The ultimate guide to building sustainability in procurement

The Ultimate Guide to

BUILDING SUSTAINABILITY INTO PROCUREMENT

2024

If you’re a procurement professional looking to put sustainability at the heart of your purchasing strategy, this ultimate guide is exactly what you need. With the ongoing climate crisis and global expectations on brands to prioritize the environment, procurement managers are under increasing pressure to make more sustainable purchasing decisions.

While many may want to, there can be uncertainty about knowing where to start or how to scale your influence on sustainability across other teams. Obviously, working with ESGcompliant suppliers with the right certifications is key but it can be challenging and time consuming to find them. Luckily, we can help you out there too. Some of the other key challenges are listed here.

Challenges in making procurement sustainable 1. Reputation and brand image 2. Corporate social responsibility 3. Becoming a customer of choice 4. Stakeholder engagement 5. Risk management

If this sounds like an all too familiar struggle, we promise you that the solutions are easier than you think. Scoutbee and DitchCarbon’s in-depth guide will show you how to not only build sustainability into your purchasing decisions, but also encourage your colleagues and wider organization to do the same. Let’s dive in!

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Where to start Starting always feels like an uphill battle, but we’re here to make life easier for you.

Get your team up to speed. Any successful project must start with buyin across the entire organization. The best way to get your team (and others) on board is to explain the importance of sustainability and share some basic strategies.

It’s hard to stress enough how sourcing from diverse suppliers with strong ESG ratings contributes to other major priorities like reducing costs and ensuring supply chain continuity. If you need any further convincing, you can find out more in this blog post by Nicole Verkindt, tech entrepreneur and ESG expert.

Getting a strong understanding of a company’s climate action at this stage allows you to start to build climate factors into your procurement process and establish what changes you might need to make going forward, for example, finding new suppliers that align better with your sustainability goals. Need a helping hand understanding your suppliers’ carbon footprint? DitchCarbon’s score can benchmark any company within seconds.

Start small but stop the rot. Finding new suppliers is a notorious pain point in procurement, with business stakeholders keen to make this a quick and smooth process. Happily, there are solutions out there, such as Scoutbee Discovery, that can make finding new sustainable suppliers a breeze. You can also take advantage of the onboarding process by using it as an opportunity to capture all the data you need from a supplier when you have their full attention.

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The three stages of sustainable procurement Naturally, it’s difficult to overhaul your entire procurement process overnight. But, by starting small and gradually taking more significant measures, you can transform your procurement process into one with sustainability at its core.

Stage 1: Identify and communicate sustainability maturity.

The first stage involves identifying the sustainability maturity of current or potential suppliers (and it’s easier than it sounds). One key differentiator is whether the supplier has disclosed any data on its climate impact. This can be a single link or document upload - as long as the data is there. If you use Scoutbee Discovery to search for new suppliers, you can input the certifications that the suppliers should have. You can also check CDP & SBTi to see how much progress they have made or use DitchCarbon for data and insights.

At this point, focus on communicating with internal stakeholders that you’re measuring sustainability and establish which criteria you’ll use to measure it.

What gets measured gets done.

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Stage 2: Start to give preference to mature suppliers.

Here’s where you put your money where your mouth is, by prioritizing working with sustainable suppliers. This can be as subtle or as ambitious as you like we’ve seen great success using nudge techniques as seen in the table. The higher the impact, the bigger the effect it will have on nudging your suppliers towards greater sustainability.

Stage 3: Make climate action a “hard” measure for procurement.

The final stage is to move from nudging to making climate action hard criteria for your procurement process and supplier relationships. Use this handy table to make climate action a must-do for your suppliers.

Action

Impact (1-5)

Effort (1-5)

List providers by their climate maturity

2

1

Give suppliers with higher maturity more time to pitch

3

2

Share internally the average maturity by category or department

3

3

Pay suppliers with higher scores early

3

2

Action

Impact (1-5)

Effort (1-5)

Set an internal cost of carbon

5

5

Only onboard suppliers that meet a minimum threshold

3

2

Connect incentives for procurement and business stakeholders to climate action of the supplier base

3

3

Require business stakeholders to explain why they are onboarding on organization if the score is low

5

4

The actions listed above signal to the market that you want suppliers with a lower carbon footprint. While this has a significant impact, you’ll also need to consider your existing supply chain as well as SMEs that may not be able to make progress without support.

