For most businesses, the majority of their carbon emissions originate, not from their own operations, but from their supply chains. These indirect emissions across a company’s value chain, also known as Scope 3 emissions, account for a staggering 88% of a business’s carbon footprint.

Despite their significance, Scope 3 emissions are notoriously hard to track as they include a lot of factors beyond a company’s direct control. This is where sustainable procurement comes in: the process of adjusting your procurement practices to bring more visibility and transparency to these emissions – so you can start working to reduce them. 

Alongside reducing risk and ensuring regulatory compliance, sustainable procurement also offers numerous advantages, from cost savings to revenue growth and enhanced reputation.

So, what is sustainable procurement? How exactly can it benefit your business? And how can you implement it within your organization? This article will cover all the basics. We’ve also included a free downloadable guide to help you get started with reducing your Scope 3 emissions today.

What is sustainable procurement exactly?

Sustainable procurement is the process of weaving environmental, social, and governance (ESG) factors into your procurement processes, policies, and decisions. It's about incorporating responsible and ethical practices across the entire procurement lifecycle – all while balancing sustainability, financial performance, and stakeholder expectations.

Far beyond just avoiding risks or ticking compliance boxes, it’s a strategic business move that enables you to do good business now without compromising future generations.

Benefits of sustainable procurement

Besides the positive environmental impact, sustainable procurement is good for business, too. Let’s take a look at some of the key benefits: 

Improved reputation

From organic to fair trade to animal-friendly, today’s consumers demand ethical and sustainable products. Harvard Business Review research predicts that we’re fast approaching the tipping point where sustainability will be considered a baseline requirement for purchasing a product.

By demonstrating your commitment to sustainable procurement practices, you can attract new customers and enhance brand loyalty. One study by the World Economic Forum found that companies with responsible supply chains can have as much as a 15-30% increase in brand value.

Risk management 

Supply chains are inherently complex with many elements beyond your direct control. Are your suppliers considering the health and safety of their employees? Are they paying fair wages? Do they comply with the necessary regulations? 

Such complexity can cloud transparency, exposing your business to financial or reputational risks that could cause serious damage – from dips in market share and sales to challenges with attracting and retaining talent or even securing investment. 

Sustainable procurement ensures you have the right procedures in place to anticipate and manage risks early and safeguard your business's future for years to come. 

Cost savings

Improving the sustainability of your supply chain often goes hand in hand with making it more efficient – from using resources more wisely to minimizing waste or optimizing logistics, among other things. This greater efficiency naturally leads to cost savings. In fact, Research by McKinsey found that strong ESG credentials can drive down costs by 5-10%. 

Revenue growth

Alongside cost savings, implementing sustainable procurement can lead to revenue growth, too. Consumers globally are willing to pay more for sustainable products – a 12% premium according to a recent Bain & Company study. Not only that, McKinsey found that top ESG performers have higher growth and valuation by margins of 10-20%.

Regulatory compliance

Governments around the world are tightening sustainability regulations – particularly around transparent target setting and stricter reporting requirements. Take the EU’s Corporate Sustainability Reporting Directive (CSRD), for instance, which requires many companies to disclose their Scope 3 emissions starting from the 2024 financial year.

Adopting sustainable procurement ensures you’ve got the systems and data available to comply with the increasingly strict environmental and social regulations while avoiding fines and legal issues.

The role of Scope 3 emissions in achieving sustainability goals

Despite Scope 3 emissions accounting for the largest portion of a business’s carbon footprint, capturing data from across the entire value chain can be problematic. 

That’s why we created a step-by-step guide that offers six actionable recommendations to help you reduce your company’s Scope 3 emissions. Start your journey towards sustainable procurement by downloading our free guide today.

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5 steps to implement sustainable procurement

Building an effective sustainable procurement program is a complex process that requires commitment from all levels of your organization. Here's a five-step approach to help you get started on the right path:

1. Evaluate the state of sustainability in your organization

Start by reviewing the current state of your organization’s procurement practices and how they align with your sustainability goals. 

What does your organization buy? Who does it buy from? What are the ESG impacts? How do your practices compare against industry standards or sustainability frameworks? Answering these questions will help you to identify gaps and areas for improvement.

2. Define sustainability goals

After evaluating your current procurement practices, it’s time to define ESG goals and corresponding Key Performance Indicators (KPIs). This will help you to define what your business aims to achieve in terms of sustainability and how it’s going to get there – whether it’s reducing carbon emissions, encouraging fair labor practices, or sourcing more sustainable materials. 

These goals and KPIs can guide your efforts in the right direction, keep you accountable, and provide a way to measure your progress toward sustainable procurement.

3. Select the right suppliers

Choosing the right suppliers is one of the most critical procurement decisions you can make. 

Implementing a strict selection process can help you evaluate whether a potential supplier shares your values and meets your standards in terms of environmental and social issues.

The process could involve sustainability assessments, pre-qualification questionnaires, and audits to ensure suppliers’ practices align with your sustainability goals. Make sure to check whether your supplier uses an environmental management system (EMS), legal compliance, and overall environmental and social impact.

4. Set policies and procedures

It's now time to develop a comprehensive sustainable procurement policy. This should lay out your goals, how you plan to achieve them, and the KPIs you'll use to track progress. It can also include things like your criteria for selecting suppliers, sustainable purchasing guidelines, and how you plan to monitor and evaluate supplier performance.

It serves as a North Star for your procurement team and suppliers, ensuring everyone's on the same page about your sustainability standards. Don’t forget to communicate your sustainable procurement policy, mission, and targets to your suppliers and employees. Offering training or resources can ensure everyone understands their responsibilities.

5. Measure and report

Make sure to regularly monitor your performance against your sustainability targets. Gather data from your key suppliers and use high-quality secondary data such as industry emission averages or insights from external data partners for a complete picture of your impact. 

Use this data for progress reporting and make necessary adjustments for continuous improvement.

Start measuring Scope 3 emissions with Coolset today

Ready to kickstart your company’s sustainable procurement journey? Coolset is here to help. Our user-friendly platform makes it easier than ever to measure, manage, and reduce your Scope 3 emissions. Want to see how it works? Schedule a free demo today and take a meaningful step towards a more sustainable future for your business.

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