Sustainability in Sourcing and Procurement needs to go beyond simply implementing some tech tools and measuring supplier activities if the goal is to make a lasting impact on the organization and society at large. It requires an organizational and mindset shift to truly embed sustainable behaviors and targets within an organization and achieve measurable outcomes.
As part of our journey to explore the importance of sustainability in sourcing and Procurement, we want to put the topic into the broader context of a Procurement organization. Our webinar on “Making sustainability actionable in Sourcing & Procurement (Part 1)” explored the basics of sustainability in Procurement. With our white paper, we want to become specific about how it can be brought to life and move sustainability in Procurement to the next level.
To understand how different aspects of the Procurement function intertwine and how organizations can truly embed sustainability in their Procurement organization, we use the concept of the Procurement Operating Model (POM) and Business Process Design principles, which help us connect the dots between the different dimensions of the POM.
In organizational design, operating models help to provide structure and ensure alignment within and across different parts of the organization. To illustrate how sustainability can be embedded within Procurement, we use a Procurement Operating Model that clusters the key building blocks of an organization along the five main dimensions Strategy, People, Processes, Technology, and Ecosystems.
Strategy defines the role of Procurement within the organization including the department structure and the mandate Procurement holds. The People dimension contains all elements impacting individuals in the team. It ranges from determining the right location strategy to determining the training requirements. The Process dimension formalizes all processes and tasks required to deliver on the expectations towards Procurement, including everything from business engagement to sourcing, contracting, and purchasing.
The Technology dimension covers all topics around Procurement Tools and data management. Lastly, the Ecosystem dimension covers internal and external elements and partners that are relevant to the success of an organization. It focuses on sustainable value-creation through connectivity and the sharing of information across crucial players without friction.
The second model we propose for embedding sustainability in Procurement is borrowed from the thinking established in Business Process (Re)design (BPR). By breaking processes down into their most granular level, we can understand where opportunities for improvements exist - the individual tasks and activities.
For each task, a clear owner with responsibility and authority to fulfill the task needs to be established. Aided by appropriate control mechanisms and a healthy mix of intrinsic and extrinsic incentives ensures that tasks are performed as intended and the process runs smoothly.
These two models are helpful for understanding how sustainability can be embedded in Procurement as they show the interdependency of different elements and objectives faced by the organization. Only the consistent design and alignment of objectives will lead to lasting success.
To incorporate sustainability into daily routines and make it a habit rather than a requirement, we have created a second layer for each dimension of the POM that outlines where to get started. This second layer consists of Leadership, Skills and Education, Consistency, Enablement, and Partnerships.
It takes Leadership to bring awareness to the topic, explain its importance to the organization and the potential benefits. SMART goals and targets and frequent communication are required to make it stick.
As sustainability is still an evolving topic, it needs to become part of the Skills & Education agenda. By providing individuals a good understanding of the different aspects of sustainability and developing category specific sustainability indicators (see our white paper “Sustainability in Sourcing & Procurement” for Raw Materials, Packaging, Logistics and MRO & CAPEX metrics), the topic becomes more digestible, and organizations can make meaningful progress across all their spend categories.
Consistency around the inclusion of environmental aspects next to commercial when selecting the best supplier is key. Scenario-based thinking provides transparency on the opportunity costs of sustainable options, allowing Procurement to have more meaningful and fact-based discussions with stakeholders and suppliers.
The Enablement of technology allows Procurement to incorporate sustainability, risk, diversity, or performance information next to commercial factors in the decision-making process. Processing data in a consistent and repeatable way allows organizations to understand the respective costs of available options and is a powerful way to advance sustainable sourcing initiatives.
Tackling sustainability individually is an enormous task that will most likely end in disappointment and frustration. Partnerships of like-minded individuals and companies prove more powerful in affecting change.
Non-profit organizations like the “Sustainable Procurement Pledge” or “Together for Sustainability” bring together professionals and organizations to further the awareness for the topic, educate individuals, and reduce costs for suppliers and organizations. Tech providers combine their offerings and data to ensure information is shared and can be used across the end-to-end Procurement process.
Embedding sustainability within the Procurement organization is not an easy task and requires dedication and persistence. Organizations must develop a clear understanding of the capabilities needed to be successful and the dependencies between them. By reviewing the Procurement Operating Model dimensions through the lens of Business Process Redesign, Procurement can ensure that all executive communication, training activities and processes are aligned on their objective.
When sustainability and sourcing teams work hand in hand rather than in isolation, organizations can make a meaningful impact and reduce the environmental footprint across their supply chain. Archlet partners with EcoVadis to provide customers with a seamless way to incorporate sustainability metrics during the supplier selection process in strategic sourcing and drive their sustainable sourcing goals.
This holistic approach to embedding sustainability in Procurement requires commitment, time, and effort. Providing the right amount of leadership, education and enabling tools to facilitate the consistent application of sustainability considerations in the decision processes is what separates good intentions from action. Yet, organizations shouldn’t aim for perfection in the first iteration. They should get started, constantly evolve, and align.
Download the free whitepaper “Making sustainability actionable in Sourcing & Procurement” and get detailed insights on how to effectively embed sustainability in your Procurement organization.