12. Procurement
“Climate-friendly purchasing not only is good for the planet and people, it also has significant financial benefits. Businesses can expect to see revenues increase 5–20 percent and supply chain costs decrease 9–16 percent. Strong sustainability procurement standards also can shield businesses from many climate risks that will increasingly affect supply chains, such as crop failures, natural disasters, and sea-level rise. Purchasing with climate in mind will make your company’s supply chain more resilient and responsible.”
As American consumers, our shopping prowess is undeniable. A generation of us has spent hours in malls, proudly hunted for 'good deals,' and sought solace in the balm of retail therapy. Yet, amidst our countless purchases, we've curiously spared only fleeting thought to the essence of what lies within those products or their origins. Occasionally, a glimpse of distant news might have drawn our attention to companies employing inhumane working conditions to fashion our affordable commodities across the globe. But for the most part, we entrusted our providers, perhaps turning a blind eye.
However, the landscape has shifted dramatically in our interconnected and digitized age, pouring more information into the hands of consumers than ever before. This transformation echoes within our procurement domains too. Just as we vote with our dollars as individuals, every toilet paper roll, ream of paper, laptop computer, and standing desk procured on our behalf resonates as a profound statement of our principles. It signifies a choice for an enduringly sustainable future – or the lack thereof.
For this collective commitment to thrive, we beckon upon our armies of buyers to embrace a proactive culture of learning and the assimilation of new procurement practices. As companies, our spending shapes more than just transactions; it echoes our aspirations for a world guided by sustainability. Begone inconsiderate styrofoam, begone lazy single-use plastic, begone thoughtless spending. Every purchase extends beyond the point of sale, weaving a narrative of responsible stewardship for the generations to come.
Learning Objectives
Understand the concept of sustainable purchasing and its role in promoting environmental, social, and economic responsibility in procurement decisions.
Explain how sustainable purchasing contributes to addressing global challenges such as climate change, resource depletion, and social inequality.
Recognize the importance of collaborating with suppliers to foster sustainable practices and support positive environmental and social outcomes.
List and describe best practices in sustainable procurement, focusing on factors beyond cost, quality, and delivery.
Analyze the benefits of incorporating local sourcing, sustainable packaging, and resource efficiency in procurement practices.
Describe the concept of life cycle assessment and how it helps evaluate the environmental footprint of products and services.
Identify strategies to minimize environmental harm through material selection, efficient production, and responsible waste management.
Analyze the role of circular economy principles in reducing resource consumption and promoting the reuse and recycling of materials.
Explain how sustainable materials sourcing contributes to reducing carbon emissions, conserving resources, and minimizing ecological harm.
Identify different types of certifications (e.g., organic, fair trade, eco-labels) and understand their roles in verifying sustainable and ethical practices.
Understand the importance of aligning producer values with sustainable procurement goals.
Recognize the role of ethical sourcing and producer values in building strong relationships and collaborations within the supply chain.
Analyze the potential positive impact of supporting producers who prioritize environmental stewardship, fair labor practices, and community engagement.
Sustainable Purchasing
Sustainable procurement, also known as green procurement or responsible procurement, is the process of integrating environmental, social, and economic considerations into the purchasing decisions of organizations. It involves selecting suppliers and products/services that align with sustainability principles and contribute to positive environmental and social outcomes.
The concept of sustainable procurement recognizes that the purchasing decisions of organizations have a significant impact on the environment and society. By incorporating sustainability criteria into the procurement process, organizations can support the transition to a more sustainable economy and address pressing global challenges such as climate change, resource depletion, and social inequality.
Sustainable procurement goes beyond traditional procurement practices, which primarily focus on cost, quality, and delivery. It takes into account a broader set of factors, including:
Environmental Impact: Sustainable procurement considers the environmental implications of products and services throughout their life cycle. This includes evaluating the environmental footprint of raw material extraction, production processes, energy consumption, waste generation, and end-of-life disposal. It aims to select products/services with lower carbon emissions, reduced resource consumption, and minimized ecological harm.
