Ethical and sustainable procurement is essential to the survival of our planet. Making a profit and preserving our planet do not have to be at odds with each other.
Business leaders are beginning to see that their actions have far-reaching consequences, beyond their bottom line. They have a responsibility to ensure there is a viable planet for the coming generations to inhabit.
As far as procurement is concerned, procurement managers possess the power to both change the way products are sourced, and place pressure on suppliers to prove their goods are ethically and sustainably produced.
The drive for sustainability is quickly becoming a core factor in procurement circles.
David Ingram, CPO at Unilever, stated at the 2019 World Procurement Congress in London, that sustainability and acting responsibility were a “massive driver” for business. He is not alone in his thoughts, with other procurement specialists from big-name companies, such as Shell and Heinekin, sharing his sentiment.
The Impact on your Brand’s Image and Profits
How a company responds to the call for sustainable procurement will affect how it is viewed by both its consumers and the general public. There is a growing demand, especially from the younger generations, that the products they purchase are ethically and sustainably produced.
Business Insider Australia published Nuveen’s Third Annual Responsible Investing Survey, in which 90% of Millenials (born between 1981 and 1996) said yes to: “I prefer to shop for brands that have environmentally sustainable business practices.”
In a Cone Communications survey, 94% of respondants from Generation Z (born from 1997 to 2011) said that companies should address urgent social and environmental issues. This generation will make up 40% of global consumers by 2020. In the same survey, it was found that more than 9 out of 10 millenials would switch brands to one associated with a cause.
Savvy consumers look at a company’s record on sustainable sourcing, manufacturing, energy use, pollution and ethical treatment of labour.
We live in an online age, with 24/7 news cycles and detailed information only a few clicks away thanks to the internet, a stark contrast from previous generations. Social media is being used as a vehicle to initiate change, pressuring companies, particularly global big-name brands, to make better decisions.
Going viral, can cause serious damage to a company’s brand and reputation, as seen with the aftermath of the 2013 Bangladesh factory collapse, which saw over 1000 people killed and highlighted the working conditions of garment workers employed by global, big-name clothing brands. Media and public pressure from around the world was immediately placed on both the Bangladesh Government and global clothing companies to improve workers conditions.
In 2016, the ABC News website published an article featuring Baptist World Aid’s report, which gives clothing manufacturers a grade of A to F based on efforts to improve these conditions; household names such as ASOS received a C+, Bardot a C-, Bonds an B+ and David Jones a B-.
“90% of Millenials (born between 1981 and 1996) prefer to shop for brands that have environmentally sustainable business practices.
94% of Generation Z (born 1997-2011) said that companies should address urgent social and environmental issues.“
Triple Bottom Line: People, Planet and Profit
The Economist published an article on The Triple Bottom Line, first presented by John Elkington back in 1994, which proposes that a business’s success is not just related to how much profit it makes, but also how it affects the world in which it operates. It is the idea that the bottom line is made up of three parts: Social, Environmental and Financial, or in other words, People, Planet and Profit. A company may be making money, but is actually at a loss if it’s costing the community and the environment.
- People: This looks at how a company affects a community, for good or bad. It looks at issues such as fair trade, labour exploitation, child labour, the social cost and how a business is feeding back into the community.
- Planet: How is a company affecting the environment with its actions? Issues like recycling, renewable energy, waste management, carbon emissions, etc. fall into this category.
- Profit: This considers the total profit and how it affects the whole community, not just the money made for shareholders.
A fourth element can be added to include how a business looks to the future – it’s sustainable development plans.
Green Procurement: Saving the Environment
There continues to be a paradigm shift to understand procurement is not only about making the best deal cost-wise. Managers are starting to see the knock-on effects along the entire supply chain, which affect the environment and, ultimately, their business. This can be seen most notably across hospitality venues and major supermarkets as a result of the war on single-use plastic. Throughout Australia, plastic straws have been replaced with reusable alternatives or withdrawn completely across a number of venues. For example, Coles and Woolworths, the two dominant supermarket chains in Australia, have banned free, single-use plastic bags at their checkouts nationally, instead providing re-usable, recyclable alternatives for purchase.
Big name companies are required to work together with their suppliers, to support research and development into sustainable products, ensuring a higher number of available products and providing a competitive advantage within their industry.
The topic of green procurement should not only affect the procurement and purchasing departments, but should also be supported from senior management down. Corporate incentives should be introduced to motivate all employees to reduce their ecological impact. Procurement is positioned to be a major force in bringing business into a new economic era.
By Jeannie De Vynck