Sustainable Procurement: Opportunities and Challenges

Feb 7, 2023 | Impact of procurement

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Feb 7, 20233 min read

Sustainable procurement practices can have a positive impact on the environment, society, and economy. Leading companies have set sustainability goals for procurement and have achieved significant reductions in carbon footprint and increased renewable energy usage. Procurement has a crucial role in promoting sustainability and will play an increasingly important role in the future.

The way businesses purchase products and services is becoming increasingly important in terms of sustainability. Those responsible for procurement, or buying, must consider environmental, social, and economic aspects when making decisions about what to spend their money on. This article looks at how procurement affects sustainability and outlines strategies and challenges that must be addressed in order to achieve successful and sustainable procurement practices. 

Understanding How Procurement Impacts Sustainability 

Procurement can have a significant impact on the environment, particularly due to the emissions associated with the transport of goods. Additionally, businesses can have a positive or negative impact on society by choosing to source from local or ethical suppliers. Sustainable procurement also considers economic factors such as job security, fair wages, and whether suppliers pay taxes. FactWise enables supplier diversity, so organizations can choose to prioritize preferred vendors and suppliers whose ethos they are better aligned with. 

By considering all these factors, businesses can make better decisions which will have a positive impact on the environment, society, and economy. This can lead to reduced costs, improved relationships with suppliers, and increased customer satisfaction. 

In order to ensure that procurement decisions are sustainable, businesses should develop a comprehensive strategy that outlines their goals and objectives. This strategy should include a detailed assessment of the environmental, social, and economic impacts of their procurement decisions. Additionally, businesses should ensure that their suppliers are compliant with relevant regulations and standards. 

Real-life examples of companies that have incorporated sustainability into their procurement processes

  • A recent survey by the Green Purchasing Network found that 75% of companies have set sustainability goals for their procurement practices, and 90% of these companies have achieved at least some of their goals. 
  • Procter & Gamble, a leading consumer goods company, has committed to using 100% sustainable cotton in its products by 2020. The company has sourced over 15,000 metric tons of sustainable cotton and has reduced its carbon footprint by over 30,000 metric tons through its procurement initiatives. 
  • Unilever, a multinational consumer goods company, has implemented a sustainable sourcing program that focuses on sourcing palm oil, soy, and paper and packaging materials from sustainable sources. The program has led to a reduction in the company's greenhouse gas emissions by 4.5 million tons. 
  • IBM, a technology company, has set a goal to purchase 50% of its electricity from renewable sources by 2020. The company has already exceeded this goal and now sources 60% of its electricity from renewable sources. 
  • Walmart, a retail giant, has committed to sourcing 100% of its products from sustainable sources. The company has also set a goal to reduce its greenhouse gas emissions by 18% by 2025, and has implemented a comprehensive sustainability program for its suppliers. 

These statistics and examples show the positive impact that procurement can have on sustainability, and demonstrate that companies are increasingly taking their sustainability responsibilities seriously. By incorporating sustainability into their procurement processes, companies can make a meaningful contribution to a more sustainable future. 

The Challenges of Achieving Sustainable Procurement 

Although sustainable procurement offers a range of benefits, there are a number of challenges that must be overcome in order to achieve successful practices. These include: 

  • Cost: Sustainable products and services can often be more expensive, meaning businesses must find ways to reduce costs while still meeting their sustainability objectives. FactWise enables procurement organizations to reduce costs by 25%, which helps create a margin that could be allocated towards sustainability, if the company wishes to. 
  • Supply Chain Complexity: Businesses must be able to track the origin of all products and services in order to ensure they are sourced sustainably. FactWise source-to-pay features detailed vendor profiles so that organizations can check their compliance status and ESR certifications. 
  • Lack of Regulations: In many countries, there are few regulations in place to govern sustainable procurement practices. This makes it difficult for businesses to ensure they are meeting their objectives. 
  • Lack of Awareness: For many businesses, there is a lack of awareness about the importance of sustainable procurement practices. 
  • Political Pressure: Businesses often face political pressure to purchase certain products or services, regardless of their sustainability objectives. 

In conclusion, procurement has a vital role in promoting sustainability within organizations. By sourcing products and services from suppliers who are committed to sustainable practices, negotiating contracts that prioritize sustainability, and monitoring supplier performance, procurement can help organizations meet their sustainability goals and reduce their environmental impact. In recent years, many leading companies have made significant commitments to sustainability, and have implemented comprehensive sustainability programs that include procurement. The examples and statistics mentioned above show that these efforts are making a real difference, and are evidence of the growing importance of sustainable procurement. As companies continue to place greater emphasis on sustainability, it is likely that procurement will play an even larger role in promoting sustainability in the future. 

About the Author

Stawan is the founder and CEO of FactWise. Before founding FactWise, Stawan was the NA TMT-Procurement Leader at McKinsey. Passionate about procurement, Stawan has 15 years’ experience in enabling clients of all sizes to achieve business impact via procurement.


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