CSCMP's Supply Chain Quarterly
October 16, 2019
Procurement Priorities

Starved for resources?

Sustainable procurement now has management's attention. But a recent study finds that executives may not be willing to commit the human and financial resources needed for such programs to succeed.

When choosing an airline, hotel, or auto insurance, millennials tend to prefer to do business with a company that's socially conscious. That's one reason why companies like Air France-KLM, Caesars Entertainment, and Aflac post information about their sustainable procurement policies on their websites. These companies and others have recognized the influence that sustainable procurement practices can have on sales.

It is important to note that the concept of sustainable procurement has changed greatly from even as recently as three years ago, according to EcoVadis, a company that provides procurement organizations with ratings and tools to track their sustainability efforts. Early on, purchasing environmentally friendly products—those made with recycled materials, for instance—was considered sustainable procurement. Now most companies buy this way, and sustainable procurement has taken on new meaning. Sustainable procurement now includes having suppliers adhere to government safety and health regulations and labor laws, standards that come under most companies' ethics policies and risk-mitigation programs.

While companies are increasingly realizing the benefits of sustainable procurement, many procurement leaders say their companies still need to do more to support the purchasing of goods and services that don't harm the environment, society, or the economy. "The 2017 EcoVadis/HEC Sustainable Procurement Barometer," a recent survey of U.S. and Western European companies, shows that one of the biggest challenges in managing sustainable procurement programs is a lack of internal resources. That's a change from three years ago, when the study found management was not fully behind these programs. Now, CEOs have come on board, but they are not providing procurement leaders with the personnel and tools they need to maintain them.

Having inadequate resources to run sustainable procurement programs is a worry in itself, but some procurement leaders are also concerned that these programs will increase costs, "The 2017 Sustainable Procurement Barometer" shows. This is a key challenge because reducing and managing costs is a top priority for most procurement teams, according to the EcoVadis survey and similar studies by other research firms, such as Deloitte. The cost of sustainable procurement is certainly a legitimate concern, but according to the EcoVadis survey, many companies that have invested in sustainable procurement say that doing so can help reduce costs or even increase revenue by growing sales to socially conscious millennials.

Procurement can and should take the lead in investigating what effect sustainable procurement may have on costs and revenues. One way is to participate in benchmarking activities with peers. IBM, for one, has been involved in sustainable procurement for at least 10 years. Procurement leaders there have put in place relevant polices and are working with suppliers to make sure they meet exacting standards. Another way is to learn more about sustainability and become as passionate as management about it. Procurement also needs to communicate that commitment internally and externally by including requirements for sustainability in the process for selecting suppliers and in quarterly performance reviews with the providers.

And it may be time for procurement to ask management for additional resources. Procurement leaders will need to determine the value another employee or two would bring to the organization. For example, will the new employee help reduce costs, increase revenue, or improve service? After quantifying that value, procurement leaders will then need to pull out their "sales hats" and promote the idea among colleagues and management. If the CEO supports sustainability and procurement leaders are persistent, the team may get the resources it needs to ensure it manages sustainable procurement successfully.

Susan Avery is a business journalist with 30 years of experience covering the procurement profession.

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