With the ever-growing rise of material costs, procurement professionals must constantly think up ways of lowering their amount of spending - whether it’s re-thinking their supply chain or negotiating with suppliers to acquire a cheaper agreement.
According to SIG – sustainable sourcing is “the integration of social, ethical and environmental performance factors into the process of selecting suppliers”. It also includes the procurement of eco-friendly materials and services while maintaining ESG (ethical, social and governance) guidelines and goals.
In this blog we will be looking into sustainable sourcing and how by making their procurement greener, organisations can lower material values, minimise their risk, win business and look after their reputation.
Minimising Risk
Identifying and selecting suppliers always comes with some risks. Are they dependable? Anticipating these threats can prevent some rather nasty pitfalls later on. With the amount of consumer demand for sustainable products, not being aware of how much value sustainable sourcing can provide from a customer standpoint can surprise you.
“Partnering with manufacturers and vendors, especially from foreign countries with different regulations and compliance standards, always carries some risk. Relationships with suppliers who engage in bad practices, like child labor [sic] or non-compliance with industry environmental regulations, can have a severe negative financial impact on brand value." - Bomler
Doing business with suppliers who shy away from their sustainability responsibilities will also impact the quality of the materials you procure. It reduces the amount of waste, which in turn would reduce the amount you would need to send to landfills and would significantly lower an organisation’s operating costs.
Your Company’s Reputation
Maintaining your organisation's reputation is of utmost importance. Negativity can stick and it can cause consumers and investors to not what to help your company grow. Sustainable sourcing can bring around a real positive impact on how your business is perceived.
“Sustainable procurement can help companies protect their brand reputation as it requires them to develop robust risk management. This enables them to better identify problem suppliers and address weak areas in their supply chain that have the potential to generate scandals and bad publicity. Lastly, sustainable procurement provides opportunities for brand differentiation as it encourages companies to develop more innovative and sustainable products.” - Ecovadis
According to a survey, 65% of organisations found that the further along they were with ESG practices within their supply chain – the more improved their brand reputation.
The quote by CIPS reads – “The findings were revealed in a supply chain sustainability survey of more than 1,400 professionals involved in certification across Europe, Asia and America, conducted by quality assurance and risk management firm DNV GL, with GFK Eurisko and Sedex”.
Winning Business
As stated in the above point – consumers and investors don’t want to work with or buy from companies with negative reputations around sustainability. Quite the opposite actually, sustainable sourcing can have a huge impact on winning business for your organisation.
“Savvy companies know that investors, regulators, and other stakeholders increasingly expect them to decarbonize. They also see that rising customer demand for low-emissions offerings could allow them to widen their margins and capture large shares of growing markets.” - McKinsey
Being perceived as a trustworthy company is imperative to bringing in new business. It gives them an edge over their competitors – especially those who don’t partake in the same sustainability initiatives. Investors may even choose to invest in companies that have bigger sustainability quotas and goals, consumers will even prefer to buy from them even if the costs are higher. It also has huge upsides from an HR perspective, that can lead to new business.
To Conclude
Sustainable sourcing is no longer an option for businesses - we are truly beyond that stage now.
Sustainability is an absolute must. Not just for the impact that it will hopefully have on our planet and generations to come, but from a commercial perspective. To stay ahead of the competition and to truly allow a company to thrive - sustainability has to be a top priority on the wider business agenda, with this only accounting for one part of the ESG initiative.
To drive transformational business change through sustainability, this has to be influenced by the leadership team with buy-in from all involved.