Social Responsibility: Sustainable procurement promotes socially responsible practices throughout the supply chain. This involves considering factors such as labor rights, fair wages, working conditions, health and safety standards, human rights, and diversity and inclusion. It aims to support suppliers that demonstrate ethical behavior and contribute positively to the communities in which they operate.
Economic Viability: Sustainable procurement recognizes the importance of economic viability in ensuring long-term sustainability. It takes into account factors such as supplier stability, financial health, innovation capacity, and long-term business resilience. By selecting financially sustainable suppliers, organizations can reduce risks and ensure the continuity of their supply chains.
The implementation of sustainable procurement involves setting clear sustainability goals, conducting supplier assessments, integrating sustainability criteria into supplier selection processes, and fostering collaboration with suppliers. It also includes ongoing monitoring and measurement of sustainability performance, engaging stakeholders, and promoting continuous improvement.
Overall, sustainable procurement aims to align purchasing decisions with the principles of sustainability, enabling organizations to make a positive impact on the environment, society, and economy while meeting their operational needs.
Best Practices
Sustainable procurement refers to the process of integrating environmental, social, and economic considerations into the procurement process. It involves making purchasing decisions that support sustainable development and contribute to positive environmental and social outcomes. Here are some best practices in sustainable procurement:
Set clear sustainability goals: Establish specific sustainability goals and objectives for your procurement process. These goals should align with your organization's overall sustainability strategy and consider environmental, social, and economic factors.
Conduct a sustainability assessment: Assess the sustainability performance of your suppliers and products/services. Consider factors such as carbon footprint, energy efficiency, waste management, social responsibility, and ethical sourcing practices. Use this assessment to identify suppliers that align with your sustainability goals.
Integrate sustainability criteria into supplier selection: Include sustainability criteria as part of your supplier evaluation and selection process. This can be done through questionnaires, interviews, or site visits that assess a supplier's sustainability practices and performance. Select suppliers who demonstrate a commitment to sustainability and meet your organization's requirements.
Collaborate with suppliers: Work closely with your suppliers to foster a collaborative and mutually beneficial relationship. Engage in dialogue about sustainability expectations and encourage suppliers to adopt sustainable practices. Share information and best practices to support continuous improvement.
Consider life cycle assessment (LCA): Life Cycle Assessment (LCA) is a comprehensive approach used to evaluate both the environmental and social impacts of a product or service from its inception to its final disposal. This method takes into account every stage in the product's life cycle, from the initial extraction of raw materials, through production, distribution, use, and eventually its end-of-life disposal. This holistic analysis ensures that impacts are assessed not only during the use phase but also during all preceding and subsequent stages, allowing for a thorough understanding of the overall sustainability implications.
Moreover, LCA considers factors that contribute to a "cradle-to-cradle" perspective, acknowledging the potential for products to be recycled, upcycled, or otherwise repurposed at the end of their useful life. This includes evaluating the product's durability, its potential for being recycled efficiently, and whether its materials can be safely reintroduced into the production process for new items. By encompassing these considerations, LCA provides a robust understanding of how various choices and stages of a product's life cycle impact the environment, society, and potential future resource use.
Promote local sourcing: Give preference to local suppliers and products when feasible. This reduces transportation emissions and supports the local economy. However, ensure that local sourcing does not compromise on sustainability criteria, and balance it with other factors such as quality and cost.
Encourage sustainable packaging: Request suppliers to use environmentally friendly packaging materials and minimize packaging waste. Promote the use of recyclable, biodegradable, or reusable packaging options. Opt for minimal packaging whenever possible.
Consider energy and resource efficiency: Prioritize suppliers that demonstrate energy and resource efficiency in their operations. This includes suppliers who use renewable energy sources, implement water conservation measures, or adopt circular economy principles.
Engage stakeholders: Involve stakeholders, including employees, customers, and communities, in your sustainable procurement efforts. Seek their input, communicate your sustainability goals, and involve them in decision-making processes. This increases transparency and accountability.
Monitor and measure performance: Regularly monitor and measure the sustainability performance of your procurement process. Establish key performance indicators (KPIs) to track progress towards your sustainability goals. Use this data to identify areas for improvement and make informed decisions.
