
Expected to Expand at 37.3% by 2023
The growing demand for artificial intelligence technologies, especially in
economies and the business industry will need to be met with
standards for responsible AI practices in procurement.
Furthermore, the figures reported by the World Economic Forum serves
as a basis as to how much companies will invest in AI and machine
learning technologies to streamline procurement processes and
optimize business operations. Moreover, such advancements will help
them in protecting their businesses from potential risks related to
intellectual property, data, and privacy.
14. AI Use for Environmental Purposes Can Contribute
Up to $5.2 Trillion to the Global Economy by 2030
Aside from streamlining procurement processes and overall business
operations, artificial intelligence can help provide insights on how
businesses can positively impact the environment.
Moreover, PwC reports that AI and machine learning can reduce
greenhouse gas (GHG) emissions by 4%. With that, AI for environmental
purposes can also contribute up to $5.2 trillion to the global economy
by 2030.
With these figures, it can be noted that sustainability does a lot more
than save the planet, but also bring a lot of value to the global
economy.
15. 48% of Global Companies Experience Pressure to
Embrace Greener Procurement Processes in 2023
Amidst environmental sustainability concerns, 48% of companies
globally face pressure to adopt eco-conscious practices in their supply
chains. Moreover, since the world pushes the business industry for
greener operations, emphasizing reduced carbon emissions,
responsible sourcing, and increased use of alternative fuels in shipping.
Thus, the top 3 areas that businesses report prioritizing for supply
chain sustainability are electrification at 40%, natural resource
management at 29%, and water usage and the transition to renewables
at 27%. These initiatives bring the business industry closer to their goal
of going 100% sustainable.
16. IBM Shows that 54% of All Consumers are Willing to
Pay More for Products from Companies that are
Socially Responsible
As part of their 2023 report about sustainability, IBM shows a figure of
54% of all global consumers that are willing to pay more for products
from companies that are considered socially and environmentally
responsible. They place an impressive value on positive impact to the
society which not only shows how ready they are to shoulder premium
costs but also reflect their concern for the world.
Thus, this also mirrors an impactful insight for other consumers to
follow. A sustainable procurement process and overall supply chain
illustrates the benefits of shifting to environmentally-conscious
business models.
17. Transitioning to Sustainable Practices Globally can
Lead to $26 Trillion in Savings by 2030
The United Nations’ report on Climate Action states that it is not just a
budget buster or an economy-wrecker. In reality, shifting to a greener
economy could yield a direct economic gain of $26 trillion by 2030
compared with traditional business operations.
To expound on this further, adopting sustainable practices in the
business industry can generate more income than usual because
although investing upfront can cost more, they are actually less costly
than business-as-usual in the long run. In addition, this shift can also
produce over 65 million new low-carbon job opportunities.
18. As of 2023, the Transport Sector Accounts for 15%
of Total Greenhouse Gas Emissions – the 4th Largest
Source of Global Emissions
In the same report made by the UN, after the power, industry, and
agriculture-forestry-land use sectors, the fourth largest source of global
emissions is the greenhouse gas; and for the 14% of it is composed of
the transport sector.
So, with sustainable procurement practices and the adoption of
decarbonizing in the transport sector which includes various
transformative measures like electromobility, alternative fuels for
shipping and aviation, advanced biofuels, ammonia, synthetic fuels, and
demand and efficiency strategies.
19. Sustainability-Focused S&P 500 Companies have
18% Higher Returns of Investment
The Standard & Poor’s or the S&P 500 Index, a market capitalization-
weighted index of 50 leading publicly traded companies in the US., have
almost a hundred percent of companies publishing a sustainability
report starting from 2020. Moreover, in their most recent report,
results showed that sustainability-focused S&P 500 companies have a
bigger number of ROIs reaching up to 18%. Furthermore, with this
figure, it is an eye-opener for most (if not all) global businesses to shift
to a more sustainable approach in their business operations.
20. Business Can Make a Major Impact and Account
for 60% of Emissions Cut by 2030
According to Environmental Sustainability, an island of plastic with
approximately 1.5 million square kilometers is floating the Pacific
Ocean. More than that, the world is actually on pace to produce at least
27 billion tons of solid waste by 2050 due to a business environment
that prioritizes fast and rapid production and turnover of products for
bigger and maximum profits.
In addition, mismanaged CO2 emissions are also projected to increase
temperature of two degrees celsius by 2050 which will, in turn, cause
sea levels to rise and catastrophic weather events to increase. To make
it worse, another study discovered that as small as 100 companies
globally are responsible for an alarming rate of 71% of global
emissions.
However, as per the Paris Climate Accord, the business industry can
actually account for 60% of emissions cuts by 2030 and avoid major
environmental consequences should they adopt and shift to more
sustainable practices.
21. 94% of CPOs Claim that Their Senior Leadership
Team and CEOs are Interested in Sustainable
Procurement Practices
Sustainability in procurement processes has become an integral part
for successful business operations. For what is currently seen as an
extra step when dealing with suppliers and purchasing resources, it will
ultimately become a non-negotiable measure for all companies and
their respective supply chains.
Moreover, in Supplier Day’s case study, it was revealed that 94% of the
CPOs they surveyed claim that their senior leadership teams and CEOs
have taken a keen interest in practising sustainable procurement
processes.

