Sustainable sourcing is not a new proposition; procuring goods and services in a responsible way, that minimises negative environmental and social impacts, seems logical. Though in reality, it can be challenging to prioritise and really embed into an organisation. Integrating sustainability into procurement processes offers several advantages:
- Revenue growth by doing business in the right way, which in turn enhances brand reputation and attracts conscious consumers
- Cost savings by driving operational efficiencies, resource optimisation and waste reduction
- Risk mitigation by assessing suppliers’ environmental and social practices, organisations can reduce supply chain risks, increase supply chain transparency and value chain resilience
- Regulatory compliance by staying ahead of changing regulations to ensure long-term resilience. Audits such as the EU CSRD will highlight sustainable procurement practices, and this raising of the bar will create ripple effects for other regulatory bodies and expectations will increase accordingly
These advantages are all good for businesses and good for society and the environment – but it proves a lot more difficult in practice. So where can procurement professionals start? Incorporating sustainability concerns in tenders as business-as-usual, is a must.
Set the foundations
When crafting tender questions, firstly consider if ESG is present in your business procurement policies. If not, do you need to create a standalone ESG procurement policy or amend current policies to reflect ESG priorities? This would include confirming policy criteria and ensuring that sourcing decisions are aligned with the wider organisation ESG goals.
ESG focussed policies can enable collaboration with your supply base to drive positive change. This includes demands on data, for example, if suppliers share emissions data there may be opportunities to work collaboratively to understand the reduction possibilities. The policies should promote good ethical practices and unlock partnerships with suppliers on any corrective action plans.
Policies should include:
- Mandatory and tailored ESG questions
- Guidance for how to score responses and use the information provided
- Question weighting guidelines
Mandatory and tailored ESG questions
Sustainability topics within tenders must be mandatory, regardless of category. It is also important to define what questions are standard, versus any questions that could be tailored appropriately to the supplier type. Tailoring questions enables more detailed answers and a spring broad for further collaboration after successful selection, for example:
- Environmental credentials
- Standard: Ask about suppliers’ emissions tracking, reduction targets and initiatives
- Example tailored for a digital service provider: How is data centre energy efficiency managed?
- Waste management/product lifecycle
- Standard: Inquire about waste reduction strategies and recycling initiatives
- Example tailored for IT equipment: Please describe if you have a reconditioning strategy for the equipment you sell, or if you are currently selling reconditioned equipment?
- Social responsibility
- Standard: Include questions on diversity, labour practices, and adherence to ethical codes
- Example tailored for a production facility: How do you demonstrate due diligence against the Modern Slavery Act 2015?
Guidance for how to score responses and use the information provided
Engaging with suppliers in these areas will not only enable good decision making in the tender process but. Scoring on sustainability topics must now be mandatory and core to each selection. Once supplier selection has been made, the responses can be used for supplier onboarding and supplier collaboration for both organisations on their sustainable journeys; contributing to increase maturity of both organisations in terms of ESG reporting and requirements.
Question weighting guidelines
Including ESG questions is the first step towards integrating sustainability in the supplier selection process but as important is the weighting allocated to those questions.
The average weight given to sustainability topics as part of an RFP is ~10%. However, for sustainability criteria to have a real impact on the decision making and selection process, it needs to be representative and be matched to other metrics.
Businesses should aim for sustainability metrics to be 50% of financial weighting. The influence and potential risk of this contract on the organisations overarching ESG impact should be considered too, and the weighting adjusted accordingly.
Better impact, better business performance, now and for the future.
Remember, sustainable procurement and tenders are not just about ticking boxes; it’s about creating a positive impact on the value chain. By asking the right questions and acting on the responses, organisations can contribute to a more successful, sustainable future.
Authors: Vicki Solly, Laurie Franquesa, Grace Maturi
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