By following these best practices, organizations can contribute to a more sustainable and responsible supply chain while minimizing environmental impacts and maximizing positive social outcomes.
Materials Matter
Every product we encounter, from the packaging that cradles our purchases to the components that make up our devices, carries a hidden story that extends into the realms of environmental impact, social responsibility, and sustainability. Companies, employees, and consumers alike are depending on corporate buyers to dig deeper and make holistic decisions. Not everyone understands the multitude of negative effects that materials like plastics can have on carbon emissions, waste accumulation, natural environments, and human health – but you need to. It's your role to unearth the complexities and nuances that shape the materials landscape, to discern how choices cascade into far-reaching consequences. Not everyone knows, for instance, that our clothes shed microplastics in our washing machines, infiltrating our water cycle and ultimately contaminating every surface of our planet. We ask that you take on the responsibility of unraveling these intricacies for us, to navigate the maze of materials and their repercussions. Perhaps you've heard about the detrimental impact of palm oil, but do you know why? Palm oil farms are often established on lands cleared by burning rainforests – precious ecosystems that our planet desperately needs to preserve. By understanding these underlying truths, you hold the key to informed decision-making, the potential to guide us toward a future where choices align with the well-being of our planet and its inhabitants. To help you get started, here’s a quick guide for materials.
Preferred Materials for Sustainability:
Recycled Materials: Choose materials made from recycled content, such as recycled metals, glass, and paper. Using recycled materials reduces the demand for virgin resources and minimizes waste.
Biodegradable and Compostable Materials: Opt for materials that naturally break down over time, such as biodegradable plastics and compostable packaging. When something claims to be compostable, it’s your responsibility to understand the circumstances in which decomposition occurs. Often, material breakdown requires industrial composting at extremely high temperatures by specialized equipment, not ‘naturally’ in a landfill or personal backyard compost.
Certified Wood and Bamboo: When making material choices, consider opting for wood products, including bamboo, that are certified by organizations like the Forest Stewardship Council (FSC). This certification guarantees sustainable forestry practices, responsible sourcing, and the conservation of forests, ensuring that your choices contribute to environmentally sound material selection. Bamboo, in particular, offers a remarkable advantage for sustainability due to its rapid growth rate. Bamboo is renowned for its ability to regenerate quickly, often reaching maturity in a fraction of the time it takes for traditional trees to grow. This fast growth not only makes bamboo a highly renewable resource but also reduces the pressure on natural forests and ecosystems. By selecting bamboo, you not only support sustainable material choices but also actively contribute to the preservation of natural habitats and the reduction of deforestation.
Natural and Synthetic Fibers: When making sustainable material choices, it's important to consider both natural and synthetic fibers. Natural fibers, such as organic cotton, hemp, bamboo, and wool, offer environmentally friendly options with lower ecological impacts. These fibers are biodegradable, often renewable, and produced using more sustainable farming practices. They also tend to require fewer chemical treatments during production, reducing potential harm to ecosystems.
Low-Emission Paints and Finishes: Select paints, coatings, and finishes that have low volatile organic compound (VOC) emissions. This improves indoor air quality and reduces the release of harmful chemicals into the environment.
Energy-Efficient Lighting and Appliances: Prioritize energy efficiency in your choices by selecting LED bulbs for lighting. LED bulbs consume less energy and boast longer lifespans compared to traditional incandescent bulbs. Additionally, when it comes to appliances, opt for those carrying the Energy Star certification. This certification, awarded by the U.S. Environmental Protection Agency (EPA), ensures that appliances meet energy efficiency standards, helping you reduce energy consumption and contribute to a more sustainable lifestyle.
Renewable Energy Sources: Consider materials and products sourced from renewable energy-powered facilities. This includes energy generated from solar, wind, hydropower, and other renewable sources. Coal, oil and natural gas are not renewable energy sources. Conveniently, today renewable energy is more affordable than fossil energy as the cost of these technologies have steadily dropped for the last decade.
Durable Materials: Prioritize materials known for their durability and longevity. Long-lasting materials require fewer replacements, reducing the overall environmental impact.
