Setting the Direction for Sustainable Procurement

Over the past several years, I have worked with a remarkable number of organizations that have arrived at the same crossroads. Sustainability is firmly on the boardroom agenda, the C-suite is aligned and yet when you speak to the procurement function there is a familiar and uncomfortable pause. Where do we start? Sustainable procurement does not have to be complicated. What it does require is clarity; clarity of vision, clarity of strategy and a well-structured sustainable procurement policy that translates organizational ambition into something the procurement function can actually deliver. This article sets out how to build exactly that.

Why sustainable procurement needs its own direction

There is a mistake I see organizations make repeatedly: assuming that because the organization has a sustainability strategy or an ESG commitment, procurement automatically knows what to do with it. It does not. Sustainability is not a strategy in itself. Working towards it, however, drives the overall procurement strategy and the two must be coherently connected if any real progress is to be made.

I worked with one large organization that remained in family ownership. Once a year, the family would issue a concise, plain document of just a few pages setting out the direction the owners wanted the business to take. As sustainability grew in importance, that document began to shift in toneaway from profit and towards something broader. The procurement function had to figure out what this meant for the supply base. It needed its own goals, its own strategy and its own sustainable procurement policy to make things happen.

Without this, sustainable procurement programs tend to drift, lack accountability and ultimately fail to address the supply base in any meaningful way. Sustainable procurement begins with the organization's vision and direction and procurement must be a key collaborator in shaping it, not a passive recipient of it.

Defining the sustainable procurement strategy

A strategy is the articulation of the high-level approach to accomplish a long-term ambition. It is the 'how' of sustainable procurement. A key early decision is which sustainability framework or frameworks, to adopt. Options include the UN Sustainable Development Goals (SDGs), the UN Global Compact, ISO 20400:2017 (the international guidance standard for sustainable procurement specifically) and the GHG Protocol for emissions accounting. The right framework provides a structured means to build the program, gives confidence to investors and demonstrates to stakeholders that intent is being turned into action.

In its simplest terms, the sustainable procurement strategy should clearly define:

1. How it will meet legislative obligations, now and in the future

2. How the procurement or supply chain function will organize itself to work towards achieving the wider organizational objectives for sustainability within the supply base

3. How it will determine and prioritize what it will focus on

4. How it will enable the organization to be accountable and transparent in what it does with respect to the supply base

5. The role of innovation to support this

6. The capability and systems it will deploy to support this

7. The relationship between cost and sustainability value

8. How sustainability will be integrated and embedded in every aspect of procurement and the supply chain

9. How it will measure, monitor and report on progress

Setting goals and targets + addressing the full supply base

Once the strategy is defined, the function needs clear sustainable procurement goals; high-level statements of ambition that flow directly from the wider organizational goals. From these, measurable SMART targets can be set, ideally science-based and reviewed annually. Where the wider organization has committed to reducing GHG emissions by 50% within three years, for example, the supply-side target must match that same level of ambition.

Sustainable procurement programmes most commonly fail where they cannot connect a goal to exactly what needs to happen on the supply side. This is because procurement operates across three distinct dimensions: what we buy (addressed through category management), who we buy from (addressed through supplier relationship management) and our supply chains and supply-value-chain networks.

Mobilizing the program - the 5P governance framework

The final step is mobilization. Strategies, goals and targets only have value if the conditions exist to deliver them. Targets that are regularly set but never achieved quickly become worthless. Effective mobilization requires four things; securing top-down approval so the strategy has organizational credibility, securing the people, resources and capability to deliver it, establishing governance using what I call the 5P framework - People, Plan, Payoff, Proficiency and Promote - and communicating the ambition, both internally and externally to suppliers, stakeholders and customers. This last step is the most often neglected and the most powerful. A sustainable procurement policy that exists only within the function is not a policy, it is a missed opportunity.

The direction is yours to set

The organizations making the most meaningful progress on sustainable procurement are not those with the most complex strategies. They are the ones that have set a clear, credible direction, communicated it with conviction and built the governance and capability to actually deliver against it. The OMEIA®methodology, which I developed to guide organizations through this process, is structured precisely to support this journey. Sustainable procurement is not simply a policy to be written and filed. It is a fundamental shift in how procurement operates and it starts, as all meaningful change does, with setting the direction.

Save 30% on Sustainable Procurement with code ALG30.