How to Get Started With Sustainable Procurement

Before we get to the meat of the topic, we need to ensure we begin on level footing by establishing a common definition of sustainable procurement.

Sustainable procurement is “an approach to the procurement process that embeds ESG (environmental, social, & governance) issues and corporate social responsibility (CSR) practices at the heart of its [policy, processes and specifications.]” (Vizibl)

This leads to a need to define ESG and CSR…

Corporate Social Responsibility (CSR) “is the idea that a company should play a positive role in the community and consider the environmental and social impact of business decisions” (BDC). CSR is therefore driven by the company’s vision, mission and values. It is internally defined based on social and environmental factors external to the company.

On the other hand, ESG (environmental, social, and corporate governance) “is a set of practices used to evaluate a company’s operational performance as it relates to social and environmental impact” (BDC). These practices are essentially risk management frameworks used by the investing community to evaluate how environmental and social issues could affect a company’s performance (and to mitigate the associated risks). Increasingly, governments are starting to dip their toes in this space as well with legislation. Therefore, compared to CSR, ESG is externally defined based on social and environmental factors external to the company. Naturally, it becomes an internal concern for companies who need to manage investors and/or governmental regulations related to ESG.

Given the above, let’s try to simplify the definition of sustainable procurement.

In essence, sustainable procurement is about defining and acting on company procurement policies and practices to meet:

• Internal social and environmental contribution objectives (CSR)

• External investor/governmental social and environmental expectations/regulations (ESG)

It is about maximizing positive impact, minimizing negative impact and mitigating risks related to social and environmental considerations in your particular context.

Pretty straight forward right?

The 2 Challenges with Sustainable Procurement

The first challenge is that last part in bold above: “in your particular context.” On the CSR front, companies have different missions, visions and values. On the ESG front, companies have different investors and operate in different countries with variable ESG laws. Therefore, research yields a variety of perspectives, approaches and frameworks. This is why you’re doubting yourself when putting together a sustainable procurement policy. Everyone is playing by different rules!

The second challenge is that maximizing positive impact, minimizing negative impact and mitigating risks on multiple concurrent objectives is a multi-objective optimization problem (click this link to go down a rabbit hole…). Essentially, it’s an optimization problem with a possibly infinite number of optimal solutions (it’s a really really hard math problem…).

The good news is twofold. First, now you know this. You can navigate the sustainable procurement landscape with these two challenges in mind. Second, I’ve found two pretty great resources to help you move forward with sustainable procurement in your particular context, wherever you are in the world.

#1 - The ISO 20400 Sustainable Procurement Framework

In 2017, ISO released an international standard on sustainable procurement (ISO 20400). It drew from principles established in ISO 26000 - Guidance on Social Responsibility, published in 2010.

The documents are fairly extensive and, in typical ISO fashion, a fairly dry read. However, in Annex A of ISO 20400 (sustainable procurement issues), ISO established the most extensive list of sustainability issues I’ve come across in the few years I’ve been reading up on this topic. They’ve identified 37 sustainability issues organized into 7 Core subjects.

You can use this list as a “sustainable procurement checklist.” Review each item to determine if it is:

• Already in your company policy/framework

• It isn’t and you need to develop a perspective

• It isn’t applicable to your particular context and you can ignore it

Just having this list alone helps cut through the noise on this topic… You can look up local laws and/or determine which standards you want to use (or that your investors use) for the items you keep in your scope.

I’ve provided the headers below for your reference. Here’s where you can gain paid access to the ISO 20400:2017 Sustainable Procurement document from ISO directly (I don’t get anything from ISO. I unfortunately just can’t share their IP for free).

1. Organizational Governance

   • Decision-making processes and structures

2. Human Rights

   • Due diligence

   • Human rights risk situations

   • Avoidance of complicity

   • Resolving grievances

   • Discrimination and vulnerable groups

   • Civil and political rights

   • Economic, social and cultural rights

   • Fundamental principles and rights at work

3. Labor Practices

   • Employment and employment relationships

   • Conditions of work and social protection

   • Social dialogue

   • Health and safety at work

   • Human development and training in the workplace

4. The Environment

   • Prevention of pollution

   • Sustainable resource use

   • Climate change mitigation and adaptation

   • Protection of the environment, biodiversity and restoration of natural habitats

5. Fair Operating Practices

   • Anti-corruption

   • Responsible political involvement

   • Fair competition

   • Promoting social responsibility in the value chain

   • Respect for property rights

6. Consumer Issues

   • Fair marketing, factual and unbiased information and fair contractual practices

   • Protecting consumers’ health and safety

   • Sustainable consumption

   • Consumer service, support and complaint and dispute resolution

   • Consumer data protection and privacy

   • Access to essential services

   • Education and awareness

7. Community Involvement and Development

   • Community involvement

   • Education and culture

   • Employment creation and skills development

   • Technology development and access

   • Wealth and income creation

   • Health

   • Social investment

#2 - Sustainable Procurement Policy Guide

Recently, I published my own Procurement Policy Authoring Guide. If you don’t have a procurement policy (or you have a bad one…), I would start there.

Once you have a solid foundation for procurement basics, then I would look at how to amend and/or create a sister policy for sustainable procurement. Here’s the best guide I’ve seen for how to go about writing a sustainable procurement policy. Interestingly, it’s written by Sievo, a leader in procurement analytics technology. I just love their product. So, when you get to the stage of institutionalizing and measuring your sustainable procurement practices, keep them on your short list.

There are some things I don’t 100% agree with in this guide but until I write my own (😉), it’s the best thing I know of out there. As you work through the guide, use the ISO 20400 sustainability issues list as your “raw material” and you’ll get a pretty good end result.

Sustainable procurement is still a wide topic area event with the above but now, at least you have what you need to start confidently.

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