Reusable Products: Invest in products that are designed for reuse. Reusable items, such as durable office supplies, and containers, minimize single-use waste.
Materials to Avoid or Minimize:
Single-Use Plastics: Minimize the use of single-use plastics, such as plastic bags, utensils, and packaging. These contribute to plastic pollution and harm marine life.
Polystyrene (Styrofoam): Avoid using polystyrene products due to their non-biodegradable nature and negative environmental impact.
Synthetic Fibers (such as polyester, nylon, and acrylic): Derived from petroleum-based sources and are manufactured through energy-intensive processes. While they can be versatile and durable, they pose environmental challenges. Synthetic fibers do not easily biodegrade, leading to long-lasting waste in landfills and marine environments. Moreover, the production of synthetic fibers releases greenhouse gases and contributes to plastic pollution, as microplastics shed from these materials during washing enter waterways and ecosystems.
Non-Recyclable Plastics: Choose materials that are easily recyclable. Avoid plastics that are difficult to recycle or have limited recycling options. Make sure the plastic you do dispose of is appropriately diverted for recycling.
Toxic Chemicals: Everyday items often harbor hidden toxic chemicals, such as in cleaning products, grounds care chemicals, furniture, electronics, and paints and solvents. Many conventional cleaning products contain harmful chemicals like ammonia and chlorine, releasing volatile organic compounds that contribute to indoor air pollution. Chemicals used in grounds care and landscaping can pose risks to both human health and the environment. Flame retardants in furniture can release toxins into the environment. Electronics, such as smartphones and computers, contain hazardous substances like lead and mercury, and certain paints and solvents emit volatile organic compounds that can compromise indoor air quality. Being mindful of these potential risks and seeking out safer alternatives is essential for safeguarding human health and the environment.
Non-Reusable Disposables: Minimize the use of disposable products that are not designed for reuse. This includes disposable cutlery, plates, and cups.
Unsustainable Palm Oil: Avoid products containing unsustainably sourced palm oil, as palm oil production can contribute to deforestation and habitat destruction.
Non-Biodegradable Packaging: Choose packaging materials that are biodegradable, compostable, or recyclable. Avoid packaging that cannot easily be disposed of responsibly.
Conflict Minerals: Avoid materials sourced from conflict regions, as they may contribute to human rights abuses and environmental degradation.
High-Emission Materials: Minimize the use of materials with high carbon emissions during production, such as materials derived from fossil fuels.
Excessive Packaging: Avoid products that are excessively packaged, as this contributes to unnecessary waste and environmental impact.
By considering these preferences and avoiding or minimizing environmentally harmful materials, companies can make more sustainable choices that align with their environmental goals and contribute to a healthier planet.
Fair Trade and Certifications
When seeking to make sustainable purchase decisions, there are many third-parties and certifications that can help you identify what to buy and not buy. Fair Trade is a certification and labeling system that aims to promote social and environmental sustainability in supply chains, particularly for products produced in developing countries. Fair Trade certification ensures that producers receive fair prices for their goods, adhere to certain social and labor standards, and follow environmentally responsible practices. The certification program sets criteria related to fair wages, safe working conditions, environmental protection, community development, and transparency. Some well-known Fair Trade certifications include:
Fairtrade International: Fairtrade International is a global organization that certifies a wide range of products, including coffee, cocoa, tea, bananas, sugar, cotton, and more. Their certification guarantees fair prices to farmers and workers, promotes sustainable farming practices, and supports community development projects.
Fair Trade USA: Fair Trade USA is an independent nonprofit organization that certifies various products, including coffee, tea, cocoa, sugar, and more. Their certification ensures fair prices, safe working conditions, and environmental sustainability. They also have specific programs, such as Fair Trade Certified Apparel and Fair Trade Certified Flowers.
In addition to Fair Trade, there are several other certifications and labeling schemes that focus on sustainability, ethical practices, and transparency in supply chains. Some notable certifications include:
Rainforest Alliance: The Rainforest Alliance certification focuses on environmental, social, and economic sustainability. It covers a range of sectors, including agriculture, forestry, and tourism. Their certification standards include criteria for biodiversity conservation, workers' rights, and natural resource management.