Sustainable Procurement Statistics:

What Does it Mean?
The COVID-19 pandemic is still present even though many countries
have started to vaccinate their citizens. Additionally, the ongoing war
between Ukraine and Russia, high inflation among countries, high
carbon emissions, and shortages of supplies are what the supply chain
is facing right now.
However, many companies are committing to switch to a sustainable
supply chain and procurement to counter these factors. This is due to
the fact that sustainability in the process of companies can lessen the
effects that are brought by these factors.
Although the commitment of some companies is still in its early stages,
their willingness to have sustainable objectives and goals is visible in
order to help the environment and society recover.

Automation in Sustainable
Procurement
Shifting from a sustainable procurement means integrating new
technologies that consume less energy to make the procurement
processes efficient while considering the health of the environment and
society.
Through automation, businesses can go on a paperless process.
According to a study, businesses produce 21 million tons of paper
waste each year. Thus, automation saves paper and makes it easier for
everyone to access information through their system.
Automation can also make manufacturers reduce their energy
consumption. Automation can decrease heating requirements and
reduce cycle times. Additionally, it can lower the amount of energy that
is needed for operation. Thus, lowering the carbon emissions of
manufacturing companies by using less energy.

Net-Zero Commitments by
Companies
Multinational companies like Unilever have committed to a net-zero
operation. Through Unilever’s action plan, it has set a clear pathway to
have zero emissions in its operation by 2030 and net zero emissions
across its value chain by 2039.
Although many multinational companies like Unilever are switching to a
sustainable procurement and supply chain, many small to midsize
companies are just starting to hear about sustainability.
The growing alliance of countries, cities, companies and other
institutions are pledging to get to net-zero emissions. More than 70
countries, which includes the largest polluters — the United States,
China, and European Union — have a zero net target that covers about
79% of global emissions.
According to Antonino Guterres, the United Nations Secretary-General,
they need commitments that will deliver a reduction of emissions by
45% by 2030 to reach net zero emissions by mid-century.

Shortages and Inflation

The rising prices due to shortages deepen the challenge for those
who are not able to pay for food in normal times. Acute hunger is
driven by three things which are conflicts, climatic shocks, and
economic and social fallouts due to the pandemic.
The economic fallout from the COVID-19 pandemic has shocked
the world economy as incomes are severely struck by job losses.
Additionally, inflation has ramped up due to supply chain
disruptions.
The current food crisis is about affordability. Food is available but
it is beyond the reach of millions of people. Sustainable
procurement aims that all actors in the supply chain must have a
dignified price. Thus, everyone can afford to buy their needed
products, especially food for people.
Conclusion
In 2024, sustainable procurement is a global trend, with 51% of
businesses adopting eco-friendly policies. Companies benefit from
reduced costs (5-10%) and increased brand value (15-30%). Notably,
90% of procurement experts seek carbon-neutral suppliers. However,
only 2% of Chinese firms prioritize sustainability.
Automation aids in paperless processes, reducing waste. Despite
challenges like geopolitical conflicts and inflation, businesses commit to
net-zero operations and join global alliances. Sustainability isn’t just a
trend; it’s a crucial step toward a resilient and equitable future.

