How to get started with sustainable procurement

Bob Willard, Founder and Chief Sustainability Champion at Sustainability Advantage, notes that every element of your supply chain has a potential impact on people and the planet, and represents an opportunity to contribute to sustainability.

In fact, a simple definition of sustainable procurement is the integration of environmental, social and governance (ESG) and corporate social responsibility (CSR) criteria into your procurement processes.

A more precise one, says Willard, is “obtaining best value for money by purchasing the most sustainable goods and services from the most sustainable suppliers in support of your purpose and strategic sustainability goals.”

Procurement versus purchasing

The first thing to understand is that sustainable procurement is not the same thing as sustainable purchasing. Purchasing focuses on choosing products made with minimal environmental impact, but it tends to be transactional.

In contrast, sustainable procurement considers a business’s broader sustainability commitments.

For example, suppose you need to upgrade a set of laptops. Sustainable purchasing would focus on choosing computers with eco-friendly features, such as energy efficiency, recyclable materials or minimal packaging. Sustainable procurement takes a more holistic view and considers the entire supply chain involved in producing, delivering and disposing of the computers.

That could mean assessing whether the manufacturer has ethical labour practices, uses renewable energy in production, and offers take-back programs for recycling. It might also evaluate whether the supplier aligns with your company’s broader environmental and social responsibility goals.

“Sustainable procurement isn’t just about the products,” says Monica Da Ponte, Principal Consultant at Shift & Build. “It’s also about whether the seller’s actions and decisions are in keeping with its policies or commitments on sustainability.”

Why is sustainable procurement important?

The best reason to commit to sustainable procurement is to help the earth avoid the most catastrophic consequences of climate change, says Willard, such as biodiversity loss, food and water shortages, and more frequent and intense natural disasters.

“We’re running out of runway on some of these issues,” he says. “It’s time for businesses to get serious about reducing their greenhouse gases, avoiding pollution and harms to biodiversity, and treating people properly.”

The business case for sustainable procurement

But there’s also a business case for sustainable procurement.

Ecovadis, which rates companies around the world on sustainability, estimates that sustainable procurement practices can boost brand equity by 15% to 30%, reduce procurement costs by 9% to 16%, and lower the cost of capital. Other benefits may include reduced costs related to energy use and compliance, less risk from bad supplier practices (like child labour or pollution), and more opportunities for revenue growth, such as from new eco-friendly products or services, price premiums or income from recycling programs.

Some sustainable products may cost less, last longer, and/or offer better quality. “If you are interested in quality and longevity—and in increasing your clients’ or stakeholders’ well-being—then it is absolutely the way to go,” says Willard.

Da Ponte adds that sustainable procurement can be an opportunity to stand out from competitors. “It’s something an SME can talk to clients or customers about—a way to differentiate and market themselves,” she says. According to Ecovadis, 85% of consumers are more likely to buy from a company with a reputation for sustainability than from a neutral one.

In addition, it may help with recruiting and retaining employees. “People really want to work for organizations that care about the same things they do,” says Willard.

If you’re interested in trying to calculate the return on investment (ROI) for sustainable procurement, check out the free tools available on the Sustainability Advantage website.

Understanding total cost of ownership

Total cost of ownership (TCO) considers not only the purchase price of a product, but also the cost of operating it throughout its useful life, including installation, maintenance, upgrades and disposal.

“It’s a way of showing that paying a little more upfront can be a smarter business decision than paying for a product that costs less, but has fewer benefits,” says Willard.

With regard to sustainable procurement, TCO can provide a framework for measuring sustainability impacts. It offers an opportunity to bridge one of procurement's key goals (cutting costs) with sustainability objectives (such as minimizing negative environmental impacts).

It also connects the principle of making sustainable choices to enjoying financial benefits over time. For instance, laptops that are more energy-efficient may have a higher initial price tag, but could reduce energy costs over their lifespan.

How can you get started with sustainable procurement?

Willard says the time to start thinking about sustainable procurement is now, no matter what the size or stage of your business.

“Do it as soon as possible,” he says. “Right now, today. Not only for the good of the planet, but because otherwise, your customers, bankers, investors or employees might decide for you, and you won’t be prepared.”

In fact, if you proactively engage your employees in the process, they can become a tremendous asset, says Willard. “It can be an incredible team-building exercise as employees start to recognize that the company is concerned about these issues.”

The main challenges of sustainable procurement

Willard says often, the biggest challenge a business must overcome when implementing sustainable procurement is mindset: They assume it’s going to be complicated, or they dismiss it as “airy-fairy tree-hugger stuff.” But it’s neither.

“It’s just about adding a few requirements to your product specifications and bid appraisals—a few more line items and some terms and conditions in contracts to show you’re serious,” says Willard. “Once you’ve decided, there is no lack of support and resources out there.”

Best practice for sustainable procurement

Willard has developed a questionnaire that helps businesses assess their progress on sustainable procurement. He says these five key questions indicate best practices:

1. Do you have some infrastructure to support sustainable procurement, such as policies, strategic goals, platforms, a business case and trained staff?
2. Do you ask about suppliers’ sustainability attributes and give preference to suppliers that meet your criteria?
3. Do you pay attention to the sustainability of the goods or services you procure?
4. Do you make those last two points matter in bid assessments? Your bid appraisal formula should assign at least 10% to 30% of the points in a bid process to scores connected to sustainability attributes, says Willard.
5. Are you a leader in this area? For example, do you encourage other companies to do this and share your tools, techniques and resources? 

Do you need a sustainable procurement policy?

No, says Willard—you can easily get started without one. If you do want to create a policy, just ensure it aligns with your overall business values and is adaptable to your resources and industry. Consider including:

• Standards requiring suppliers to use eco-friendly materials, follow ethical labour practices, and adhere to environmental regulations
• Requirements that prioritize sustainable products and services
• Lifecycle considerations, meaning assessments of the environmental and social impacts of products over their entire lifecycles
• A focus on supplier diversity, such as by committing to support diverse, local and/or smaller-scale suppliers
• Approaches for managing sustainability risks, such as from environmental degradation or unethical practices
• Continuous improvement approaches such as regular reviews and policy updates
• Transparency in reporting, with clear documentation of decisions and progress reports to stakeholders

Can certifications help?

Third-party verification can give you confidence that a supplier’s sustainability claims are valid, says Da Ponte. For example:

• Ecovadis rates, ranks and certifies companies and is widely used to assess suppliers’ activities and performance.
• CDP, formerly known as the Carbon Disclosure Project, rates and ranks companies in the areas of greenhouse gas emissions, water and forests.
• B Corp certification recognizes companies that meet high standards of social and environmental performance, accountability, and transparency.
• Electronic Product Environmental Assessment Tool (EPEAT) certification helps consumers identify electronic products that meet specific environmental sustainability standards.
• Diversity certifications, such as WeConnect, which certify that the business is majority-owned by traditionally underrepresented suppliers.

Is sustainable procurement more difficult (or more important) in certain industries?

There’s no denying that adopting sustainable procurement is going to be easier in some sectors than others. For example, it will be more straightforward in a small service business than in a large manufacturing one.

But it’s important in all sectors, notes Willard. “This needs to be the new normal. We need to legitimize and focus on these issues, particularly climate change.”

Consider a pilot project. “Take a cross-section of suppliers and big-spend items and give it a try,” he says. “See how it works for your suppliers, people and business, and decide if you want to go further.”

Next step

Find out how ESG practices can help you land large contracts with some of Canada’s largest companies in our study ESG in Your Business: the Edge You Need to Land Large Contracts.