Organic Certification: Organic certification verifies that agricultural products, such as fruits, vegetables, grains, and livestock, are produced following specific organic farming practices. These practices typically exclude the use of synthetic pesticides, and genetically modified organisms (GMOs), and promote soil health, biodiversity, and ecological balance.
Forest Stewardship Council (FSC): The FSC certification ensures responsible forest management, including sustainable timber harvesting, protection of biodiversity, and respect for the rights of local communities. It applies to wood and wood-based products, such as furniture, flooring, and paper.
Global Organic Textile Standard (GOTS): GOTS is a certification for textiles made from organic fibers, such as cotton, wool, or linen. It ensures that textiles meet stringent environmental and social criteria throughout the entire supply chain, including cultivation, processing, manufacturing, and labeling.
LEED (Leadership in Energy and Environmental Design): LEED certification is specific to the built environment, such as buildings and neighborhoods. It assesses factors like energy efficiency, water conservation, indoor environmental quality, and sustainable site development.
These certifications and labeling schemes provide consumers with assurance that products meet certain sustainability and ethical standards. Most industries and product categories have specific certifications. They enable businesses to demonstrate their commitment to responsible practices and help consumers make more informed choices aligned with their values.
Producer Values
When making purchasing decisions, it's important to consider the values of the provider. This involves evaluating the company's commitment to initiatives like the Science Based Targets Initiative (SBTi) for climate action and whether its supply chain is dedicated to continuous sustainability improvements. Additionally, examining the diversity within the company's leadership, including representation of women, minorities, and veterans, reflects a commitment to fostering inclusivity and equal opportunities.
Furthermore, acknowledging whether the company is recognized within the business community for supporting the Sustainable Development Goals (SDGs) provides insight into its broader societal and environmental contributions. By prioritizing providers that align with these values, procurement associates play an active role in promoting environmentally-conscious practices, equitable workplaces, and a greater global impact. Such choices not only influence individual and recurring contract purchases but also collectively encourage companies to adopt responsible and sustainable business practices.
Becoming a leader in sustainable business is a gradual process that varies across companies and industries due to unique challenges. Achieving comprehensive sustainability involves addressing diverse aspects of a company's operations. While a company might excel in a specific area, such as procurement, it's possible to fall short in other aspects. This highlights the complexity of sustainability efforts and the need for a holistic approach that continually evolves to meet various sustainability goals.
Here are a few examples of businesses that have made sustainable procurement decisions:
Interface: Interface, a global modular flooring company, has transformed its procurement practices to align with sustainability principles. They achieved a "Mission Zero" goal, aiming to eliminate any negative impact their operations may have on the environment by 2020. Interface has focused on sourcing recycled and renewable materials, reducing waste, and partnering with suppliers who share their commitment to sustainability.
Walmart: Walmart, one of the largest retailers globally, has made significant strides in sustainable procurement. They have implemented a Sustainability Index that evaluates their suppliers based on factors such as greenhouse gas emissions, waste management, and labor practices. Walmart works with suppliers to improve sustainability performance and has set goals to source more renewable energy and reduce emissions. At the same time, one could question the overall impact of the ‘low prices’ short lived products, low wages, global supply chains and more.
Nestlé: Nestlé, a multinational food and beverage company, has a robust sustainable sourcing program. They focus on responsible sourcing of agricultural commodities, such as cocoa, coffee, and palm oil, to ensure environmental protection, support smallholder farmers, and promote fair trade practices. Nestlé engages in direct partnerships with farmers and invests in sustainable agricultural practices. At the same time, Nestlé continues to be named one of the world’s largest plastic polluters, along with Coca-Cola Company, PepsiCo.
Ford Motor Company: Ford has been proactive in sustainable procurement practices within the automotive industry. They have set ambitious goals to increase the use of sustainable materials in their vehicles, such as recycled plastics and bio-based foams. Ford also collaborates with suppliers to improve energy efficiency, reduce water usage, and promote responsible mining of raw materials.
