How to write a sustainable procurement policy

Procurement expenses represent roughly 40% to 80% of companies’ turnover.
Therefore, implementing a sustainable procurement policy significantly contributes to the company’s global sustainable policy results.
According to Eurocham Singapore’s report on sustainability 2020, only nearly half of companies have required their suppliers to have sustainable business practices.

However, a Sustainable Procurement Policy brings tangible benefits:

  • Reduces external environmental, economic, and social risks. Many scandals involve first-tier suppliers, like Nike and Adidas working with suppliers that discharge toxins into rivers in China, or Apple, sourcing electronics from overseas companies with poor working conditions.
  • Fosters Competitive advantage by leading suppliers to innovate – innovative products create value for the company. 
  • Increases the company’s attractiveness for partners, customers and talents. 
  • Drives internal change management by promoting new sustainable behaviours within the teams. 
  • Is cost-efficient, especially when considering the whole life cycle of a product: saves materials, energy, reduces waste and pollution.

7 steps to build your sustainable procurement policy:

  1. 1. Identify your starting point. What is your sustainable purchasing profile? 
  • Is there a global sustainability policy in your company? How does it influence the procurement policy? 
  • Is your company’s higher management supporting a sustainable procurement policy? Green procurement is a step-by-step process that requires top management commitment and support.
  • What are the main environmental impacts and risks of your company’s activities? 
  • Has your company evaluated its carbon footprint? In many companies, the supply chain has the biggest carbon footprint  (scope 3 GHG emissions).
  • What are the products or services produced by your company that most impact the environment? 
  • Try to identify environmental impacts of your products or services over their whole life cycle, i.e. from raw material to the end of a product or service’s life.
  1. 2. Define improvement areas, develop a strategy and build an action plan

Identify the most significant procurement categories: 

  • Consider which products, services or activities are the most strategic for your company.
  • Considering these strategic products, services or activities, which ones have the biggest environmental impacts?
  • Prioritize sustainable criteria considering your company’s industry.

If needed, you might start implementing on a small category to test the approach before extending to other categories.

Set tangible procurement objectives, such as: 

  • Increasing the number of suppliers holding a CSR rating such as Ecovadis
  • Increasing the number of suppliers holding a sustainable certification such as PEFC for paper,  
  • Increasing the share of green products/services, 
  • Decreasing suppliers’ carbon footprint with your products or services (link to carbon management part).

Build an action plan and prioritize: 

  • Evaluate each purchasing category based on the defined criteria, 
  • Classify your purchasing categories started with the most significant procurement field to operate.
  1. 3. Redesign the purchasing process

Start with this first challenging question: do you really need this product or service? Indeed, frugality is the best way to save money and protect the planet!

Detail environmental factors to be included in the specifications:

  • These factors will motivate your suppliers to innovate, 
  • Examples: green transport, packaging, maintenance, old products removal, product traceability… 

 Select green suppliers to compete for Request For Quotation (RFQ): 

  • Ask them for certifications,
  • Ask for a standard evaluation such as Ecovadis,
  • Choose local suppliers (to limit transportation),
  • Evaluate suppliers’ sustainable practices.

 Include sustainable choice criteria in the suppliers' offers analysis: 

  • Add a sustainable global ratio in your evaluation: from 10 to 20% of the total scoring,
  • This sustainable evaluation could include sustainable or eco-certified products, sustainable packaging, local production, environment-friendly transportation methods, other specific criteria depending on the purchasing category.

 Limit the number of purchase orders to minimize logistics and transport: 

  • Aggregate orders among services/departments, 
  • Buy products in bulk to reduce the packaging used per item,
  • Define a minimum amount for an order,
  • Limit the number of suppliers to aggregate volumes.

Where appropriate, specify the environmental criteria that need to be included in the contract.

  1. 4. Consider products and services’ Life Cycle as well as the total cost of ownership
  • This method aims at obtaining a global vision of environmental impacts. For each step of a product’s life cycle, you need to describe all the different environmental impacts. 
  • Standards are provided by the International Organization for Standardization (ISO): ISO 14040 and ISO 14044 describe the four main phases of a Life Cycle Approach.
  • Prioritise the most significant environmental issues.
  • Use a step by step methodology. 
  • Try to answer the following questions (see chart below, non-exhaustive list).

5. Implement both internal and external approach

Communicate your procurement action plan to the teams
  • Communicate KPI's and provide progress follow-up
  • Promote responsible action. Example of initiative: paper consumption follow-up
  • Involve all team by defining with them the sustainable procurement objectives and action plans
Integrate your suppliers on upstream work
  • Share your objectives with them
  • Implement improvement plans in order to help them turn their products into sustainable ones
  • Organize co-construction workshops with suppliers and employees to reach sustainable solutions
  • Use eco-conception approach based on Product Life Cycle

6. Measure and monitor performance using KPIs

Evaluate and report on your sustainability policy’s performance.

Monitor different levels:
Define global procurement targets and KPIs such as:

  • Increase the number of sustainable products or services purchased. KPI: % of products and services purchased by the sustainable procurement principles.
  • Increase the number of local suppliers. KPI: % of local suppliers among the total of suppliers.
  • Reduce carbon footprint for main products’ volumes: limit water and energy consumption and/or transport. KPI: suppliers’ water and/or energy consumption. 
  • Grow your pool of suppliers holding a CSR certification. KPI: % of suppliers with CSR certification.
  • Reduce the use of hazardous raw material.
  • Decrease the weight and volume of your packaging and introduce reusable packaging. 
  • Reduce the volume of raw material. 
  • Limit the number and the frequency of deliveries and monitor orders’ volumes. 
  • Increase the number of tenders with CSR criteria. KPI: % of tenders with CSR criteria.

Detail procurement targets and KPIs per procurement categories.

7. Complete your actions with carbon compensation/offset

This approach should be considered only once you have already conducted sustainable procurement actions plans. 

To go further: 

  • See ISO 14001 international norm  which provides practical tools to design and implement an environmental management system.
  • See Ecovadis certification.
  • When suitable, be careful about the sustainable practices of your suppliers’ suppliers: lower-tier suppliers also contribute to your sustainable procurement plan and generally reduce your sustainability performance and increase your risks.
Written by
Severine Dubois
Procurement Specialist