Procurement as an enabler and driver of Sustainable Growth

According to Brundtland Commission’s first definition ‘‘Sustainable development meets the needs of the present without compromising the ability of future generations to meet their own needs’’ (WECD, 1987: 8). Every organisation in the world is thriving to achieve growth of their business with their own strategy. Many of the organisations are achieving the continues growth year after year but the fact needs be realized that it is often ignored the extent to which that growth is sustainable. Procurement function is an under-estimated and under-utilized weapon in organisations’ arsenal, which carry all the firepower required to lead the growth in a sustainable manner.

2010 Oil Spill in Gulf of Mexico was not directly a result of British Petroleum, Horsemeat found in TESCO’s beef burgers was not produced by themselves, Child labour scandal hit Adidas, in all of these cases the big names were not directly responsible for what was happened rather someone within their supply chain or a contractor. However, all the defamation was caused to the big brands costing them intangible cost of reputation apart from the direct and indirect financial consequences. Being responsible for procuring materials and services, procurement function role is imperative in ensuring sustainable practices and sustainable growth.

ISO 20400 Sustainable Procurement Guidelines emphasizes that an organization’s procurement decision does not only impact on itself, but it effects environment, economy and society at the same time. Focused on procurement function ISO 20400 is sector specific guidelines of applications of ISO 26000 (Guidance on Social Responsibility). Apart from this many governments’ regulations and guidelines such as British Standard (BS 8903:2010) Principles and framework for procuring sustainably Guide and Australian and New Zealand Government Framework for Sustainable Procurement (APCC 2007). Irrespective of the standard and guidelines an organization choose to follow or customize according to meet their business needs the pillars remain same.

Similar to sustainability the building of sustainable procurement is also standing on the three key pillars as illustrated in below figure.

Supply chains can be value chain or demand chain, however, irrespective of what supply chain model is being followed by an organisation the procurement function carries the pivotal role in ensuring the responsible and ethical sourcing. Procurement a key stakeholder in any organisation’s growth, considering the fact what services or materials being procured are ultimately going to decide the destiny of an organisation, it is imperious to focus Procurement strategy which is not only a driver but also a key force for sustainable growth. Procurement function is the main driver for enabling a firm’s strategy for sustainable growth.

Sustainable procurement practice has some key objectives;

• Procuring products and services with minimum negative impact throughout the supply chain
• Carrying the procurement activity without undermining social aspects across the supply chain
• The ultimate output of the organization in terms of a product or service is economically rigorous
• Procuring in an ethical way and extending the visibility of ethical practices beyond the first tier of suppliers

Any organization can have basic assessment of how well its procurement practices are aligned with its sustainable growth practices by answering a few questions. This also measures the strength of each pillar of sustainability.

a)     Social Pillar

        i.           Does the specific procurement of material or services help to generate positive social outcomes?

      ii.           Does the money spend stays local to create local jobs and business opportunities?

    iii.           Are you sure that child labour is not involved in your supply chain?

    iv.           Does the workers’ pay and working conditions acceptable across your supply chain?

      v.           Is there a forced labour or involuntary labour practices within your supply chain?

    vi.           How suppliers within your supply chain are respectful to the privacy of their internal and external stakeholders?

   vii.           Is there any kind discrimination your supplier’s organization have, such as gender, ethnic, religious or race?

 viii.           Does the society and people knowing about your business have positive impression of your Business?

     ix.           Are the employees of organizations within your supply chain, aware and practicing health and safety standards?

      x.           How compliant are the organizations within your supply chain local labour laws?

 b)     Environmental Pillar

        i.           Have toxic chemicals and/or illegally logged timber been used to make the product?

      ii.           Does a lot of logistics involve in the delivery of the product or service being procured?

    iii.           Does the product or service being procured consumes a lot of electricity, water and/or other natural resources during their manufacturing or usage?

    iv.           Does the product have NO impact on local environment at the end of life, such as littering and can be recycled?

      v.           Do the community around the supply chain consider business practices as environment friendly?

    vi.           Are your procurement practices vulnerable practices towards climate change?

   vii.           Are you and your suppliers considering low carbon content aspect for the entire lifecycle of the product/service?

 viii.           Is your organization and its vendors following environmental frameworks and complying the environmental regulations?

     ix.           Is a supplier involved within your supply chain is infamous for their poor environmental practices?

 c)      Economic Pillar

i.                    Do organization within your supply chain have conflict of interest policies and procedures?

ii.                  Is there a corruption risk involved within your supply chain and if it has a clear mitigation?

iii.                Do your suppliers’ have internal audit and compliance process, procedures and necessary qualified people to manage that?

iv.                Are the organizations following corporate best governance models and being audited by independent auditors?

v.                  Are global organizations such as OECD, WEF etc rating the country from where you are sourcing improvements for indicators such as civil unrest, political stability, corruption, ease of doing business and similar other indices year on year?

vi.                Are your suppliers’ resilient to natural disasters and ready to mitigate the natural risks?

vii.               Are their good legal framework and judicial system to protect against Intellectual Property right violations, bribery, corruption, conflict of interest in the country of you are sourcing from and what policies your suppliers are following?

viii.             Do your suppliers have supplier code of conduct, confidentiality agreements and procurement policies for employees engaged with procurement decisions?  

Many of the answer and further detailed analysis of those answers should be giving a clear picture that how sustainable is your supply chain, procurement practices and grey areas required immediate, short-term and long-term attention.

Sustainable procurement and managing sustainable practices across the chain of whole supply chain is not easy to implement, improve and sustain due to some inherited risks, high initial costs and practical implications. Having said that Procurement and Supply Professionals are the prime responsible to assist organizations and projects in developing processes and procedures for sustainable practices. With COVID19 pandemic globally when every country and industry is impacted negatively and economies are gone into recession whereas organizations' resilience to sustain is being tested to their maximum, it is probably the high time to look forward and start working towards more sustainable growth of businesses.

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