Sustainable Procurement: The Ultimate Guide

Sustainable
Procurement: The
Ultimate Guide to Going
Green
Tara Dwyer
Webinar Coordinator
Purchasing & Procurement
Zone
Sarah O'Brien
CEO, SPLC
March 15th, 2023
9:30 am PT, 12:30 pm ET, 4:30 pm BST
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Sarah O'Brien
CEO, Sustainable Purchasing Leadership
Council
Sustainable Procurement:
The Ultimate Guide to Going Green

POLL #1
(c) 2023 Sustainable Purchasing Leadership Council
What is your role or type of organization?
• Corporate procurement
• Public sector procurement
• Corporate supplier
• Small business supplier
• Other

Agenda
• Introductions + Expectations
• WHY
• The power of sustainable procurement
• Drivers of sustainable procurement
• HOW
• Getting started with sustainable procurement
• Strategies for Success
• Engaging Stakeholders

Introduction to
the Sustainable
Purchasing
Leadership
Council

SPLC leads a global community of public and private
purchasers, suppliers, advocates, and experts
dedicated to driving positive impact through the power
of procurement.
Powering Procurement for Good

180+ organizational members, $600B+ in
annual spend – focused on the same
strategy…

…Leveraging Procurement as a Powerful
Engine of Change

SPLC
Provide
s
Online member community
Guidance and best practices
Customized 1-to-1 coaching
Peer learning support
Deep Dive Learning Events
Collaborative market dialogue
Research, data and insights
Innovation working groups
Recognition programs & awards

POLL #2
What is your level of familiarity with
sustainable procurement?
• Expert – very familiar
• Just starting – not familiar
• Some experience, looking to learn
more
• Supplier hearing demand from
customers, need to know more

Defining sustainability + sustainable
procurement

ECONOMY
ENVIRONMENT
HEALTHY
FOR EVERYONE
FOREVER
COMMUNITY

The power of
sustainable
procurement
vs
‘sustainability’
Core business process
Not a special project or nice-to-have
Works with business incentive structure
Cyclical
More significant and widespread impact

Procurement that…
 achieves value for money.
 strengthens the organization.
CONVENTIONAL
PROCUREMENT

Procurement that…
 achieves value for money.
 strengthens the organization.
 strengthens the economy.
 strengthens society.
 strengthens the environment.
CONVENTIONAL
PROCUREMENT
SUSTAINABLE
PROCUREMENT

Sustainable Procurement
Environment
• Resource
efficiency
• Pollution
prevention
• Waste
reduction
• Climate
action
• Habitat
Society
• No forced
labor
• Health +
Safety
• Equal
opportunity
• Fair wages
• Employee
training
Economy
• Small
business
• Local jobs
• Fair
competition
• Supplier
diversity
• Innovation
• Corruption-
Purchasing in ways that intentionally strengthen

BENEFITS TO THE ORGANIZATION
Tangible Intangible
▲ Process efficiency ▲ Supplier relationships
▲ Performance tracking ▲ Employee satisfaction
▲ Innovation (creation
of new value)
▲ Customer satisfaction
▼ Regulatory burden ▲ Transparency
▼ Costs ▲ Investor confidence
▼ Business Disruption
Risk
▼ Brand Reputation Risk

The importance of sustainable
procurement

Extreme Weather

Modern Slavery
49.6 million people live
in modern slavery – in
forced labor and forced
marriage
Roughly a quarter of all
victims of modern
slavery are children
An estimated 17.3
million people are in
forced labour
exploitation in the
private economy,
www.antislavery.org

Waste and overconsumption

But…why is it up to procurement?

Operations
Supply Chain
Climate Change
Deforestation
Bribery & Corruption
Toxic Waste
Living Wages
Economic Development
Human Health
Modern Slavery
Biodiversity
Discrimination
Worker Health & Safety
70-80% of a typical organization’s impacts occur
in supplier base/supply chain
Resource
Conservation

…is uniquely positioned to
demand transparency into the
upstream and downstream
impacts of goods and services.
…is capable of incorporating
sustainability criteria into
purchasing decisions at a scale
that can transform markets.
Procurement

Every purchase of goods or services
is a ‘vote’ for the systems
currently in place, or for more
sustainable and equitable systems.
When procurement professionals and
the organizations they represent
align around shared goals, they can
transform markets. (c) 2023 Sustainable Purchasing Leadership Council

Sustainable procurement drivers

Financial Regulators
Requiring It
Climate
requirements,
with more to
come
Sustainable Finance Disclosure
Regulations (SFDR) - EU now
requires investors to use
standardized definitions of
what constitutes sustainable
investments, and disclose any
material sustainability risk
SEC will require Scope 1 & 2
climate emissions and risk
disclosure for all publicly
traded large companies, and
Scope 3 disclosure when
material to investment risk. (c) 2023 Sustainable Purchasing Leadership Council