RESOURCES:

 SAP  BNEF

 White House  Spend Matters

 McKinsey  Greenly Earth

 SAS  Marketsplash

 Bloomberg  Gartner

 Research AI Multiple
 CIPS

 United Nations
 Harvard Scholar
  Green Business Bureau  Maryville

Why Suppliers are Key to

Unlocking Sustainable
Procurement Value
SEPTEMBER 1, 2021ECOVADIS EN

Despite the recent challenges of the COVID-19 pandemic, both

buyers and suppliers are increasing their commitment to
sustainable procurement. This trend is spurred by growing
awareness of the need for sustainable and resilient supply
chains to unlock new value, remain agile in the face of future
crises, comply with emerging regulations and respond to
growing pressure from consumers and investors. The spotlight
often shines on the benefits that buying companies can reap
from implementing sustainable procurement programs and
initiatives. However, our recently launched Sustainable
Procurement Barometer 2021 report – which surveyed both
suppliers and buyers – makes a compelling case for why
suppliers have just as much to gain. Here are four key
takeaways from this year’s Barometer.

1) Sustainable Procurement Helped Suppliers

Endure the COVID-19 Crisis
According to the Barometer, 71% of suppliers surveyed agreed that their
sustainable procurement practices helped them endure the widespread
disruption caused by the pandemic. This was even greater than the number
of buyers (63%) that felt buoyed by similar efforts, a signal that suppliers
should actively build resilience rather than waiting for buyers to “cascade”
benefits down the supply chain.

A focus on sustainable procurement can also help suppliers develop closer

relationships with buyers that may pay off in times of crisis. Of our
respondents, 49% indicated that sustainability criteria were “very
important” or “important” for them in deciding how to support their
suppliers during the COVID-19 crisis, for example by providing them with
more business or offering better payment terms. While 30% of buyers
stated that they support all suppliers in similar ways, this has the potential
to dwindle as regulatory pressure mounts.

2) Buyers are Increasingly Using Sustainability

Criteria to Evaluate Suppliers
The use of sustainability criteria to evaluate new suppliers has become the
norm, with 69% of respondents considering sustainability performance
when selecting new suppliers and renewing contracts. More and more,
sustainability is being taken into consideration not only at the beginning of
the engagement with new suppliers but also throughout the relationship,
with 38% of respondents including sustainability criteria in
RFP/RFx/tenders and 36% addressing sustainability performance in their
supplier relationship management.

It is also encouraging that 30% of respondents look at sustainability

performance when implementing incentive or recognition programs, thus
providing a positive incentive for suppliers to increase investment in
sustainability initiatives.

“Every time we look for new supply chain partners, we check

what certifications or audits they have. It may be a wonderful
new technology that the market will love, but it could become
a liability to both ourselves and our customers if it doesn’t
come from an ethical and certified supply chain.”

- Medical device components manufacturer

3) Suppliers are Key to Unlocking the Full
Potential of Sustainable Procurement
Sustainable procurement practices are being adopted at scale by companies
of different sizes and across geographies. However, the effective
implementation of sustainable procurement programs is not without its
challenges. Of the obstacles identified in this year’s Barometer, “an
inability to effectively track supplier sustainability performance” and
“resistance from suppliers” were ranked in the top two of concerns by 38%
and 31% of respondents, respectively.

These results indicate that buying companies continue to struggle to gain

visibility into their suppliers’ practices and performance. They also
suggest that many buyers are eager to collaborate with their suppliers
around sustainable procurement – collaboration that could represent the
key to unlocking further supply chain sustainability.

4) Purpose Remains a Primary Motivator for

Supplier Engagement in Sustainability
The supplier survey explored what motivates suppliers to engage in
sustainability. The Barometer results show that just over half of
participating suppliers implement sustainable practices for market-driven
reasons: to protect their existing business (19% of respondents) and realize
opportunities for growth (32%). A greater percentage of companies this
year reported growth as their primary motivator than in 2019, an indication
that suppliers are seeing the ever-increasing value offered by sustainable
procurement.

