Sustainable Procurement And Why It Matters

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Series 1 / Part 1

In 2012 I read a life-changing book called Collapse – Why Civilisations Choose to Fail, by Jarrod Diamond. The book discussed societies such as Easter Island and posed the question – what was the collective reasoning for consuming the entire island’s timber stocks and thus condemning a society to fail? Within the book Diamond also went on to discuss current day Australia, China and humanity’s insatiable appetite for consumption. It was a book you couldn’t ignore; I concluded that our planet cannot and will not cope; we need to change!

I recognised that Sustainability would become an important area of focus for procurement functions and industry as a whole. Spurred by what I thought was an impending collapse of society, I embarked on a Masters’ thesis exploring the value that embracing Sustainable Procurement could bring to an organisation. My research revealed that organisations that engaged in sustainable procurement should expect a greater return in investment, via increased profits and increased shareholder value. This blog explores some of the key changes that have taken place in the last decade and how this has impacted procurement.

What is Sustainability?

Firstly, lets remind ourselves on the principles surrounding Sustainability. ESG and Sustainability follow four core themes; the Environmental, Human, Social and Economic impact on our planet as result of human activity. The United Nations Sustainability Goals take this further and explore 17 inter-connected goals for human development. Adopted by all United Nations Member States they are designed to be a blueprint to ‘achieve a better and more sustainable future for all’ and address the global challenges faced across poverty, inequality, climate change, environmental degradation, peace and justice. These themes form a foundation on which Procurement can act. But aside from ESG being ‘the right thing to do’ what have been the drivers in procurement adopting ESG principles over the last decade?

Sustainability Awareness

There is no doubt that over the last decade stakeholder awareness of ESG principles has increased massively. This is in no small part down to an increase in reporting, particularly in the field of climate change and modern slavery. With nearly daily cases of organisations falling foul of ESG commitments, particularly surrounding supply chain management, the impact of negative publicity poses a very real risk to organisations who fall short of accepted standards.

Legislative Change

In 2012 I argued that consumer and stakeholder pressure would not be enough to allow sustainable measures to become accepted good practice, and that legislative pressure would be needed. The last ten years have seen a great deal of activity; the Public Procurement Act being the latest legislation to highlight this requirement. UK public procurement accounts for 43% of GDP, and with a mandated minimum weighting of 10% given to ESG objectives in each procurement, public sector procurement is an area rich in opportunities for all organisations, but especially so for SMEs. It is recognised that SMEs have a greater ability to be agile and innovative, enabling them to embrace sustainable principles and supply innovative, cost effective and sustainably sourced solutions directly to the Government, or in partnership with existing larger suppliers.

Supply Chain Risk Management

As supply chains become more complicated, the impact of risks becoming realised are increasing, be it disruption from natural disasters such as tsunamis or volcanic ash, or war zones to name but a few. But with increased awareness of ESG principles, supply chain risk management should now also encompass an organisation’s approach to the monitoring of scope 1, 2 and 3 emissions. Scope 1 and 2 emissions are CO2 emissions that are directly attributed to the manufacture of the goods or services the organisation produces. Scope 3 emissions, look at the impact of that good or service through the supply chain.

In July 2023 the European Commission adopted the European Sustainability Reporting Standards recommendation, mandating that organisations with a turnover of over €100 million per annum in Europe have a future legal obligation to report scope 1, 2 & 3 emissions. This will also impact UK organisations with more than a £100 million turnover within the European jurisdiction. Currently there is no industry-wide standard to calculate, compare and monitor ESG credentials. It is, however, expected that standards will emerge within the next two to five years. With legislative change and supply chain monitoring becoming a crucial element of sustainable procurement, sustainability experts, such as the team here at Barkers, can help organisations to understand the inherent risk within their supply chain and more importantly, develop a plan to mitigate those risks.

Conclusion

  • It is clear that in time UK legislation will mandate that all organisations will need to tackle Scope 1, 2 & 3 emissions. Any organisation that achieves this first will gain a competitive advantage.
  • ESG requirements are becoming much more prevalent in the minds of the consumer and organisations should consider the risk to reputation were they to fall foul of consumer sustainability expectations. Inaction will not be tolerated.
  • ESG is increasingly gaining a higher weighting in tender requirements. Couple this with ESG financing where lower interest rates are available for investments following the ethos of Sustainable Development, and maybe the balance is tipping in favour of Sustainable Business?

Navigating these ever-changing issues is difficult for any business. Here at Barkers, we have the experience and the passion to assist you in this journey. We’ve been meticulously following sustainability procurement principles for over a decade and have the drive, tenacity and skillset to partner with you on your ESG journey. Our cradle to grave approach will ensure your business goals are aligned with ESG principles, enabling your organisation to flourish and make positive change that not only benefits your business but enhances prospects for the planet too.

Now is the time to act.

In our next blog we’ll look at some of the flow-down benefits to ESG. We cannot and do not expect organisations to act through guilt or a sense of duty alone, we will go on to demonstrate the ways organisations can derive tangible benefits from an ESG-centric business model.

James Gaskin B&W (1)

James Gaskin

James is a natural team player with strong leadership skills, a proven track record in building relationships through interpersonal and negotiation skills, and the ability to inspire others while adapting to enhance business performance. Experienced in complex organisational structures, he is highly motivated and thrives on new challenges. With an MSc in Procurement and Supply Chain, he is dedicated to personal and team development, earning distinction in his dissertation on sustainable procurement.

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Author: James Gaskin
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