Human Rights Protections
UK, Australia and more have enacted
“Modern Slavery” laws
Businesses must undertake due
diligence to identify and stop uses of
slave labor to produce their goods
Companies must identify the risk of
modern slavery and the actions taken to
prevent it
Requires a serious assessment of the
supply chain - can serve as the
foundation for more robust sustainable
Modern slavery
requirements

Small and
Diverse
Business
Requirements
Builds local community wealth
Helps disadvantaged
populations build businesses
Profits the community with tax
revenues
Supports govt’s existing social
objectives

Corporate Commitments
622 of the largest 2000 corporations
have Net Zero commitments - because
of the material risk that climate change
poses to their business
Committed corporations have over $14 T
in annual sales
~80% of their impact is in Scope 3/supply
chain
If you are a competitor or supplier, you
need to understand how to compete with
and/or support these commitments
Procurement +
Supply Chain
are going to
have to make
Net Zero real

Driving meaningful change with sustainable
procurement

What is the long-term vision, mission or outcome that
you desire?
What areas within your organization can you prioritize to
address these impacts, enabling you to meet your vision?
What specific goals and metrics can you use to
demonstrate progress towards the desired outcome?
What are the largest impacts of your purchasing?
Which of many possible “solution” strategies will work
best to execute on these goals with best ROI/TCO
Vision
Prioritize Impacts
Focus Areas
Goals and Metrics
Solution Strategies
Take a Strategic Program Approach

Procurement “Programs”
• Strategic Sourcing Program
• Supplier Diversity Program
• Category Management Program
• Sustainable Purchasing Program
Program Rationale Is Same for All:
Adding a strategic planning process ahead of more tactical
procurement process enables results that more than pay for
the strategic planning process.
Analyze
Action Plan
Implement
Measure
Results
Requirements
Development
Assess Market
Invite Supplier Offers
Select Supplier
Agree to Terms
Manage Contract
Tactical
Procurement
Process
Strategic
Planning
Process for
Program
Goals

Prioritize for Impact
Once an organization understands its
most significant purchasing impacts, it
can confidently identify prioritize,
and plan the best solutions to those
impacts.
By committing to strategic action plans
that address the most relevant
(prioritized) impacts within its
purchasing, the organization can

Prioritization Pilot: Environmental Impacts
of Higher Education Spend
Electricity
Food, & Dining
Construction & Maintenance
Fuels
Sanitary & Waste
purchasing
categories
5
64% of total
spending
83% of estimated
impacts
Insight: Analysis and prioritization sharpens focus and reduces complexity

Opportunistic Activity vs. Prioritized Strategic
Program
More work, less
impact
Lack of
prioritized
focus
IMPACT
Prioritization

Getting started with sustainable
procurement

Aligning with
your
organization
Supports organizational-level recognition for the
value of sustainable purchasing activities
Identifies resources that can help (expertise,
exec sponsors, people resources, tools, etc.)
Grows your own understanding of your
organization
Provides visibility to how existing sustainability
goals and commitments can be supported in the
procurement process

What existing objectives can you support?
When starting out , look for initiatives that can solve problems
or support existing goals
• Legal compliance – e.g safe working conditions
• Economic growth – e.g. buy local, prefer small business
• Environmental impact – e.g. waste reduction
• Cost savings - many opportunities
• Problem solving – address an existing issue like employee
health issues

Determine your focus areas
• Make a list of contracts that are
coming up for bid in the next 6 – 12
months
• Determine which ones you want to
focus on:
• Which are highest spend?
• Which are tied to existing
organizational goals?
• Which may be highest risk?
• Which are “low hanging fruit”?
Prioritize for
impact and
efficiency

Remember when setting goals…
Sustainable procurement does not mean switching every
product you buy to a more sustainable alternative
It means identifying your most impactful spend categories
and prioritizing changes to them that will create the most
positive (or reduce the most negative) impact
Setting prioritized goals enables you to expend LESS
EFFORT for MORE IMPACT

