Responsible sourcing has been around for a while now. Implementing a Sustainable Sourcing Strategy Innovation around offerings and/or operations.Improved compliance with legislation/regulation. Major benefits of responsible sourcing programs: In a Deloitte survey, the top benefits selected by respondents were brand recognition and reputation, and customer satisfaction. A Mckinsey report pointed out that executing ESG effectively can help drive down costs by 5 to 10 percent, as these companies focus on operational efficiency and waste reduction. Moreover, procurement organizations also report benefits in supplier collaboration, sales, brand perception, and product/service quality. For example, Germany has passed the German Supply Chain Due Diligence Act which will be effective from January 2023 and mandates larger companies to conduct supply chain due diligence activities.Įffective sustainable procurement practices can not only help in ensuring compliance and mitigating risks but also deliver other outcomes such as brand differentiation enabling revenue growth and ecosystem enablement where a company along with their peers go a step further to impact a common issues such as deforestation, water use, greenhouse gas emission, etc. Many countries and governments are enforcing companies to incorporate environmental and social protection into their supply chain processes. Sustainable procurement or sustainable sourcing, also often referred to as responsible sourcing is an approach to sourcing materials where an organization consciously considers social, ethical and environmental factors along with the typical cost and quality factors, in the process of selecting suppliers.Įnsuring that prospective suppliers comply with social and environmental standards is critical in limiting the organization’s risk exposure from the supply base. What is Sustainable Procurement/Sustainable Sourcing and Why does it Matter? In this blog, we try to break down sustainable procurement, and its outcomes as well as shed some light on how to build an effective sustainable procurement strategy and the tools that could help with it. However, we have seen procurement leaders looking to build a sustainable sourcing strategy often struggle to identify what environmental, social and governance (ESG) issues they should incorporate into their sourcing and procurement strategy. According to a recent research report from Gartner, 93% of organizations are planning to invest in sustainable sourcing initiatives. Hence sustainable procurement practices become a critical factor in helping organizations achieve their ESG goals. Just to make sure we are on the same page, ESG refers to a collection of corporate performance evaluation criteria that assess the robustness of a company’s governance mechanisms and its ability to effectively manage its environmental and social impacts.Ī huge part of the push for ESG is the way organizations spend – what, how and from whom they source. While many companies have been investing in the required Environmental, Social and Governance (ESG) for the sake of regulations and laws, many are now investing in these activities such as sustainable procurement beyond compliance for increasing corporate value and market differentiation. Companies are ramping up their environment and social commitments as well. There is an increased concern about sustainability in recent years. In the modern world of rapid urbanization and growing pollution, it’s not easy to sustain a greener and safer world for us to live in. “There must be a better way to make the things we want, a way that doesn’t spoil the sky, or the rain or the land”
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