7 Steps to Build and Execute your Sustainable Procurement Initiative

Published April 20, 2020

Category: ESG | Procurement

Become A Contributor

Written by: Anne Riihimäki
Author Image

Anne Riihimäki

Anne Riihimäki is an enthusiastic and highly experienced Marketing Executive with over 20 years of experience across strategic and operational roles.

Holding a master’s degree in Economics, she has worked with strong, international brands in a variety of industries, including Accenture, Reader's Digest, Telia Company and European Dynamics S.A. Anne has broad experience in ICT and over the last five years has been working for global procurement software companies. She has a passion for inspiring and motivating businesses on how to leverage digitalization in procurement. Anne firmly believes sustainability is integral to achieving lasting commercial success in every business sector and in society as a whole.

Read More

Identify Your Sustainability Priorities

To build a sustainable procurement process that complements your company’s core mission, the next step to take after conducting a thorough spend analysis is to identify the blend of environmental, social and economic sustainability goals your organization both prioritizes and is able to make real impact by addressing.

Every organization is unique, operating in different business ecosystems with a bespoke list of priorities and pressures. Once these are understood, you can set long-term, high-impact goals that can be met by following a number of smaller steps. For example, setting KPIs for the number of vendors that implement their own new sustainability management systems, or monitoring correlation of procurement spend and supplier sustainability ratings.

Assess Procurement Risks Using Your New Sustainability Priorities

Once your priorities are defined, they become a useful tool for assessing risks when procuring goods and services. Contracts can now be assessed by key areas of sustainability concern, as high-priority sustainability requirements will guide procurement decision-makers to work with vendors that offer lower risks in these key areas.

This will lead to procurement working with vendors who deliver the most value at lower levels of risk, and it will also enable procurers to wield greater influence when requiring vendors to act sustainably within their own value chains. Finally, it will also help justify where to spend more, as high-risk processes can be mitigated by procuring appropriate precautions.

Select and Evaluate the Right Vendors

The vendors you work with have the most impact on whether the goods and services you procure are sustainable, so it is important to understand the risk profile of the contracts you build so you can set appropriate sustainability criteria. An example of this would be setting criteria for a transportation partner to offset their carbon emissions. It is important to understand the legal framework in which you operate so you can set sustainability criteria that are backed by law.

Once all sustainability criteria are set, the procurer should comprehensively evaluate vendors, including criteria that does not affect sustainability goals such as cost. Contracts with higher risks in certain areas will be weighted differently, and this needs to be taken into consideration in the evaluation process. 

Define Specifications and Invite Tenders

Well-defined specifications essentially enforce sustainable procurement practices, as they entice vendors to meet required standards and monitor how they operate, as doing so will help them reap a number of business-related benefits. Equally, sustainability-driven specifications will make others see you as a procurer who is driving the market forward in a mutually beneficial, considered way.

It is worth considering whether procurers should set minimum criteria for vendors who wish to submit tenders, or whether a list of preferable criteria should be used. The latter may make sense if the procurer is unsure whether the market has the capability to meet the sustainability standards the procurer wishes to achieve.

Evaluate and Award the Right Vendors

It is critical at this point that bids are selected using the most impartial and fair means possible. The specification you have created will certainly guide much of the decision-making process. Still, a robust, logical, and legally-sound selection criteria will further enforce the fairness and impartiality of your bid evaluation.

An automated bid selection system paired with well-thought out and legally sound selection criteria will ensure your process is exhaustive, fair and does not suffer from human error.

Manage the Contract Throughout Its Lifecycle

Once a contract is awarded, it is essential that the procurer monitors that it is being fulfilled as agreed, especially in situations where partnerships are set to run for several years. This is also true for contracts where the goods and services procured are high-risk from a sustainability point of view.

The complexities of contract lifecycle management can be mitigated when using an automated system where the system can alert and remind procurers to follow up with vendors, book meetings, perform assessments and monitor KPIs. With these reporting tools in place, the procurer can build processes to reward and even (if necessary) penalize vendors in line with meeting requirements through service delivery.

Embrace Links to the Rest of Your Supply Chain

The procurement world is ever-more interconnected and the relationships your vendors maintain with their own vendors are important to consider. The impacts of your sustainability work could be all but wiped out if there are issues further along your supply chain.

Back-to-back contracts are an effective tool for ensuring vendors and subcontractors are held to the same standards in high-risk procurements. Part of your selection criteria in high-risk procurements should be requiring vendors to use back-to-back contracts with their own subcontractors. However, these are not popular with vendors, so you should consider when and where to use them.

Sustainable Procurement and Your Organization

Does your organization have a sourcing system in place that enables you to build a sustainable procurement process? Setting tender and partner requirements, ensuring compliance with certification, contract lifecycle management and purchase origins are extremely time-consuming processes when performed manually. A fully digital source-to-contract system will automate this process – and push your procurement operations into a sustainable world.

You May Also Like…

SIG|ORG Spotlight Content