Seven steps to a more sustainable procurement process

11/01/22

Sustainable procurement truly important to achieving sustainability goals

By 2030, the world must have undergone a sustainable transformation based on the UN 2030 Agenda for Sustainable Development and the ‘sustainable development goals’. More and more companies are realising that sustainability must be a priority in their business operations and are setting their own targets. Not only because of increasing legislation and regulations, but also because consumers, shareholders and also their own employees demand it.

Purchasing can play an important role in the realisation of these objectives. For example, by contributing to the reduction of CO₂ emissions and 'net zero' ambitions. But how do you go about this? PwC's ESG experts Femke Helgers and Jenny Bruin outline - based on the success stories of leading companies and governments - seven measures needed to make procurement more sustainable.

1. Formulate concrete objectives

Everything starts with the formulation of a sustainability strategy, with concrete objectives against which the purchasing policy must also be measured. In doing so, describe in the procurement policy definitions, objectives, responsibilities and consequences of not following the policy.

2. Get sustainable procurement processes in place

Organise processes in such a way that sustainability is an integral part of the organisation's procurement policy and that the implementation of this policy is safeguarded. For example, make sustainability part of the internal contract awarding process, the plan of action and the drawing up of the tender. Create tender documents with standard and tailor-made sustainability information (for the specific tender), including the ambitions of the organisation and the measures that will contribute to this. This not only ensures effective communication with the market, but also stimulates internal discussion between the client and the contractor. An Environmental Cost Indicator (a so-called shadow price method for taking account of environmental effects) and the CO₂ Performance Ladder (a certification instrument for reducing CO₂ emissions) can then be included in the award, giving organisations that reduce their negative environmental impact an advantage in the award.

3. Monitor on the basis of KPIs

Ensure that the monitoring of the sustainability of procurement is preferably done on the basis of relevant indicators (KPIs). Measure and discuss these KPIs regularly, also at board level. And ensure that, if necessary, adjustments are made and external reports issued. Consider, for example, the monitoring of CO₂ emissions before, during and after the execution of projects. In addition, annual reports must be transparent about environmental costs, CO₂ KPIs and the embedding of sustainability in the organisation.

4. Share knowledge - internally and externally

Share knowledge about sustainable procurement through interactive training and e-learning, and promote this actively inside and outside the organisation. For example, develop a training course on 'climate neutral and circular procurement' for both your own buyers and external suppliers. And support implementation with expertise; assign product groups with a high environmental impact to specific employees with sustainability expertise. These specialists then support the procurement process to ensure that sustainability requirements are properly applied.

5. Delegate responsibilities to different function levels

Delegate operational, reporting and policy responsibilities clearly to different functions to ensure a sustainable procurement process. Purchasers, for example, are responsible for compliance with sustainability requirements in their portfolio, steering committees have a signalling and steering role, and the highest budget holders are responsible for achieving the targets. Board involvement is crucial here. They must demonstrate in their communications that making purchasing more sustainable is important to the organisation.

6. Provide extra budget for sustainable options

Make extra funding - outside the project budget - available for sustainable options. This ensures a balanced choice of sustainability in relation to financial and other quality requirements. An example is the use of an internal CO₂ price and monetisation of the CO₂ footprint. Set a budget for this that is used for CO₂ reduction, compensation and innovation, including through sustainable procurement. If a sustainable product has additional costs, the budget can reimburse these additional costs.

7. Innovate and work together in the supply chain

Encourage suppliers to innovate in order to make purchasing more sustainable. Because you have to invest to innovate and this involves risks, we see this as a shared responsibility. Those who cooperate with suppliers, and therefore share the risks, will accelerate the process of becoming more sustainable. Offer long-term contracts to accommodate the investments that suppliers have to make. Talk to organisations with large suppliers and offer them the opportunity to share their success stories. Ask them to sign a 'sustainable procurement charter'; by doing so, they demonstrate their willingness to work together to maximise the potential of entrepreneurship and innovation for sustainable procurement.

The nine building blocks of company-wide net zero transformation

To deliver on their net zero commitments, companies will need to undertake end-to-end business transformation. This includes understanding the implications of net zero for a company’s growth strategy and operating model, and embedding net zero across all business functions from governance, to supply chains, to finance and innovation.

To support companies on their net zero journeys, PwC has defined nine key building blocks for corporate net zero transformation. This ‘blueprint’ seeks to help organisations in various sectors throughout the entire process of strategy, transformation and reporting.