However, one thing has not changed from our 2019 Barometer: Ethical
purpose remains the primary motivator for suppliers choosing to engage in
sustainability. This is an encouraging metric that signals suppliers are
building the company-wide foundation and buy-in needed to develop
comprehensive sustainable procurement programs that enable close
collaboration with buyers.

Conclusion
The survey and in-depth interviews conducted as part of this year’s
Barometer highlight how sustainable procurement has contributed to
greater supply chain resilience in the face of unprecedented disruption and
benefited suppliers in a multitude of other ways. As sustainable
procurement increasingly becomes the norm for large and mid-size buying
companies – fuelled by greater ambition around climate action and an
evolving regulatory landscape – suppliers will be called upon to
implement comprehensive sustainability practices and provide greater
supply chain transparency.

As uncertainty lingers in the global economy, now is the time to work

toward these goals. Read our Sustainable Procurement Barometer 2021
report for more insight.

Sustainable Procurement
Barometer 2021
JULY 29, 2021

[UPDATED July 2023:]

The 2023 Sustainable Procurement Barometer is
now Launching
The 2021 Barometer study is still available for viewing and download
above - but we take this opportunity to announce a new version of this
research is kicking off now.

Conducted every two years, the goal of the Sustainable Procurement

Barometer is to benchmark practices, and uncover insights and success
factors in an effort to to help purchasing teams to optimize strategy and
accelerate SP programs to the next level.

To start this research, we need your help: We invite you - or the

appropriate person from your organization - to provide your input through
a 15 minute survey:

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What’s new in 2023:

 We are thrilled to partner with Accenture for this 2023 edition.

Together we have enriched the diagnostic and research
framework, aiming to uncover even more critical insights on how
practitioners are tackling key challenges, and shifting focus,
investments, and strategies.

 This 2023 study dives deeper than previous editions on topics

like integration of sustainability/ESG across the full P2P workflow,
how it fits in overall digitization strategy, priorities for your
team’s skills and training, and other critical factors.

 Only participants will receive the study output customized with your
responses alongside the benchmarks

 We are also adding selected industry benchmarks -- sample size

permitting, so complete the input survey now and make sure your
industry is represented! Report to publish in November.

**** End Update. Continue reading for highlights on the 2021 edition
****
2021 Report: From Resilience to Opportunity - Sustainability
Pays Off Through the Crisis and Beyond
Despite the fears that it would negatively impact sustainability progress,
the COVID-19 pandemic has consolidated corporate sustainability goals at
the top of the executive agenda. Sustainable Procurement Barometer 2021,
developed jointly by EcoVadis and the Value Chain Innovation Initiative
at Stanford Graduate School of Business, provides critical insights into the
growing recognition that sustainable procurement is fundamental to
building resilience throughout organizations and supply chains, mitigating
risk and driving results.

Key findings from the 2021 report include:

 Labor and human rights issues shape procurement strategy. In

order, procurement organizations are prioritizing labor and human
rights issues, followed by the environment, social issues, and
business ethics, in their two – three-year strategies.
  Procurement is now paying attention to diversity, racism,
nondiscrimination, and equity. 61% of procurement leaders say
social issues will be “more important” or “significantly more
important” over the next two to three years.

 Sustainable procurement proves key to supply chain

resilience. 63% of corporate respondents, and 71% of supplier
respondents, report that their sustainable procurement initiative
helped them endure the COVID-19 pandemic.

 Sustainability performance is critical for revenue and

growth. 69% of respondents are taking sustainability performance
into consideration when selecting new suppliers and renewing
contracts – up from 51% in 2019.

