We live in an increasingly volatile, competitive, and resource constrained world. Business leaders are balancing tomorrow's strategy with today’s trading performance and trying to optimise value levers of profitability/investment returns/people stability/customer sentiment and reputation.

The key value lever that is often underestimated is the supply chain ecosystem, and Procurement functions have the skills to this value potential.

With the introduction of the Procurement Act 2023, public sector procurement has an expanded responsibility to evaluate social and environmental factors alongside value for money. With a shift in methodology from Most Economically Advantageous Tender to Most Advantageous Tender, sustainable procurement is now a regulatory mandate.

In the private sector,  sustainable procurement seems to be a divisive topic - on a good day embedded into the organisations’ purpose, on a bad day considered a barrier to profit or waste of time and resources.

So how do procurement teams bridge the gap between purpose, value for money, and social and environment impact.  Let’s unpack this and look at the business case for sustainable procurement.

1. Supply Chain Resilience

• Procurement teams appreciate the complexities and nuances of the supply chain ecosystem, and use expertise, insight, and judgement to optimise return.

• Reducing the use of resources preserves supply and ensures continuity during disruptive events.

• Building strategic relationships creates trust and ensures collaboration through macro-economic headwinds, and facilitates innovation for the future.

2. Total Lifecycle Cost

• Traditional procurement metrics prioritise input price, and sometimes the “green” option comes with a price premium. Rather than discard this, an assessment of the life cycle cost can often reveal the most compelling business case.

• Durable materials typically last longer, deferring replacement time frames. Resilient equipment is more efficient and reliable, reducing repair and maintenance costs, and reducing usage of resources.

• Waste management strategies and circular economy deals will reduce end of life costs.

3. SMEs are Vital

• Procurement plans often drive value through consolidation, and specialist contractors, suppliers and advisors can be viewed as tail spend on a spreadsheet.

• However, their value is vital to business performance. Response times, bespoke products, and flexibility can make all the difference, and go hand in hand with social and economic impact on the communities they employee and serve.

 4. Risk Mitigation

• Procurement can be criticised for implementing clunky governance e.g. lengthy policies and vendor assessment frameworks, satisfying the scrutiny of Risk and Audit Committees. But operational execution is vital for success.

• The key is to implement fit for purpose governance that is appropriate for the business context and risk appetite - policies that are understood, supplier due diligence frameworks that are accessible for SMEs aswell as large vendors, and policies and procedures that make it easy for operations to comply.

5. Future Ready

• Forward thinking procurement teams will consider lifecycle horizons for regulation and technology - some materials that can be bought for today’s contract may no longer be viable in the future.

• More than ever as businesses look to decarbonise and drive competitive edge, established suppliers of today may well be outshone by the suppliers of tomorrow. Procurement are constantly on the lookout for innovation, and they understand how strategic partnerships can access R&D pipelines, deploying proof of concept trials for future scale - factoring in return on investment, ease of implementation, operational efficacy, and point of difference.

6. Stakeholder Trust

• There is often the debate whether customers will pay more to have a positive environmental or social impact and there are certainly many aspects to this discussion. However, businesses unanimously agree that customers and employees want to know that the organisation cares about the products and services they provide and the communities they serve. Clarity of purpose shows what an organisation stands for and that they are trying their best.

• Procurement are advocates of the message with suppliers and want to ensure the business is viewed as an attractive partner for the long-term. We want to be the first in the queue with innovation, we thrive on leverage, and we want to make an impact.