Key Points
- Many procurement teams are energized by the prospect of helping to achieve a more sustainable future for their organization but lack the critical resources to do so.
- Not only does procurement control a large amount of budget, but it also has strong leverage in supplier selection.
- BSR’s supply chain sustainability team provides key actions business leaders can take to engage and integrate the procurement team into their net-zero strategy.
Companies are increasingly active and ambitious in their journeys to reduce detrimental impacts on the environment. Led in part by stakeholder demand, legislative pressure, and a clearer understanding of declining available natural resources, a paradigm shift has taken place. Many organizations now have in place not only large sustainability teams but supply chain teams that are well-versed in issues like deforestation and water scarcity and are finding that ESG has made its way consistently into boardroom discussions. However, if companies are truly going to achieve their net-zero visions, one critical partner that needs to be engaged is the procurement team.
When it comes to engaging with suppliers, there is a real focus on managing existing suppliers who are currently contracted to provide key services and materials across a company’s value chain. Supply chain teams are integrating with more traditional sustainability teams, assigned key performance indicators (KPIs), exposing employees to new ways of thinking, and producing integrated reporting with the sustainability team.
The same has yet to occur with procurement teams. While managing the existing supplier base is, of course, integral in the path toward net zero — it is not the sole area of focus. And, in fact, influencing change with a current supplier base, many of whom have long-term, multi-year contracts already in place, can be much more challenging than integrating stricter ESG requirements at the procurement phase.
Currently, most companies’ procurement sits separately from the sustainability initiatives — this is a missed opportunity. Not only does procurement control a large amount of budget, but they also sit at the critical juncture where an organization has the most leverage: the phase before a contract is awarded. Setting a high bar on environmental topics before suppliers are either brought on or re-upping contracts for new engagement allows companies to get more aggressive on their requirements.
Many procurement teams are energized by the prospect of helping to achieve a more stainable future for their organization but lack the critical resources to do so.
Businesses can engage procurement on net-zero transformation via the following steps:
Set the Stage.
- Get buy-in from leadership that sustainability will be a key element embedded into business decisions. Executives can communicate that remit directly to procurement and explain how additional criteria are being added to the traditional time, cost, quality trifecta.
- Help them understand how sustainability will serve as a risk mitigation tool and be a value-add to their department.
Train and Communicate.
- Understanding that this has not been a traditional subject covered in their role, provide access to training via internal meetings and webinars, and direct them to publicly available resources on ESG topics.
- Recognize that embedding sustainability into the procurement function is a long process, and institute regular check-ins between procurement and sustainability teams.
Assign Proper Governance and KPIs.
- Ensure that there is at least one sustainability expert on the procurement team to serve as the point person and liaison between the procurement, business, and sustainability teams.
- Give the procurement team clear targets and objectives to work toward, thus incentivizing them to push for further integration of sustainability into sourcing decisions.
Codify Policies and Procedures.
- Create sustainable procurement policies (including deciding what certifications to use) and an accompanying rollout procedure. It may be best to pilot this policy in a smaller region/department to see how it works in practice and adjust accordingly.
- Integrate sustainability into the onboarding process for new suppliers, ensuring that suppliers fully understand the requirements being asked of them.
Amend the Supplier Scorecard.
- Embed sustainability topics into the supplier scorecard and increase weighting, thus incentivizing suppliers to integrate sustainability more quickly into their operations. With the new legislative push (mainly from Europe at this juncture) toward due diligence, procurement teams have a clear mandate to request much more information during the RFP process as suppliers are trying to win business.
Source from Zero-Emissions Suppliers.
- In conjunction with reducing the impacts of current suppliers, there is a unique opportunity to select suppliers who have already achieved carbon neutrality in their own operations.
Integrate with Design Teams.
- Suppliers are selected many times based on design specifications. This means that it is essential for procurement and design to work together to understand what opportunities exist, what barriers are non-negotiable, and where the biggest opportunity for change exists.
Remember that this is not a one-off session with procurement. This should be the beginning of a deep connection and integration of sustainability into sourcing decisions. Acknowledge that there is a reason that procurement will need time to shift their traditional ways of selection and onboarding and provide the necessary support and guidance to help them on their journey.
Diana Wilkinson is the director of consumer sectors at BSR. This article originally appeared on BSR’s blog.