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How and Why to Integrate Sustainable Business Principles

In this article, we will introduce the concept of sustainable procurement and will explore why businesses should have sustainable principles

In this article, you will be introduced to the concept of sustainable procurement and will explore how and why businesses can integrate sustainable principles into their traditional procurement practices.

A journey of a thousand miles begins with a single step.

_{Laozi, Chinese philosopher (604-531 BCE)}

Defining sustainable procurement

The procurement of materials and suppliers is considered to be the first step in supply chain management. Procurement has a key role in the sustainable development of a business as it refers to the:

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…acquisition of goods and services in a way that ensures that there is the least impact to society and the environment throughout the full life cycle of the product.

_{(Meehan and Bryde 2011)}

Sustainable procurement is, therefore, a concept based on the ‘Triple Bottom Line’ notion, as it concerns the sourcing of materials and the selection of suppliers taking into account environmental and social aspects in addition to traditional economic or financial considerations. Its aim is to:

…achieve optimal value for money in delivering development objectives.

_{(World Bank 2019)}

and

…generate benefits to the organisation and the society whilst minimising damage to the environment.

_{(CIPS 2009)}

The procurement process

According to the World Bank (2019), the procurement process includes six main steps:

Step name	Step description
1. Initial considerations	Identify the main development need and the outcomes to be achieved
2. Market research and planning	Research the supply market, determine optimum procurement method and decide how to approach the market
3. Procurement process design	Specify requirements, develop evaluation method and prepare to go to market
4. Sourcing process	Approach the market, select the most advantageous bid/proposal and award contract
5. Contract implementation	Proactively manage contract implementation
6. Check	Review project implementation using Key Performance Indicators. What are the lessons learned?

The document in the downloads section, Key stages in the procurement process, identifies some of the key sustainability considerations that a business may have to take into account across the different procurement stages.

Why should businesses adopt sustainable procurement practices?

According to the CIPS (2009), the main reasons for a business to procure materials and suppliers sustainably are to achieve compliance with their legal requirements, cost and waste reduction, mitigation of risks and protection of brand and its reputation. In addition, the World Bank (2019) identifies five key business drivers for businesses to undertake sustainable procurement including:

1. Financial

Reduce operating costs by procuring more sustainable and innovative goods and services.

2. Risk management

Map and manage social, legal, economic and environmental sustainability risks.

3. Commitments and goals

Meet policies, harmonise business culture and ethics with national strategy.

4. Stakeholders’ expectations

Take account of social responsibility and sustainability issues.

5. Attractiveness

Attract more investors or suppliers, boost labour markets, drive development goals.

Benefits of sustainable procurement practices

According to the Australian Department of the Environment and Energy, the businesses that adopt sustainable procurement practices demonstrate social and environmental responsibility through improved resource utilisation and reduced waste production (DEE 2018).

The use of recycled and reusable materials enables them not only to reduce waste disposal costs, but also to lower the costs across the whole product lifecycle and eventually increase their overall financial savings. In addition, by sourcing sustainable materials, businesses can reduce the harmful impact of hazardous elements and waste on human health and the environment, and implement their legal commitments (IAPWG 2006). They can support the creation of markets for new, innovative and differentiated products and services taking advantage of the newest technologies and improve social inclusion and cohesion through the creation of employment opportunities for disadvantaged and marginalised groups (CIPS 2009).

As a result, businesses that practice sustainable procurement enhance their corporate image in the marketplace and achieve positive publicity associated with the selection of materials and suppliers with good environmental and social responsibility records (DEE 2018).

Challenges of sustainable procurement practices

On the other hand, many businesses face various challenges impeding the adoption of sustainable procurement practices. Unclear definition of what sustainable procurement is, poor consumer perceptions, absence of a mandatory legal and regulatory framework, increased costs, time limitations, lack of structural and organisational changes needed, and a dearth of sustainable procurement knowledge by suppliers, are some of the main barriers businesses face today (Gormly 2014; Gatari and Were 2014).

Ecolabels

To verify the environmental claims and credentials of sustainable procurement practices, businesses and their suppliers may use ecolabels. Ecolabelling is a voluntary method of environmental performance certification used across the world. It is used to identify products and services that meet a wide range of environmental performance criteria or standards but not to describe product or service specifications. There are three types of ecolabels (Active Sustainability 2018):

Label type	Description
Official ecolabels	These are accredited by a public organisation which checks whether various ecological criteria have been fulfilled
Private ecolabel	These are designated by national and international private entities, based on ecological regulation
Self-declared ecolabels	These are self-proclaimed designations that technically cannot be verified

Ecolabels must be accredited by third-parties such as governments, manufacturers and third-parties, and verified in an independent and transparent way. Depending on the accreditation body and its standards, the quality of an ecolabel may vary. In the past, there were cases of unfair or deceptive environmental claims, but with increased government oversight and regulation cases of misleading environmental claims have nearly disappeared (DEE 2018).

References

_{Active Sustainability (2018) ‘How to Use Ecolabels’. Acciona [online]. available from https://www.activesustainability.com/sustainable-life/how-to-use-ecolabels/ [8 July 2019]}

_{CIPS (2009) ‘Sustainable Procurement Knowledge Summary’. CIPS Knowledge Works [online]. UK Chartered Institute of Procurement and Supply. available from https://www.cips.org/en-GB/knowledge/procurement-topics-and-skills/sustainability/sustainable-and-ethical-procurement/sustainable-procurement/ [8 July 2019]}

_{DEE (2018) ‘Sustainable Procurement Guide’. Australian Government, Department of Environment and Energy [online]. Commonwealth of Australia 32. available from http://www.environment.gov.au/protection/waste-resource-recovery/publications/sustainable-procurement-guide [8 July 2019]}

_{Gatari, C. N., and Were, S. (2014) ‘Challenges Facing Implementation of Green Procurement in Manufacturing Sector in Kenya: A Case Study of UNGA Limited in Kenya’. European Journal of Business Management 2 (1), 1-11}

_{Gormly, J. (2014) ‘What are the Challenges to Sustainable Procurement in Commercial Semi-state Bodies in Ireland?’ Journal of Public Procurement 14 (3), 395-445}

_{IAPWG (2006) ‘Sustainable Procurement’. in UN Procurement Practitioner’s Handbook [online]. Interagency Procurement Working Group (IAPWG). available from https://www.ungm.org/Areas/Public/pph/ch04s05.html [8 July 2019]}

_{Meehan, J., Bryde, D. (2011) ‘Sustainable Procurement Practice’. Business Strategy and the Environment 20 (2), 94-106}

_{World Bank (2019) Sustainable Procurement. An Introduction for Practitioners to Sustainable Procurement in World Bank IPF Projects. 2nd edn. Washington DC: The World Bank, 60}

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How and Why to Integrate Sustainable Business Principles

Defining sustainable procurement

Want to keep
learning?

Sustainability and Green Logistics: An Introduction

The procurement process