 Mid-sized companies (from $100M to $1Bn in revenue) are

embracing sustainability. 48% believe sustainability will have a
net positive financial impact on their business, while 47% expect a
sustainable approach to lead to improved operational efficiency and
lower costs.
The significance of sustainability in the Procurement and supply chains are:

 $23T reduced annual global economic output worldwide because of climate change.
 35% revenue losses due to climate-related disruptions to specialty supply chains, well-prepared
players only risk ~5% revenue losses.
 $970B in extra costs due to factors incl. hotter temperatures, chaotic weather, and pricing of
greenhouse gas emissions.
 With sustainable procurement 5-10% costs down,
 57% of consumers are willing to change their purchasing habits to help reduce negative
environmental impact. Sustainability as #1 concern amongst Millennial and Gen Z jobseekers.
 Procurement has a significant impact as 2/3 of a company’s ESG footprint lies with their
suppliers.
 Comply with increasing regulations such as Extended Producer Responsibility or ban on plastics.
 Receive sustainability targeted Investments ,10-20% faster growth and higher valuation.

Following sustainability factors in the procurement and supply chain can support your organization to
achieve the Sustainability Objective and improve corporate value.

1. Transitioning from “Low to No” carbon across your suppliers and procurement spend.
 Carbon footprint of materials at product level
 Carbon performance of suppliers
 Supplier-level certifications and data tracking (i.e., renewable energy usage)
 Water-emission at product level
2. Contribute to a zero-waste world by incorporating resilience and circularity into your
procurement processes and supply chains.
 Percentage of recyclable materials
 Percentage of recycled materials
 Percentage of bio-based plastic
  Tracking and quantifying reusability
 Asset transfer for internal use
3. Ensure zero incidents, accidents and harm to communities, people, and the environment.
Guarantee diversity and fair working conditions.
 Supplier ownership, e.g., woman-owned, veteran-owned, minority-owned etc.
 Measures of diversity in management
 Social impact of the enterprise
 Human-right violations in the supply chain

How to promote sustainability in the Procurement processes and how to enable it in your
organization?

To promote sustainable procurement, it is important to pay attention to the following 3 points.

1. Formulation of a company-wide procurement policy that incorporates sustainable procurement.

2. Establishing a procurement process that enables sustainable procurement.
3. Continuous monitoring of business partners with respect to progress on sustainability KPIs.
Supplier evaluation management/improvement including sustainability KPIs.

Why Sustainable
Procurement Makes
Good Business Sense
Sustainable procurement refers to a way of doing business that
safeguards the environment for future generations. It’s more than
just a trend in the business world. It’s an integral part of any
company seeking Net Zero Business Champion status and wants
to succeed in the long term.

That’s because sustainable sourcing is both cost-effective and

helps companies understand their supply chains. And there are
plenty of benefits for businesses who are using sustainable
procurement: increased brand credibility, growing customer loyalty,
reduced product liability risk, and more.

Sustainable procurement means proactively measuring and

managing the sustainability of every part of the supply chain. This
means not just considering the environmental impacts (the ‘green’
side) of business activities but also the social impacts (the “people”
side) as well as the financial impacts. Sustainable procurement is a
way of doing business that aims to reduce or eliminate harm to
people and the planet, now and in the future.

The three pillars of sustainable

procurement
 The environmental pillar includes reducing impacts on the
environment, such as greenhouse gas emissions, energy
consumption, waste disposal and water use.
 The financial pillar incorporates the costs associated with a
product’s net operating income.

 The social pillar considers the impact on society as a whole through

worker rights and compensation in addition to consumer safety.

In order to properly assess these factors, businesses should work

together with stakeholders throughout their supply chains in order
to monitor performance in all three pillars, as without them, the
expected benefits will not be reached.

Our global environmental emergency is not news and companies

and governments have generally been slow to react to provide
proper, robust and tangible solutions to our planet’s needs. But
with careful planning, a business supporting the planet can make
healthy profits and support the sustainable development of the
world.

The benefits of procuring sustainable

goods and services
 Creating new business opportunities in a growing, global market.

 Increasing sales revenue (by appealing to new customers).

 Reducing risks and improving cash flow.

 Strengthening international competitiveness.

 Acquiring new technologies, increasing productivity and reducing

costs through innovation and competition.
  Saving on transportation costs (purchasing local raw materials
close to the production facility).

Change cannot improve environmental impact and financial

output, if it is socially unacceptable, or causes any form of
deterioration in people’s lives or well being. For example, closing
all motorways would reduce transport pollution, and save lots of
money in fuel. However, it would remove the ability for people to
move around the country, to work, to see friends and family and
would decimate all supply chains, so would not be an option.