Starbucks: Starbucks, the well-known coffee chain, has implemented sustainable sourcing practices to support ethical and environmentally responsible coffee production. They have established the Coffee and Farmer Equity (C.A.F.E.) Practices program, which sets standards for responsible sourcing. Starbucks works directly with farmers, promotes fair trade, and supports sustainable farming practices.
Procter & Gamble (P&G): P&G, a global consumer goods company, has a comprehensive sustainability program that extends to procurement. They prioritize suppliers who meet strict sustainability criteria, such as reducing greenhouse gas emissions and minimizing water usage. P&G collaborates with suppliers to drive innovation in sustainable materials and packaging.
Here are examples of sustainable procurement practices from lesser-known businesses:
Ecover: Ecover is a Belgium-based company that produces ecological cleaning and laundry products. They prioritize sustainable procurement by sourcing plant-based and biodegradable ingredients. Ecover also promotes responsible packaging, using recycled and recyclable materials whenever possible. Their commitment to sustainability extends to their supply chain, where they work closely with suppliers to ensure ethical practices and reduce environmental impacts.
Indigenous: Indigenous is a fashion company that specializes in fair trade and organic clothing. They prioritize sustainable procurement by working directly with artisans and farmers in Peru and other countries to source organic cotton and other sustainable fibers. Indigenous ensures fair wages and safe working conditions for their suppliers, promoting social responsibility along with environmental sustainability.
Divine Chocolate: Divine Chocolate is a UK-based chocolate company that operates as a cooperative, ensuring that cocoa farmers have ownership and share in the profits. They prioritize sustainable procurement by sourcing cocoa beans from Fairtrade-certified farmer cooperatives in Ghana and other countries. Divine Chocolate supports fair prices, empowerment of farmers, and sustainable farming practices.
Alter Eco: Alter Eco is a company that produces organic, fair trade, and sustainable food products. They focus on sustainable procurement by sourcing ingredients such as cocoa, quinoa, and rice from small-scale farmers who use organic and regenerative farming practices. Alter Eco is committed to fair prices, environmental conservation, and reducing their carbon footprint throughout their supply chain.
Coyuchi: Coyuchi is a California-based company that specializes in organic bedding and home textiles. They prioritize sustainable procurement by sourcing organic cotton and other natural fibers. Coyuchi works directly with farmers and textile producers who adhere to organic farming practices and fair labor standards. They promote transparency and traceability in their supply chain to ensure responsible sourcing.
These examples demonstrate that sustainable procurement practices are not limited to well-known companies. Many smaller businesses are also making conscious choices to integrate sustainability into their procurement processes, supporting ethical sourcing, fair trade, and environmentally responsible practices.
Critical Thinking Questions
How does the integration of environmental, social, and economic considerations in sustainable procurement contribute to a more holistic approach to decision-making?
Reflect on a recent purchasing decision you made. How might considering sustainability principles have influenced your choice differently?
What potential challenges might organizations face when trying to align their procurement practices with sustainability goals? How can these challenges be overcome?
In what ways can sustainable procurement practices enhance a company's reputation and brand image? Provide examples of companies that have successfully leveraged sustainable practices in their procurement.
Consider the role of stakeholder engagement in sustainable procurement. How might engaging employees, customers, and local communities contribute to more transparent and responsible procurement processes?
How can organizations strike a balance between implementing best practices in sustainable procurement and addressing practical constraints such as cost and availability?
Discuss a product that you use regularly. Can you identify the various stages in its life cycle and the environmental impacts associated with each? How could these impacts be mitigated?
Reflect on the concept of a circular economy. How can designing products for durability, repairability, and recycling contribute to reducing waste and resource consumption?
Analyze the trade-offs between selecting materials that are environmentally friendly but potentially more expensive versus materials that are cost-effective but have a larger ecological footprint.
Research and compare different certification labels such as organic, fair trade, or eco-labels. How do these certifications enhance transparency and guide consumers toward more responsible choices?
Discuss the challenges that companies might face when seeking certifications for their products. What benefits might outweigh these challenges in terms of ethical consumer preferences?
How do certifications like fair trade contribute to improving the lives of workers and communities in global supply chains? What are some potential limitations of relying solely on certifications for ethical sourcing?