Choose from
relevant
sustainable
purchasing
approaches

DETAILED GUIDANCE
SOLUTION STRATEGIES TO CONSIDER
Strategy Description Example
Efficiency
Reduced impact through reduced use Implementing a Purchase-to-Pay IT system reduces impacts associated with printing and
transporting paper documents.
Process change
Design the impact out of a process Air pollution from medical waste incineration is reduced by switching to reusable surgical tools
that are steam sterilized.
Behavior change
Implement programs to shift attitudes and
practices
Voluntary “green office” competitions reduce energy and material consumption, while increasing
recycling.
Aggregation
Achieve price or other efficiencies by
consolidating demand
Streamlining computer purchase options to 3 laptops and 3 desktop configurations reduces price,
service costs, and complexity of vetting sustainability of computers
Supplier engagement
Engage suppliers and hold accountable for
a specific impact
Some universities require apparel manufacturers to permit independent audits of factory
conditions and provide retribution-free grievance and remedy processes.
Product substitution
Choose a different product with lower ESE
impacts
Chemical costs and workers compensation insurance premiums reduced by switching to green
cleaning products.
Supplier substitution
Choose a supplier with lower ESE impacts Making evidence of bribery or extortion automatic grounds for suspension of business with a
supplier.
Servicizing
Convert a product acquisition to a long-term
service relationship
Instead of owning copiers, establish a pay-per-copy service relationship so that the price of each
copy reflects the true cost.
In-source
In-source a function to better reduce
impacts
Hiring LEED expertise in-house to optimize and streamline green building across all of org’s
construction and renovations.
Out-source
Outsource when an external party can
better reduce impacts
Contract out utility bill management to firms that leverage energy market expertise to cut energy
and carbon costs.
Offsetting
Pay for an impact reduction to offset Buying carbon offsets; paying to put land in permanent conservation to offset development of
Solution Strategies

Compare life-cycle costs
Approach in action: When LED lighting
was still new, and cost significantly more
than incandescent or fluorescent bulbs,
TCO analysis proved that the cost of labor
to frequently swap out conventional bulbs,
plus the cost of the additional energy they
consumed, meant that LEDs cost less
overall
 Evaluate potential savings on maintenance, replacement, or
disposal costs
 Evaluate savings resulting from energy efficiency

Rely on reputable ecolabels, standards,
and certification
 Saves purchaser time in reviewing for specification compliance
 Avoids greenwashing
 Can assist in measuring impacts
Approach in action: Bon Appetit requires the purchase
of seafood defined as “Best Choice” (green) or “Good
Alternative” (yellow) by Monterey Bay Aquarium
Seafood Watch program’s guidelines for commercial
buyers (result: FY17 = $7.3M on sustainable seafood)

Use preferences to drive change
 Issue a Request for Proposals
and award additional points to
products meeting sustainability
criteria
 Use this approach if you are
unsure about availability or
impacts to costs
 Can use a “notify, prefer,
require” approach over several
contract cycles
 Signal (Explain)/Prefer/Require
Approach in action: In a request
for proposals for office supplies,
the State of Minnesota awarded
additional points to vendors who
operated lower emission
delivery trucks.

Avoid over-specification
 Specify the need or function (vs. a
specific product) to allow for innovative,
potentially cost-saving approaches
Approach in action: Instead of giving their suppliers a specification to
fulfill, Proctor & Gamble brought them a problem statement – “How
we do address the issue of Marine Plastic by leveraging P&G’s
Brands?” – and empowered them with the autonomy and creativity to
collaboratively build the solution.
Structure the engagement to drive innovation, yet still retain the right
to choose among options presented. You may obtain multiple
benefits beyond just your initial goal

Require informative reports
 Allows you to
quantify the
impacts of your
work
 Saves you time –
you won’t have to
gather the
information on
your own!
 Use of a common
3rd party platform
enables suppliers
to report to
multiple customers
Approach in action: Microsoft requires suppliers
to set GHG reduction goals and report their GHG
reductions to CDP, a third party GHG reporting
system.

Coming together to drive the same asks…
Makes our jobs easier
Increases our positive impact
Reduces cost and complexity

State Gov’t
Local Government
Federal
Gov’t
Healthcare
K-12 Education
Higher
Education
Professional
Services
Retail
Manufacturing
Hospitality
The Challenge – multiplying asks that
don’t align

The Solution – coming together around
agreed demands
State Gov’t
Local Government
Federal
Gov’t
Healthcare
K-12 Education
Higher
Education
Professional
Services
Retail
Manufacturing
Hospitality

Vision
Alignment
Aggregation
Consistency
Capacity Building

Exercise your
procurement
superpowers!
(c) 2023 Sustainable Purchasing

/in/dwyertara
Q&A
Sarah O'Brien Tara Dwyer
Webinar Coordinator,
Purchasing & Procurement Zone
/in/sarah-o-brien-sustainable-business/
sustainablepurchasing.org
@SPLCounc
il
CEO,
SPLC
purchasingprocurementzone.com
(c) 2023 Sustainable Purchasing
Leadership Council

Sustainable Procurement: The Ultimate Guide

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