To be sustainable, a company should have a clear understanding

of what it actually means to be ‘sustainable’, as there is not one
specific definition, but many. As with many things in life, the
difference between good and bad sustainability is often
determined by the company’s purpose and identity.

In order to be a socially responsible company, all stakeholders

have to be taken into consideration and act in line with the
principle that everyone’s needs must be met. All stakeholders can
play an important part in creating a climate that allows them to
succeed.

The intended benefits of sustainable

procurement
The top priority for a sustainable existence is to improve the
quality of our environment and economy.

With a robust and well designed sustainable procurement

strategy, cost savings will follow, allowing further investment into
creating further efficiencies and ultimately improving a company’s
bottom line.

Risk and reputation

The reputation of a company can be damaged by negative
coverage of environmental, social and governance performance.
In addition to the above, there is a moral obligation and growing
expectation for businesses to be responsible.
Revenue growth
Firms which are more sustainable are perceived as being more
trustworthy and often outperform others. This builds brand value
and competitive advantage, and there is a growing body of
research that shows how customers will choose a company based
on its reputation for sustainability, even if the price is higher.
Furthermore, many companies have found that a strong corporate
social responsibility policy has powerful PR benefits, particularly
when the decision is made to act publicly rather than internally.
This public image also generates positive press coverage and the
right kind of publicity can lead to more business.
Cost reductions
Companies with a sustainable procurement strategy can make
cost reductions by improving the efficiency of their supply chains,
and reducing the use of unnecessary packaging, energy
consumption and minimising waste. Such financial savings can
then be re-invested back into the company to make further
efficiencies and make an impact on the bottom line.
Future proofing
Companies can also future-proof themselves against scarcity. By
planning ahead and reducing dependence on non-renewable
resources, firms are less likely to be affected in the long term by
price volatility and shortages. They often innovate to create new
products and services as well as build a more cohesive workforce
which can be employed to solve a range of other sustainability
challenges.
Governments and legislation
Legal frameworks that safeguard the environment and regulate
the distribution of goods and services are a key barometer of a
country or region’s commitment to sustainable procurement.
Legal frameworks can have a positive impact on the business
community and society by:
 Enforcing targets for sustainable investment and procurement
  Increasing competition in business, driving sustainability
improvements across the industry.

 Collaborating with the private sector to ensure that new regulations

are met.

Meaningful social and economic impact

Decisions that are in the best interest of society as a whole, such
as fair wages for workers and an environment which allows for
social cohesion, are more likely to be endorsed by stakeholders.
Such decisions provide long term job creation, wellbeing and
broader economic development.

How to achieve sustainable

procurement?
Keep up with changing attitudes
• 60% of companies are more engaged with sustainable
procurement than two years ago.
• 33% of consumers choose to buy from brands they believe are
doing social or environmental good.
• 89% of companies state that sustainability issues could have a
financial impact.
• 25% of employees don’t know how much their organisations
spend on sustainability.
Collaboration
• Examine your suppliers and ensure they achieve a common,
sustainable goal. With a group effort of businesses, suppliers,
agencies and NGOs the end goal becomes far more achievable.
• Examine your competitors. 20% of sustainability professionals
believe industry collaboration is the most effective way to achieve
sustainability.
Modern Slavery Awareness
The UK government estimates that there are tens of thousands of
people in slavery in Britain today.

 Do not assume your supply chain is slavery free.

 The UN Global Compact, for example, has guidance, tools and

resources to assist companies with business practices. It calls on
 companies to align their operations with 10 universally accepted
principles in human rights, labour, environment and anti-
corruption.

Meercat’s Sustainability Credentials

Environmental sustainability has run through Meercat’s due
diligence and procurement since 2007.

 Our suppliers have all undergone a thorough vetting process,

ensuring we are offering best practice to our customers.

 Our products are intertwined with our sustainable agenda.

 Green and renewable energy quotations will always be offered as

options from us, though the customer will decide which energy
source they purchase.
 It is important to us that we follow organisations like the Carbon
Trust and collaborate with net zero analysts to continually learn
and refine our services to businesses, councils, forums and
Business Improvement Districts.