Sustainable Sourcing: The Role of Procurement in CSR

Supply Chain & Procurement
Written By Guest User

In recent years the business world has undergone a notable shift toward improving sustainability measures that minimise carbon emissions. Curtailing the negative effects of climate change is one of the most pressing challenges we are facing as a society, evidenced by recent discussions at the COP26 climate summit [1]. Today, companies are in the midst of innovation programmes to use more sustainable materials and reduce waste over the long term. However, it is not only the environmental focus that is of importance to businesses of today but the social and economic impacts also. Now more than ever, companies are being held accountable for their social and environmental impact. Corporate Social Responsibility (CSR) is the organisational process by which companies can integrate these concerns into their operations.

CSR is a self-regulatory model practised by companies of all sizes. Effective adoption of the concept encourages businesses to better consider the broader impact of their actions on all stakeholders and the wider public. CSR policies should ensure that companies conduct their business in a responsible manner, take leadership in their community and operate with transparency.

Whilst there are three dimensions of CSR: economic, social and environmental, there are mutual key principles that sit within these as outlined in the graphic below.

The three key principles of CSR

But how do CSR principles get translated into applicable business strategy? Unfortunately, there is often a discrepancy between words and actions when it comes to sustainability policies.  For organisations to meaningfully commit to sustainable practices, CSR policies can be embedded throughout the supply chain. For example, by establishing compatibility requirements for suppliers to have ethical business practices.

CSR and the Supply Chain

The procurement function offers a major area of opportunity to adopt impactful CSR initiatives. Research indicates that effective CSR programmes have significant organisational benefits, from improved supplier relationships to increased sales [2]. Not only this, but organisations not implementing sufficient CSR practices may be missing opportunities to differentiate and build a new competitive advantage.

Source: Ivalua Inc, 2021 - study from Forrester (n=467)

A study conducted by Forrester Consulting surveyed 467 decision-makers responsible for procurement, supply chain and finance and found that the most critical challenge to successful CSR initiatives was an inability to effectively assess individual supplier CSR performance [3] . The below graphic summarises some of the notable challenges identified within this research:

Source: Ivalua Inc, 2021 - study from Forrester. % of 467 “decision-makers”

Sustainable Sourcing

Companies can play a crucial role in ensuring the robustness of suppliers' sustainability pledges and CSR strategies in procurement. Truly sustainable sourcing is the integration of social, ethical and environmental performance factors into the supplier selection process. Sustainability principles in procurement should be well-defined in both quantitative and qualitative requirements and KPIs to be fully integrated into the supplier screening process: 

1.      Criteria and Expectations

Organisations can determine minimum qualification criteria in the tender evaluation process to clearly communicate sustainability expectations to potential suppliers. Research indicates that organisations setting minimum sustainability criteria are more successful at assuring CSR initiatives [4]. For example, the IKEA IWAY code of conduct sets minimum requirements for all materials, products and services; this ensures their suppliers meet their required standards for social, environmental and economic factors whilst ensuring supply chain efficiency [5].

2.      Communication and Collaboration

After expectations are established, ensuring the flexibility of how they are met is equally as important. 59% of successful companies in the Forrester Consulting research identified that flexibility was the most effective strategy for improving sustainability [2]. One way of doing this is through data sharing that enables efficient progress tracking to facilitate client-supplier collaboration on optimising the trade-off between cost reduction and CSR targets. Ongoing monitoring is essential to maintaining the CSR practices of supply chain partners and thus transparency of information must be a guiding principle for those relationships.

Conclusion

To succeed, sustainability efforts need to be a priority throughout the organisation, with support from the procurement function crucial. Companies managing tender processes have an important role to play in dictating the agenda throughout their supply chains, translating the promise of sustainability into real value propositions. While the perceived importance of CSR programs has soared in recent years, there can be scepticism on the bottom-line benefits achieved by big, costly changes. However, transforming procurement strategies to lead sustainability principles can drive meaningful change, improve supplier relationships and enhance visibility throughout the supply chain to ultimately drive efficiency.

Guest User
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