Improving business outcomes with sustainable procurement
Integrating environmental, social and governance (ESG) criteria into a company’s procurement processes and sourcing decisions is far from straightforward. Sustainable procurement takes a holistic approach to doing just that, balancing these factors with financial matters in a bid to achieve long-term sustainable outcomes – not only for procurement, but for the environment and society as a whole.
It’s a key focus for Sandra Gerhartz, Managing Director at TÜV NORD GROUP, one of the world’s largest technical service providers. TÜV specialises in supporting companies based all over the world as they endeavour to comply with safety standards and deliver sustainable solutions. Sandra has spent almost two decades with TÜV NORD GROUP, working with companies operating in all manner of industries
She explains that, in order to achieve sustainable procurement, it’s crucial to consider full lifecycle costs – rather than simply the initial purchasing price.
“This is exactly what we’re aiming for with the launch of TÜV NORD CERA 4in1 – a certification concept that proves sustainable development along the entire mineral raw material value chain up to the final product,” Sandra continues. “Once all four standards are launched, it will be possible to verify sustainable operations along all stages of the mineral raw materials value chain.
“The certification will allow companies to knowingly buy from sustainable sources and give their procurement practices a significant sustainability push. When all standards are available, we can cover the value chain from exploration to the final product.”
Improving business outcomes with sustainable procurement
Believing sustainable procurement not only provides added value for the environment and society, but is also crucial to a company's financial success, Sandra says optimising resource usage, combined with improving supply chain efficiencies, can lead to significant cost savings.
“In the current volatile global conditions, collaborating with suppliers and prioritising sustainability can lead to more resilient and adaptable supply chains,” she goes on.
“Additionally, sustainability is playing an increasingly important role for many stakeholders, starting with investors who attach ever-greater importance to ESG compliance for their investments, right up to the conscious end consumer. Therefore, sustainable procurement can enhance a company's brand reputation and improve customer loyalty.”
She adds: “Governments around the world are also prioritising sustainable processes and promoting them through regulations. Sustainable procurement can help organisations comply with evolving environmental and social regulations. Last but not least, innovation is also an often-underestimated factor that is boosted by the transition to sustainable procurement.”
Prioritising sustainable procurement
More and more companies are recognising the aforementioned benefits of implementing sustainable procurement, both from a social and economic point of view.
Sandra highlights that, as the importance of sustainability continues to grow, integrating sustainable procurement practices “has become a strategic imperative for businesses seeking long-term success and a harmonious relationship with society and the environment”.
However, despite the obvious and appealing benefits, depending on the industry it hasn’t always been easy to implement sustainable procurement processes.
“One major hurdle is the enormous complexity of global supply chains, which are often very difficult to trace,” says Sandra. “Certifications are key here as they create transparency and trust. This allows companies to better understand and manage the sustainability performance of their suppliers and supply chain operations. Certifications also entail continuous audits, which can identify areas for improvement in supply chain management practices.”
Harnessing technology to make procurement activities more sustainable
Historically, sustainable procurement is difficult for companies to achieve due to the sheer size of their supply chains and how diversified they can be, with multiple tiers of suppliers.
While this is an ongoing challenge, firms with complex supply chains are striving to improve their sustainability performance.
“For example,” Sandra continues, “special departments are being set up to advise the purchasing department on sustainability. The more complex the supply chains and the more resources are required in large quantities, the more difficult it is for companies to create transparency here.”
This is an area where emerging tools and technologies can help.
“I’m confident digital technologies will advance sustainability in all kinds of areas, including sustainable procurement,” Sandra concludes. “There are already green procurement tools that collect, digest and report ESG data and, by using technologies like blockchain or RFID tags, we can trace the origin of raw materials and monitor their journey through the supply chain.
“Technology also allows companies to track the entire lifecycle of products, ensuring ethical sourcing and reducing environmental impact. CERA 4in1 also uses blockchain as a traceability mechanism, allowing us to prove the origin of a product through the entire value chain. Digital technologies are a great way to closely monitor the reputation and practices of suppliers, enabling better collaboration and risk mitigation.”
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