Value of Sustainable Procurement Practices

Source: “Value of Sustainable Procurement Practices” by Instead, EcoVadis, and PriceWaterhouseCoopers

Since sustainability is still relatively new to procurement practices, the ability to express these benefits in financial terms is one of the key drivers needed to make a case for implementing sustainable practices into business models. The topic of the “Value of Sustainable Procurement Practices” white paper by Insead, EcoVadis, and PwC shows that many factors, some new to businesses, will have to be considered such as implementations costs, sustainable cost and risk reduction, and ultimately, revenue growth.

Implementation costs, specifically, can appear staggering to businesses new to sustainable procurement practices. There are many steps involved in executing sustainable operations including certifications, training, redesign efforts, and more, all of which come with their own costs – but, once sustainability is reached, the value of these newly implemented practices will be more than worth the initial costs.

The study has brought to light strong evidence of value creation, thus making a strong case for sustainable procurement on the basis of three main value drivers:

Cost reduction is most likely the first thing you think of when it comes to the benefits of sustainable procurement. When implemented correctly, sustainability initiatives can result in the reduction of costs in a few different ways: internal costs are reduced through the procurement of more efficient products and the reduced consumption of non-production related categories; reduced specifications and demand resulting in lower costs; and reduced environmental and social compliance costs via lighter and eco-designed products exempt from certain taxes.

Risk reduction represents a major benefit for companies given the financial consequences of a supply chain incident. The financial impact on brand value from bad supplier practices and the economic cost of supply chain disruptions can be substantial. Many brand reputations are affected by events involving safety, environment, or social issues with suppliers, so by investing in stable and consistent sustainable procurement practices the likelihood of additional risk-related costs is minimized

The study goes on to say that while revenue growth is closely linked to the strengthening of a brand’s reputation through sustainable procurement practices, it’s also one of the least explored areas of procurement and the most complex to achieve. However, sustainability is constantly gaining desirability, especially in the public sector, and if a company can display their sustainable practices, revenue growth is inevitable, and the value of their sustainable procurement implementation will not go unnoticed.

For more information on the value of sustainable procurement and tips on building a case to present to management, you can read the full report here.