A SYNERGY exists between the economic and social aspects of sustainability in a commercial sense. In the same way, pursuing a sustainable procurement agenda attracts a certain level of risks and opportunities.
With the level and extent of globalisation that has extended supply chain, issues at the core of sustainable procurement become difficult to manage. Ethical sourcing is at the core of supply chain activities that achieve and maintain consumer confidence becoming a social issue that provides an opportunity to directly impact on the economics of the business through the capacity to charge premium prices.
Sustainable procurement focuses on developing trade with societies from the developing world so as to improve their standards of living. This is along the shift or an extension of corporate social responsibility to corporate social integration, where social issues are considered in procurement decisions.
The development has put emphasis on the consideration of diversity in procurement. Affirmative action, as it is considered by Americans, Black Economic Empowerment — as it is considered by South Africans and indigenisation as it is referred to locally — can be part of the diversity strategy.
Affirmative action has demand and supply potential, where ethnic minority businesses are afforded opportunities as other businesses. The inevitable commercial benefits include new procurement and sales opportunities, where the supplier base is a potential consumer promoting indirect reciprocal trading. It further provides new sources of innovation and competitiveness promoting agile supply chains in industries such as the retail and clothing that require rapid response that might be difficult to achieve with the big traditional suppliers.
The societal benefits of engaging in affirmative action include increased commitment, flexibility and security from ethnic minority that easily translate to an economic benefit. It also encourages local economic development and growth. The organisational risk associated with meeting stakeholders’ societal requirements is minimised.
On the other hand, environmental issues, such as climate change and conservative use of resources cannot be ignored when discussing sustainable procurement. Most sustainability programmes focus on five overarching themes of climate change, waste, biodiversity and ecology, inclusion and health living.
Sustainable procurement concentrates on three of the five elements of climate change, waste and inclusion by providing conditions of supply that compel potentials suppliers to agree to the elements of sustainable procurement principles.
Elements of managing sustainable procurement includes considerations of the elimination of waste, reduction of waste, re-use of waste, recycling waste, recovery of waste and the disposal of waste. This has led to organisations placing emphasis on the management of the carbon footprint. Construction projects reduce the carbon footprint by designing elements such as combined cooling, heating and power plants and use of renewable energy. Managing waste is, therefore, closely aligned to the climate change agenda.
The major risk associated with the failure to employ sustainable procurement is mainly on the penalties for failure to meet minimum environmental conditions. The German car manufacturer, Volkswagen, is bleeding from the penalties that are in billions of dollars for procurement of a vehicle component that was not compliant with the minimum American environmental standards.
The procurement function can achieve promotion of waste management in the sourcing activities. They can engage innovation within the supplier base to deliver products that will use less water and energy. Inclusion can also be promoted by employing a policy to engage diverse suppliers. In that regard, procurement is no longer a backroom function, it is a strategic function of the organisation capable to transform the companies, industries and the economy.
Nyasha Chizu is a fellow of the Chartered Institute of Procurement and Supply writing in his personal capacity. Feedback: firstname.lastname@example.org Skype: Nyasha.chizu