Sustainability: Four steps for procurement to drive change
The environmental crisis is often labelled as the most critical challenge of our lifetime. It is so vast that it can easily seem overwhelming. However, professional procurers have a vital role to play in driving change.
Are you ready for change?
A traditional procurement organization is typically evaluated based on its ability to reduce costs and maintain a steady supply of goods. However, given the challenges we face, this approach is not enough. The modern procurement organization has a pivotal role to play in reducing emissions, particularly as nearly 90% of emissions within an organization are Scope 3 emissions. This isn't just a challenge; it's a significant opportunity to create value for customers, help protect the planet, and elevate the procurement function within the company.
Of course, it’s not simple. The barriers between costs and the value of sustainability must be removed or at least narrowed. The challenge is that goals relating to costs are mandated and must typically be achieved within 1-3 years, whereas sustainability goals are often aspirational and have a target date of around five years.
The power of change
A shift in attitude is key. The energy crisis in Europe demonstrated that change is possible, as some countries managed to reduce their energy consumption by as much as 20% within a year or so. This example shows that with the right strategies and commitment, significant changes are possible, even in a short period. Like all behavioral changes, the start is only half the success; persistence is necessary to achieve real change.
4 Steps to success
Here are four hands-on steps that can help an organization succeed in closing the barriers between cost and sustainability-based procurement:
1) Data Analysis: When implementing change, you must understand your starting point. The first step involves the collection and analysis of your suppliers’ emission data. Start small and ask for Scope 1 & 2 since it's easier for organizations to provide this. Larger suppliers may have Environmental Product Declarations (EPD) on their products which makes it easier. Then, define improvements by setting some KPIs on which your suppliers can be measured.
2) Ignore ratings and focus on SRM: There are multiple certification companies that suppliers can turn to ratings. However, these alone should not be relied upon. Instead, the focus should be on supplier relationship management (SRM). When you are selecting suppliers, concentrate your efforts on those companies that are passionate about sustainability and are actively targeting emissions goals and improvements.
3) Collaboration across the organization: Reducing emissions is a team effort. Different functions within the corporation must work together to address the challenges. A modern procurement function works closely with the sales teams to gain a better understanding of customer requirements. Many have more demands than just costs and may even be prepared to pay more for products or services that are more sustainable.
4) Value vs Cost: Most companies have well-developed ways to calculate savings, ROI, or increased payment days. If you can apply the same way of thinking to emissions, you can put a value on a product’s reduced emissions, which can be used in price negotiations.
Close the gap
Implementing one or all of these steps can help you close the gap between value through sustainability and value through costs. Furthermore, it will elevate the procurement organization’s position as a front runner in change management and sustainable thinking.
Get Started Now
If you want help in achieving these steps or in any other area of procurement, we can help. At Three P, we help traditional procurement organizations to transform. We don't just scratch the surface; we dig deep into your organization's strategies and adapt them so they align with your goals. If you are ready for change, please don’t hesitate to reach out.
