Sustainability is now a crucial factor to survive in a rapidly changing and increasingly diverse marketplace. Businesses must set themselves apart with values that are more than vision and mission statements. This implies that enterprises must deliver actionable results on issues surrounding environmental, social, and corporate governance on a day-to-day basis.
Procurement is undoubtedly the lifeblood of this sustainable process. By designing and deploying sustainable procurement strategies that encompass everything from product sourcing to supply chain onboarding, relationship management, reporting, and product sourcing, companies can capture end-to-end visibility and achieve sustained value.
But how exactly can sustainable procurement improve spend management? In this article, we delve deeper into the interdisciplinary relationship between sustainable procurement and spend management, with a closer look at how sustainable procurement can improve spend management.
Sustainable Procurement Strategies Improve Spend Management in the Following Ways:
- Improving legal compliance. Sustainable procurement strategies determine changes in supply chain regulations and initiate timely compliance responses to avoid costs associated with compliance issues.
- Avoiding costs associated with poor supplies. Sustainable procurement strategies carefully assess vendors and suppliers against a code of conduct and later align this to corporate strategy and legislative compliance requirements.
- Avoiding environmental costs. Sustainable procurement seeks to reduce energy consumption and energy emissions, thus avoiding hefty costs associated with environmental degradation.
- Avoiding energy costs. Sustainable procurement sources machines, systems, and equipment that consume the least energy and that generate the least waste. It seeks to maximize sustainable systems to ensure they have the most efficiency with the least resource inputs.
- Risk reduction. Sustainable procurement understands the degenerative impact of risk and seeks to minimize risk by sourcing quality products and supplies.
- Improving decision-making. Sustainable procurement strategies improve spend management by helping managers improve decision-making across the supply chain lifecycle. From creating the purchase order and the requisition form to filing the goods return notes and the supplier’s invoice, sustainable procurement improves decision-making throughout this cycle.
- Identification of better sourcing opportunities. Spend management allows enterprises to map every cost involved in the supply chain process. By tracing costs and expenditure, you can identify whether you need to switch suppliers or focus on a single vendor instead of many.
- Sustainable reputation. Since the onset of the economic recession, sustainable business strategies have taken a backseat to the focus of driving down costs. However, for most enterprises, sustainable procurement is once again becoming an issue. That is so as most people recognize the importance of sound environmental practices in improving the corporate image.
Practical Steps to Sustainable Procurement Strategies
1. Identify supply chain regulations affecting your organization
One part of sustainable procurement is to identify which supply chain-related policies affect your organization. Businesses must consider country-specific regulations and standards, including voluntary commitments. In addition, understand which areas of your business are affected by changing supply chain regulations and which functional areas are responsible for compliance. By identifying supply chain regulations, and their impact on your procurement planning and management processes, you can scale down compliance costs.
2. Assess suppliers against a code of conduct
To achieve sustainable procurement, align supplier assessment with your corporate strategy and your legislative compliance requirements. Supplier attestation must be mandated in any supplier selection exercise by recording live compliance statistics. By recording supplier attestation statistics, you can improve spend management in procurement planning and management processes.
3. Develop a consistent approach for responsible supplier assessment
Develop supplier assessment models based on global reporting guidelines and frameworks such as SDGs, UNGC, and GRI. It’s advisable to include cross-business compliance requirements such as legal, risk, health and safety, sustainability, and information security. Developing a consistent approach to supplier selection will improve spend management by giving you access to trusted suppliers, quality products, and better contracting opportunities.
4. Use of assessment information
Identify non-compliances and communicate them to relevant suppliers and relevant business areas. It’s important to use performance metrics to embed review and supplier selection processes. Assessment information provides better visibility in different areas of spending, thus guiding you on future spend management processes.
5. Creating a deeper supplier audit process
A key to a sustainable procurement strategy is creating a supplier review and audit process. To drive deeper assessment or audit, link further assessment to review processes, that is poor performance or high risk. By creating deeper supplier review or audit processes, you get to work through your improvement plans with suppliers and achieve low-cost margins and better spend management.
A New Dawn For Sustainable Procurement
Indeed, as the recent scandal over corporate tax avoidance has revealed, in an era of social network-enabled and real-time global communication, perceptions of poor business practices can have immediate and dramatic implications on revenues and profitability. Taking a sustainable approach to procurement requires corporate upheaval, meaning that existing vendor relationships need to be re-assessed based on the supplier’s green track record while working staff will experience a degree of cultural change.
ProcurePort – Exploring the Sustainability Advantage
As a reputable provider of collaborative performance improvement tools and business sustainability ratings, ProcurePort is ideally positioned to assist companies in their sustainability efforts by reducing the risk associated with sub-optimal decision-making in supply chain processes. Meanwhile, ProcurePort’s many tools help businesses boost ROI without sacrificing sustainable procurement practices. Sustainable procurement strategies can deliver measurable impacts for your business and the community at large. Contact ProcurePort for sustainable procurement strategies.