Money talks: Making the Case for Sustainable Procurement Investments

Posted: 08/01/2019 - 00:04
The business benefits and value derived from robust responsible procurement programs can be remarkable, such as driving uplift revenue by 5% to 20%, reducing supply chain costs by 9% to 16% and increasing brand value by 15% to 30%. Creating such programs requires investing in key internal areas, such as new tools, staff and strategies to reap the value that’s possible.  
Whether you are just starting to plan your company’s first sustainable procurement initiative, or looking to expand an existing one, you will need to present the business case to your company in order to gain access to the resources required of a successful sustainable procurement program. Recently the Sustainable Purchasing Leadership Council (SPLC) rounded up practical insights from several key decision-makers on how to communicate the big-dollar value of sustainable procurement programs. The report highlights how building a solid business case starts with communicating the benefits of sustainable procurement in a way that compels senior leadership to allocate more budget and resources to a program – creating the foundation for a lifetime of big returns. 
How do future program champions construct the case for sustainable procurement today that can lead to greater business value later? SPLC found that the key is to emphasize that sustainable procurement is more than just a compliance program and to engage teams with a big-picture view – one that goes well beyond compliance programs they may be familiar with. Through focusing on the business benefits that senior executives care about – such as revenue, market share, product differentiation, staff retention and recruiting and procurement spend – and collaborating with various parts of the business that will also experience those gains, you can be well on your way to developing a tangible plan. 

Creating a Big-Picture View   

Through emphasizing how sustainable procurement advances overall corporate goals – sales growth, lower costs, reduced risk, better supplier relationships – senior leadership will take a greater interest in learning more about program implementation and required resources because you’re now speaking their language. Each stakeholder is motivated by success in different aspects of the business given their respective roles and responsibilities – and messages should be tailored accordingly. According to procurement leaders in SPLC’s report, there are a few ways to present the big picture case for sustainable procurement: 
  • Focus on customer revenue. By adding up the number of customers and key sales opportunities that use sustainability attributes in supplier evaluations, you’re changing the focus of the investment in resources from “what I need” to “what our customers want and demand” – something that will be much easier to gain support in. 
  • Emphasize investor values. Sustainability issues carry growing weight in the financial market. In fact, the number of sustainable investment funds in the U.S. alone grew 50% between 2017 and 2018, to 351 funds with $161 billion under management at the end of 2018.  It’s crucial to position your program as a visible lever of shareholder satisfaction and show how the financials of sustainable procurement drive investor confidence and appetite. In addition, there is a new wave of business loans offering more favorable rates linked to sustainability performance.  
  • Highlight the advantage on competition. Communicating how sustainable purchasing efforts can differentiate the business from rival companies is another great point that will resonate with executive leads. Consumers and business customers generally want to buy from sustainable companies, and more employees than ever prefer to work for them. Sharing what competitors are doing in terms of sustainability, and where your organization can take that progress a step further, will heighten the sense of urgency for leadership. 
  • Discuss brand reputation and supplier engagements. The reality is an issue that happens in a supplier’s world can have a negative impact on a buying company’s brand. Sustainable procurement naturally focuses suppliers’ performance on key sustainability criteria, which not only extracts more value from the supply base – efficiency, innovation, reliability and more – but also avoids unknown or unresolved supply chain issues that could tarnish the brand. This two-fold outcome can help get executives on board with investing further in a program. 

Investments Beyond the Financial – It’s Not All About Money   

For sustainable procurement programs to be successful, organizations need to commit resources beyond the monetary, like staff capacity or even new team members. Due to the effort and time required to develop strategy and best practices, coordinate implementation and track and report data, teams need to make more time to keep up with the evolving sustainability landscape.  
Trainings with experts may also be needed to help both buyers and suppliers develop sustainability management and reporting capabilities. Bringing in subject-matter experts to conduct risk assessments or impact spend analyses may also be useful in informing the development of sourcing strategies for highly affected supply areas. These aspects don’t always require direct or large financial investment, but still need buy-in from leadership. 
Asking for more budget and resources is a tough conversation for any procurement professional to have, but programs can’t evolve and grow without continued support from the top. Effectively building that business case means collaborating with various parts of the business who will experience the gains that sustainable procurement can bring and leveraging that vision to present a big picture overview. SPLC’s findings show that reminding executive leads of the specific benefits sustainable procurement brings to the business –and offering clear plans for where investments will be allocated –will help drive urgency that gets all stakeholders on board. 

About The Author

David McClintock's picture

David McClintock is the Marketing Director for EcoVadis. David has a strong passion for bringing complex technologies to productive, everyday use. Before joining EcoVadis in 2014, David was co-founder and CMO at Xform Computing, a cloud computing and mobile apps startup. Prior to that he was VP Marketing at, and Director of Product Management at Callwave, Inc., both in VoIP-related technology and services. David holds a degree in Industrial Engineering from Stanford University.