7 steps to follow when building and executing your sustainable procurement initiative
What are the practical steps you can take to implement sustainable procurement processes in your organisation?
1 – Identify your sustainability priorities
To build a sustainable procurement process that complements your company’s core mission, the first step to take after conducting a thorough spend analysis is to identify the blend of environmental, social and economic sustainability goals your organisation both prioritises and is able to make real impact by addressing.
Every organisation is unique, operating in different business ecosystems with a bespoke list of priorities and pressures. Once these are understood, you can set long-term, high impact goals that can be met by following a number of smaller steps, such as setting KPIs for the number of vendors that implement their own new sustainability management systems, or monitoring correlation of procurement spend and supplier sustainability ratings.
2 – Assess procurement risks using your new sustainability priorities
Once your priorities are defined, they become a useful tool for assessing risks when procuring goods and services. Contracts can now be assessed by key areas of sustainability concern, as high-priority sustainability requirements will guide procurement decision-makers to work with vendors that offer lower risks in these key areas.
This will lead to procurement working with vendors who deliver the most value at lower levels of risk, and it will also enable procurers to wield greater influence when requiring vendors to act sustainably within their own value chains. Finally, it will also help justify where to spend more, as high-risk processes can be mitigated by procuring appropriate precautions.
3 – Select and evaluate the right vendors
The vendors you work with have most impact on whether the goods and services you procure are sustainable, so it is important to understand the risk profile of the contracts you build so you can set appropriate sustainability criteria. An example of this would be setting criteria for a transportation partners to offset their carbon emissions. It is important to understand the legal framework in which you operate so you can set sustainability criteria that are backed by law.
Once all sustainability criteria are set, the procurer should comprehensively evaluate vendors, including criteria that do not affect sustainability goals such as cost. Contracts with higher risks in certain areas will be weighted differently, and this needs to be taken into consideration in the evaluation process. Cloudia Supplier Management is a great tool for managing this process.
4 – Define specifications and invite tenders
Well-defined specifications essentially enforce sustainable procurement practices, as they entice vendors to meet required standards and monitor how they operate, as doing so will help them reap a number of business-related benefits. Equally, sustainability-driven specifications will make others see you as a procurer who is driving the market forward in a mutually-beneficial, considered way.
It is worth considering whether procurers should set minimum criteria for vendors who wish to submit tenders, or whether a list of preferable criteria should be used. The latter may make sense if the procurer is unsure whether the market has the capability to meet the sustainability standards the procurer wishes to achieve. Cloudia Sourcing has specifically been designed to make this process run smoothly.
5 – Evaluate and award the right vendors
It is critical at this point that bids are selected using the most impartial, fair means possible. The specification you have created will certainly guide much of the decision-making process, but a robust, logical, and legally-sound selection criteria will further enforce the fairness and impartiality of your bid evaluation.
An automated bid selection system such as Cloudia Sourcing paired with well thought out and legally sound selection criteria will ensure your process is exhaustive, fair, and does not suffer from human error.
6 – Manage the contract throughout its lifecycle
Once a contract is awarded, it is essential that the procurer monitors that it is being fulfilled as agreed, especially in situations where partnerships are set to run for several years. This is also true for contracts where the goods and services procured are high-risk from a sustainability point of view.
The complexities of contract lifecycle management can be mitigated when using an automated system like Cloudia Contract, where the system can alert and remind procurers to follow up with vendors, book meetings, perform assessments, and monitor KPIs. With these reporting tools in place, the procurer can build processes to reward and even (if necessary) penalise vendors in-line with meeting requirements through service delivery.
7 – Embrace links to the rest of your supply chain
The procurement world is ever-more interconnected, and the relationships your vendors maintain with their own vendors is important to consider. The impacts of your sustainability work could be all but wiped out if there are issues further along your supply chain.
Back-to-back contracts are an effective tool for ensuring vendors and subcontractors are held to the same standards in high-risk procurements. Part of your selection criteria in high-risk procurements should be requiring vendors to use back-to-back contracts with their own subcontractors. However, these are not popular with vendors, so you should consider when and where to use them.
Sustainable procurement and your organisation – things to consider
Does your organisation have a sourcing system in place that enables you to build a sustainable procurement process? Setting tender and partner requirements, ensuring compliance with certification, contract lifecycle management, and purchase origins are extremely time-consuming processes when performed manually.
A fully digital source to contract system will automate this process – and push your procurement operations into a sustainable world. Contact us to get expert advice on digitalising your procurement!
Download also Everything you need to know about sustainable procurement in 2020 that looks at the higher-level trends and drivers of change that affect sustainable procurement.