Your supply chain is likely divided into larger companies and smaller providers - these require different approaches so we’ve split them out.

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Working with existing suppliers - larger companies When looking at how to prioritize tackling your supply chain, why pay a consultant thousands to tell you that it all comes down to impact vs effort? You’ll see the concept explained in the graphic below. So, how should you plot your suppliers on this chart? Who’s a quick win? Who will require more effort? Who should you triage for later? Here are some factors to consider along with suggested measures.

Big projects High impact but high effort

Fill-in jobs Low effort, low impact

Thankless tasks Low impact AND high effort

Low effort

Quick wins High impact and low effort

High impact

High impact

Low impact

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Factor

How big of an issue is this supplier?

What progress have they made?

What are the power dynamics at play in your relationship?

Suggested measure

What % of emissions does this supplier make up of your total?

What proportion of their relevant emission categories have been disclosed?

How much influence do you have (if you have the data: what % do you make up of their revenue)?

Prioritize your efforts based on those with the furthest to go, i.e., those with low levels of disclosure and a higher proportion of your emissions. Take into account how much impact you feel you can realistically have - it would be more challenging to influence Amazon Web Services than a small or medium-sized supplier, for example, but if you have high levels of influence as a result of the dynamic, it may be possible.

LESS OF THIS Please state your reduction targets over the next 10 years.

It might seem complex, but an actionoriented style will be far more effective for you and your suppliers. While time is of the essence with sustainability, giving your existing suppliers plenty of time to adapt means you can actually set more ambitious targets.

A perfect example of this is the Eden Project, a tourist attraction in England.

So, what about specific commitments?

While commitments can be a useful indicator of the direction of travel, actions speak louder than words, as the saying goes. Commitments are useful for forecasting reductions, but actions will help you figure out who to engage with now. If you’re keen to understand a supplier’s commitments, try this approach.

MORE OF THIS Your most recent sustainability report states that your business travel accounts for 30% of your overall emissions. What are you doing to reduce this and how soon would you expect to see results?

The organizers set clear dates for their tier 1 suppliers to comply with climate goals, then the same for their tier 2 a few years later, then their tier 3 suppliers. Simple, but effective. Need a helping hand? The WBCD has an excellent resource of case studies on their climate drive. DitchCarbon provides recommendations along with a relevant case study for each of your suppliers.

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Working with existing suppliers SMEs Due to financial restraints and a lack of resources, SMEs often find it more difficult than larger companies to make sustainable switches. You might also find there’s less readily available data about their sustainability measures. Firstly, it’s worth noting that a lack of disclosure isn’t a barrier to ranking - the company’s actions influence its carbon intensity. But if they haven’t been disclosed, SMEs might be lumped with unfairly low scores. So, how do you accurately assess them?

Basically, don’t get bogged down with numbers over actions. Some obvious actions don’t require measurement to know they’re the right approach.

Electrifying Scope 1 and ensuring Scope 2 is as decarbonized as possible (yes, we know it’s a bit of a mouthful) might be as simple as moving to a renewable energy supplier for a service-based business.

Granted, manufacturing companies might need more complex actions, but you don’t need an ESG survey to know what to do.

If you’re a larger company, share your resources with SME suppliers to make their transition easier. Recently, a UK house building company with a great deal on electric vehicles via their fleet contract extended it to make it available to SME suppliers, all at zero cost to the house builder, but with huge gains for the environment. What similar resources do you have that you can share?

In summary, ambition is important, but you need to take the process step by step to get the results you want. Start with highimpact/low-effort suppliers and work your way up from there, setting clear action-oriented targets and supporting those smaller suppliers who have fewer resources.

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What’s next?

To find new, innovative, and sustainable suppliers that align with your goals - in a fraction of the time - check out Scoutbee Discovery’s AI-powered solution.

Request a demo today

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