Have you ever had to build a business case for a Sustainable Procurement or Responsible Sourcing project, only to face a wall of objections about cost or supply security?
Integrating sustainability into daily business operations is now essential. Whether driven by regulations, client demands, or talent attraction, the necessity is clear if we want to maintain our licence to operate and succeed in today’s market.
However, implementing sustainability is often easier said than done. It frequently clashes with other business requirements, such as achieving savings in an inflationary market or ensuring supply security in an uncertain world. Additionally, different aspects of sustainability sometimes compete with each other, as explained in our article on carbon trade-offs.
In this article, we will explore various Sustainable Procurement trade-offs and offer tips to help you navigate them.
Sustainable Procurement vs Cost Reduction
This is a common dilemma: How can you justify implementing sometimes costly sustainability measures when your company is already struggling to maintain margins?
1. Look at the Total Cost and ROI
Have you considered all factors? Think about the full lifecycle costs, including potential fines for non-compliance with regulations. Also, consider the potential loss of revenue if a client withdraws due to your lack of sustainability measures. While the initial investment might be high, the long-term benefits, including cost savings, enhanced brand reputation, and regulatory compliance, provide substantial returns over time.
2. Collaborate to Reduce Costs
Pool resources by participating in multi-stakeholder initiatives and sharing audit costs with peers. Engage with your suppliers to identify possible optimisations, such as guaranteeing certain volumes or providing long-term forecasts of your needs.
3. Anticipate
The old adage about investing applies to sustainability as well: When is the best time to invest in sustainability? Yesterday. When is the second-best time? Now.
Some examples:
Energy inflation since the war in Ukraine: Companies reliant on gas were hit harder than those that had already switched to renewables.
Supplier bankruptcy: This can sometimes be avoided with more ethical payment terms and procurement practices.
Reducing crop yields: This issue can be mitigated through sustainable agriculture practices that restore soil health.
Sustainable Procurement vs Security of Supply
Sometimes, sustainability means reducing the number of suppliers to better control their sustainability practices or weeding out suppliers that are unsustainable and have no intention to improve. This can create discomfort and worry about the security of supply. What if one of the suppliers fails to deliver the products or services? Here are three reasons why this concern needs to be put in perspective:
Having many suppliers with unproven sustainability practices grants a false sense of security.
Sustainable suppliers are less likely to fail; they are better adapted to a changing environment.
This feeling of imbalance is temporary. As the supplier base evolves toward more sustainable practices, you will be able to integrate more suppliers.
How can you mitigate the risk in the meantime?
Give suppliers a chance to improve: Before severing ties with a supplier, offer them the opportunity to improve through a corrective action plan. Check our article on this to learn more on how to react to supplier unethical practices.
Be a partner: Transparency between both parties is key. Gain supplier trust so they can share their struggles, allowing you to anticipate issues and collaborate on solutions.
Sustainable Procurement vs Sustainable Procurement
Sometimes different aspects of Sustainable Procurement seem to be at odds with each other, as we discovered in our article about carbon trade-offs. The examples in this article illustrate the complexities of balancing various sustainability goals.
To effectively manage these trade-offs, follow these steps:
1. Establish a hierarchy of priorities: Typically, human rights should be at the top. After that, determine what other sustainability aspect (carbon, biodiversity, water, waste, etc.) take precedence, depending on the specific goals of your procurement strategy. This doesn't mean ignoring lower-priority issues but allows for a balanced business case by focusing on the highest impact areas while mitigating lower-impact ones as much as possible.
2. Utilise this framework for communication and decision-making: A clear hierarchy of priorities can help you communicate effectively with stakeholders and guide decision-making. Ensure that this framework is widely shared so that decision-makers and buyers understand the focus areas.
By prioritising your sustainability efforts, you can create a more coherent and impactful procurement strategy that addresses the most significant issues while still considering all relevant factors.
In summary, managing trade-offs in Sustainable Procurement requires balancing cost reduction, security of supply, and competing sustainability goals. Addressing these challenges involves considering the total cost and ROI of sustainability initiatives, collaborating with stakeholders to reduce costs, and anticipating future risks. It also requires maintaining a secure supply chain by fostering partnerships with sustainable suppliers and giving existing suppliers opportunities to improve. Lastly, establishing a hierarchy of sustainability priorities helps in navigating conflicting objectives and making informed decisions.
Next time you need to build a sustainable procurement business case, remember to weigh these considerations carefully. By looking at the full lifecycle costs, collaborating with others, and anticipating future challenges, you can effectively integrate sustainability into your procurement strategies while balancing other business requirements.
If you need expert guidance in building business cases for sustainable procurement or identifying your company's impact to create a hierarchy of priorities, don't hesitate to contact us at info@beeaware-consulting.com. We are dedicated to helping organisations navigate the complexities of sustainable procurement and drive positive environmental and social impact. Reach out to us for support in creating robust, impactful procurement strategies.
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