As a key value driver, procurement can and must play a decisive role in supporting sustainable business models. We explore four ways they can do that
Disruption hits business in many ways – in the form of tech, in the form market changes and in the form of unforeseen events. And while nobody could have predicted the scale disruption we have seen this year, it has undoubtedly shown that business have to be resilient, flexible and adaptable if they are to thrive in modern environments.
Moreover, it presents an opportunity to build for the future by highlighting deficiencies and by highlighting opportunities for future success. One of the major disruptors we’ve faced over the last 20 years is climate change, and with it the drive for sustainable business practices. Consumers now demand that businesses are environmentally aware and ethical. And for companies not to have CSR or sustainability policies in place is considered both bad practise and bad PR.
Of course, having a sustainable approach is more than a PR exercise. The business opportunity is huge. The Boston Consulting Group estimates that there will be in the region of £10.1tn business opportunities by 2030 simply by adopting sustainable practices. To that end, the environmental pressure is also pressing – a 45% emission reduction is required in production and logistics by 2030 if Paris Agreement targets are to be met.
Procurement’s role in this shouldn’t be underestimated. As a key value driver for organisations, it can and must play a decisive role in supporting sustainable business models. Doing so is a win-win. Implementing clearly defined strategies for the function and for improved environmental performance in the supply can delivers measurable benefits. Both organisation and planet stand to gain. It also helps to build resilience – which is vital in a post-pandemic landscape.
Set your vision and partner accordingly
If you’re embedding sustainability into your procurement strategy, then it’s vital you partner with the right organisations. You may already be working with some of them. And you may also need to find others, or better still work with existing suppliers to get them up the standards you expect.
Working with the right suppliers is crucial for your sustainability journey. As you’ll see, the network and bonds you will form will underpin all aspects of what sustainability is and what it means – a co-operation is necessary for that. That’s not possible with a supplier you have a poor working relationship with.
The best fit, you will tend to find, are those organisations that share similar values and culture and that are willing to grow their business in the same way that you are – from an innovation perspective, from a sustainability perspective and from a revenue perspective. Having close ties helps you jointly deliver all the goals.
Drive sustainable innovations with suppliers and vendors
We’re seeing a big shift in the way organisations source goods, in the way they work with suppliers and in the types of suppliers they work with. As the organisation’s primary link with the supply network, procurement can directly drive innovation with its supply partners facilitate mutually beneficial initiatives.
These initiatives come in many shapes and sizes but have an impact across the entire value chain. In the consumer packaged goods market for example, innovative package design and packaging have reduced companies’ environmental footprint and reduced the footprint of its supply chain.
Elsewhere, in the construction industry, organisations with a positive environmental model are using raw materials that have a favourable environmental footprint. They’re also partnering with suppliers that emphasize renewable goods, practices and policies.
Many organisations are increasingly turning to the circular economy model, a model that repurposes old or reconditioned products instead of discarding them – thus reducing waste. In our own industry, ReFlow Marine is seeing great success with this model. The organisation facilitates the reuse and reconditioning of marine spare parts, helping its clients to reduce their carbon footprint by 90%.
Identify areas for improvement in the supply chain
If you’re looking to embed sustainable practises into your approach, then there are a number of avenues you can explore in your supply chain.
The first is delivering value beyond the traditional metrics such as cost, savings and other performance related KPIs. Value creation goes beyond traditional procurement and deals with things like (as we’ve already mentioned) supplier innovation and supplier collaboration. Are your suppliers partners, or are they a company you haggle over price with? The former is a sustainable, viable partnership – identifying opportunities for those in your supply chain takes some creative work, but it’s worth doing.
Learning to think outside your company walls isn’t natural for a lot of organisations – it’s not even that easy for departments. But being aware of what’s going on elsewhere in your supply chain, elsewhere in the world opens up your thinking and opens your organisation up to change.
It starts with awareness – are you aware of what’s going on with your stakeholders, your suppliers, your colleagues, your customers? How can you have a positive impact on that? What is important for them? In the end, what’s important for your customer or for the customer of your customer? And translate that back to key impacts for you and your business. From there, have key actions that you can take to have a positive influence on the situation.
Mitigate sustainability risks
When the COVID-19 pandemic began to disrupt global supply chains, most companies could be forgiven for not prioritising their environmental policies. Yet, actually failing to address the issues the policies seek to mitigate could actually put the company at further risk down the line.
In a world that is growing increasingly complex, it is easy for organisations to be disrupted – even more so by environmental issues. To that end, climate change, resource constraints and rising commodity prices are three major areas of risk for supply chains – take necessary steps to mitigate those.
Sustainability in this instance also means viable, long-term relationships with your suppliers. Are the companies you are partnering with going to meet your future demands? Are they able to grow with you and support you – and you them? And are they also open to sustainable i.e. environmentally friendly approaches?
Find the right partners to work with and check they’re on the same journey as you – in our industry those that have undertaken or are undertaking the IMPA ACT are a good bet.