Feb 22 2024

Sustainable Procurement: A Key Driver of Supply Chain Decarbonisation



Sustainable Procurement: A Key Driver of Supply Chain Decarbonisation

In the race to net zero, businesses are leaving no stone unturned in the search for ways to reduce their carbon emissions and mitigate the risks of climate change. From renewable energy and energy efficiency to low-carbon transportation and waste reduction, companies are exploring a wide range of strategies to shrink their environmental footprint and build more sustainable operations.

But there's one area that often gets overlooked in the decarbonization conversation: the supply chain. For most businesses, the vast majority of their total greenhouse gas emissions - up to 90% or more - come not from their own operations, but from the goods and services they purchase from suppliers.

These so-called Scope 3 emissions, which include everything from raw material extraction and processing to transportation and distribution to end-of-life disposal, are notoriously difficult to measure and manage. They span multiple tiers of suppliers, cross international borders, and involve complex webs of environmental, social, and economic impacts.

But as the saying goes, what gets measured gets managed - and what gets managed gets improved. That's where sustainable procurement comes in.

Sustainable procurement is the process of incorporating environmental, social, and governance (ESG) criteria into purchasing decisions and supplier relationships. It's about looking beyond just price and quality to consider the full lifecycle impacts of the products and services you buy, and working with suppliers to minimize negative externalities and maximize positive impact.

In the context of supply chain decarbonisation, sustainable procurement is a key driver of emissions reduction and risk mitigation. By using your purchasing power to prioritize low-carbon materials, technologies, and practices, and by engaging suppliers in collaborative efforts to measure and reduce their own emissions, you can catalyze transformation across your entire value chain.

But sustainable procurement is about more than just cutting carbon. It's also about building resilience, fostering innovation, and creating shared value for all stakeholders. By aligning your procurement practices with your sustainability goals and values, you can:

- Mitigate supply chain risks related to climate change, resource scarcity, and social disruption

  • Drive efficiency and cost savings through more circular, regenerative supply chains
  • Spur sustainable innovation and differentiation through partnerships with forward-thinking suppliers
  • Enhance brand reputation and stakeholder trust through responsible, transparent sourcing
  • Contribute to the achievement of global sustainability goals like the Paris Agreement and the UN Sustainable Development Goals
    Of course, implementing sustainable procurement is easier said than done. It requires a fundamental shift in mindset and behavior, from a narrow focus on cost and compliance to a broader view of value creation and impact. It also requires new skills, tools, and partnerships to effectively assess and engage suppliers on ESG issues.

But the good news is that there are proven strategies and best practices for embedding sustainability into procurement, and a growing ecosystem of resources and support to help companies on their journey. Here are a few key steps to get started:

Develop a sustainable procurement policy and strategy

The first step in any sustainable procurement program is to articulate a clear policy and strategy that aligns with your company's overall sustainability goals and values. This should include a vision for what sustainable procurement means for your organization, as well as specific objectives, targets, and principles to guide decision-making.

Your sustainable procurement strategy should also identify priority categories and suppliers to focus on, based on factors like spend, risk, and impact. And it should establish governance structures and processes for implementation, monitoring, and continuous improvement.

Assess and engage suppliers on ESG performance

Once you have a strategy in place, the next step is to assess and engage your suppliers on their ESG performance. This typically involves a combination of supplier self-assessment questionnaires, third-party audits or certifications, and direct dialogue and collaboration.

When assessing suppliers, it's important to use a consistent, credible framework that covers a broad range of ESG issues relevant to your industry and supply chain. The EcoVadis Sustainability Assessment, for example, evaluates suppliers on 21 ESG criteria across four themes: environment, labor and human rights, ethics, and sustainable procurement.

But assessment is just the beginning. To drive meaningful change, you also need to engage suppliers in ongoing dialogue, capacity building, and performance improvement. This might include providing training and resources on sustainability best practices, setting clear expectations and incentives for improvement, and collaborating on joint initiatives to reduce emissions or advance circular economy principles.

Integrate sustainability into procurement processes and decisions

To truly embed sustainability into procurement, it needs to be integrated into every stage of the procurement process, from sourcing and selection to contracting and performance management. This might involve:

Including sustainability criteria in RFPs and supplier scorecards

Setting minimum sustainability standards or certifications for key categories

Incorporating sustainability KPIs and incentives into supplier contracts

Conducting joint sustainability planning and target-setting with strategic suppliers

Monitoring and reporting on supplier sustainability performance alongside other key metrics

By making sustainability a core part of how you do business with suppliers, you can drive more systemic and scalable change than through isolated initiatives or pilot projects.

Collaborate and advocate for systems change

Finally, to accelerate progress towards supply chain decarbonisation and sustainable procurement, companies need to look beyond their own operations and engage in broader collaboration and advocacy efforts.

This might include joining industry consortia or multi-stakeholder initiatives focused on sustainable supply chains, such as the Sustainable Purchasing Leadership Council or the Sustainable Apparel Coalition. It might involve partnering with NGOs, academia, or government agencies to develop new tools, standards, or policies to support sustainable procurement. Or it might mean using your voice and influence to advocate for stronger climate action and ESG disclosure requirements across the global economy.

By working together to drive systems change, companies can create a more level playing field for sustainable procurement, and accelerate the transition to a net-zero, circular economy.

The road to sustainable procurement and supply chain decarbonisation is long and complex, but the destination is clear: a more resilient, responsible, and regenerative global economy that works for people and planet. As a procurement and sustainability leader, you have a critical role to play in driving this transformation - one purchase, one supplier, one partnership at a time.

So start small, but think big. Set bold ambitions, but take pragmatic steps. And never stop learning, collaborating, and pushing for progress. The future of our planet and our economy depends on it.

About Newtral

Newtral AI Platform- Enterprise ESG Platform for Corporates and Supply Chain

We help organizations automate their ESG metric measurements, tracking and reporting across company as well as their supply chain. Our platform solves for all corporate sustainability reporting and carbon accounting needs.

Schedule Exclusive Demo

Learn how Newtral helps sustainability teams. The only tool sustainability teams need to measure, track, and improve ESG metrics, ensuring global compliances within budget.

Book a demo


Related Articles

Tool and strategies modern teams need for sustainability roadmap.