Introduction
In recent years,
with issues such as COVID-19 and with the current volatile market, the
resilience of supply chain is deemed more critical than ever. Companies have
started to integrate Sustainability into its operations but the focus now is to
ensure it is expanded across its value chain or in other words; procurement.
Sourcing from
suppliers that are sustainable, may help companies to mitigate risks arising
from supply disruptions due to environmental events or regulatory changes.
Moreover, companies that mitigate social and environmental issues across the
value chain will help to mitigate reputational risks.
It easier said than done
Integrating
Sustainability across the value chain requires a lot of collaborative approach
and sound governance and processes – and this is also complex as companies are
dealing with shortages in tools, data and internal capabilities. This is backed
by the findings from a study by McKinsey. According to this study, one of the
exercises indicates that, 70% of the sample informed that their companies is
not aware of where Scope 3 emissions were generated in their value chain. Apart
from that, 90% of the sample highlighted that they face difficulty in
identifying the right actions to move the needle on ESG topics. Also, in terms
of target setting, almost 75% highlighted that they face issues in this area.
The SMEs are the
backbone of the economy – globally they represent up to 90% of businesses. The
SMEs are also facing the scrutiny and pressure from all angles to adopt
sustainable practices and operations. This is due to their supply chain
ecosystem that includes large corporations that are setting higher ESG
standards and requirements.
Logically,
implementing sustainability is always a good cause for any organisation,
regardless of their size. While larger corporations have been able to
progressively integrate ESG into their business, many SMEs struggle in their
journey to do the same, due to a lack of technical skills, knowledge and
capital.
Not only
sustainable procurement results in good reputation for the company, but it can
also have a positive impact on the company’s relations with its stakeholders,
especially the customers and investors. These two stakeholder groups are now more
focus than ever to scrutinise ESG considerations integrated across companies’
supply chain and will support those companies that have a clear and practical
sustainable procurement plan and monitoring. Customers and investors would also
be more likely to do business (over a longer period of time) with companies
which have lower exposure towards non-ESG compliant suppliers.
Current and
potential employees are also looking into how serious companies are towards
sustainable procurement, especially those that value environmental and social
responsibility. Employees nowadays do not want to be affiliated with companies
with poor sustainability practices in its procurement process and management.
Additionally, employees would also expect companies they are working for to
also have a sound and robust sustainable procurement strategy and plan.
Sustainable
procurement is not all just about environmental and social benefits, but can
also have potential economic value. Companies with good sustainable procurement
practices will have competitive edge, and can reduce costs, improve efficiency,
and gain a competitive advantage over their peers in the same sector.
On top of that,
sustainable procurement would also improve supplier relations as well as
business continuity. Early adoption and transition in sustainable practices ahead
of mandatory regulations or imposed by specific jurisdictions, can benefit
organisations in securing and building networks of quality and sustainable
suppliers as part of its value chain.
Conclusion
Sustainable procurement
is expected to be a norm moving forward. We are seeing more pressure from
sustainable companies to embed Sustainability across its business operations.
Engagement with suppliers on Sustainability are seen to be intensified and more
and more suppliers are also on the look out to obtain relevant certifications,
tools and resources towards being more sustainable. More or less, both
organisations and suppliers are aware that sustainable procurement will bring
economic benefits and would remain relevant and competitive in the market over
the long term.
All views and opinions expressed on this site are by the author and do
not represent any particular entity or organisation
