SUSTAINABLE PROCUREMENT

Sustainability has been the key agenda for the CPO this year and onwards but Sustainable procurement is more than just a word, its call for action by the procurement leaders, a plea for help and a question: Can you be the change? The most crucial step is to fully comprehend what sustainable procurement entails and how to include it into the procurement process. While many people think that sustainability simply has to do with climate control measures that affect warming temperatures and ecosystem threats, the desire to cut emissions, and climate justice, it goes far beyond than this. Ethical procurement, green procurement, and social procurement are the three key components of a sustainable buying strategy. Let's dive into each one:

Ethical Procurement: As many relates ethics to simply the principles of right and wrongdoing but Raman believes that it is a blend of honesty and integrity. Ethical procurement practice indeed is also not just about bribery and corruption, but it is beyond. it encompasses more than just these issues. Transparency throughout the procurement eco-system is a key component of ethical buying. Let us talk about what are the 4 major streams in procurement eco-system.

Our senior management and owners are at the top, while our own procurement team is at the bottom. It may be difficult to maintain transparency across both, but it is critical that transparency at one stream alone does not work out with procurement leaders and they fail, at the same time in the left end side we have end users and stakeholders who hold the budget who should be involved and aware of their budget spend & patterns with clear communication, right end side what we ignore the most is the suppliers. For example, it is critical that we notify suppliers about how and on what basis they will be evaluated in the bidding process, as well as how the selection process will function, whether it is entirely technical, commercial, or a combination of both. In order to retain openness, most procurement forks also do not disclose feedback to non-selected providers on the basis for their disqualification. It is critical that, while we focus on the ethical aspects of the procurement process, we simultaneously preserve transparency to promote fairness across the procurement spectrum.2

With the growing emphasis on Sustainable procurement practice, ethical procurement has always been more important, it also involves sourcing products and services from suppliers who adhere to ethical practices and anti-corruption measures.

“Ethical Procurement is not just about buying with a conscience; it's about embracing a philosophy that empowers us.”

By: Raman I Nathani

Green Procurement: As we tackle climate change and strive for a greener future, green procurement plays a key role. By incorporating environmental considerations into the procurement process, we can reduce waste, conserve energy, and minimize the carbon footprint across the supply chain. It is obvious that green procurement is all about finding green product to reduce carbon footprint however, if we step back and take a closer look, we must also consider what we are doing about this in our individual day-to-day lives as humans

Raman shares that I was reading an interesting article about the causes of human unhappiness, anxiety, and depression, and the surprising conclusion was that it was not social media. The actual cause was our disconnection from the elements of which humans are made of. Do we remember the basic science that we were taught, we are made up of five elements: air, water, fire, earth, and sky? Let us think how well we are externally connected to these? How do we connect and communicate? 15 to 30 minute walk along the beach will provide us with direct access to water, sunlight (fire), earth, cleaner air, and the sky.

Raman believes that once we understand and value these elements, we will begin to act on them and protect them. We must know that every action we take in our personal or professional lives has an impact on these five elements, which are the core of the human body and the core of the entire green procurement cycle. Green procurement is about more than just saving the earth; it is about understanding that. To put this into action, we must first understand and value it in order to save it for our future and the future of our children. As individuals, we must begin valuing, and then as procurement professionals, we must begin implementing this throughout the procurement and supply chain via

scope 1, scope 2, and scope 3. Let us do little deep dive of all the scopes;

Scope 1) Direct Emissions – These emissions primarily result from activities that are under our operational control and involves emissions from the fuels and fossils that are burnt directly in the company properties and assets. As a procurement professional some of these can be picked as low hanging or immediate quick wins if we are just starting our journey towards sustainability. Scope1 emissions refer to the direct greenhouse gas (GHG) produced by a company, such as combustion of fossil fuels in heating systems or company-owned vehicles. In the context of sustainable procurement, Scope 1 emissions can be minimized by adopting energy-efficient technologies, promoting the use of renewable energy, and encouraging alternative transportation solutions such as electric vehicles or CNG gas converted vehicles. Organizations can also focus on reducing Scope 1 emissions through effective waste management practices, which include measures like recycling, composting, and responsible disposal. By managing Scope 1 emissions, companies can significantly reduce their carbon footprint and contribute to a more sustainable future.

Scope 2) Indirect Emissions – These emissions are associated with the purchased energy consumed by an organization.

These emissions arise from electricity or HVAC that we consume and pay to utility companies. While companies don't have direct control over Scope 2 emissions,2 but they do have the power to make conscious choices about the types of energy sources they purchase. To address Scope 2 emissions, organizations can prioritize procuring renewable energy or purchasing renewable energy credits to offset electricity consumption. Investing in energy efficient technologies and adopting green building practices during construction phase can also contribute to Scope 2 emission reduction. Collaboration with energy suppliers becomes important as organizations seek to ensure that their purchased energy aligns with sustainability goals Emissions from the energy that we bought such as electricity, heating and cooling for our facilities and operations.

Scope 3) Emissions are also indirect emissions but in complete indirect control of the organization since these occur outside the company in the entire value chain, including activities beyond its direct operational control. These emissions often emerge from activities such as transportation, distribution, sourcing of raw materials, and disposal of products.

It is important to note that Scope 3 emissions typically account for the largest share of an organization's carbon footprint depending upon the industries but an average of 70% contributes scope 3. To address Scope 3 emissions, sustainable procurement practices should involve suppliers and stakeholders up and down. This can be achieved through various means, like selecting suppliers with sustainable practices, collaborating with them to drive innovation and efficiency. Additionally, encouraging transparency and traceability in the supply chain is crucial in identifying and mitigating Scope 3 emissions includes assessing the environmental and social impact of suppliers, promoting, monitoring and minimizing waste throughout. Though these Emissions are floated across the organizations supply chain – upstream and downstream which are beyond our operations and completely sitting outside our portfolio with the suppliers. Some key examples of scope 3 vendors are outsourced fleet services, Employee Computing, Waste Management, Fuel, Travel and leasing asset.

Green procurement under these 3 scopes is essential component of any organization's commitment to environmental stewardship and corporate social responsibility. By understanding and addressing the different scopes organizations can effectively reduce their carbon footprint and contribute to a better future.

Social Procurement: While we spoke about ethical and green procurement, it is also equally important to understand the social procurement which has a direct impact to economy & human rights.

In order to practice sustainable procurement, it is critical that we recognize our responsibilities to the local economy and uphold initiatives like locally produced goods, manufacturing, and ICV (In-Country Value). We can also take proactive measures like incorporating a clause in our procurement policy that encourages the use of local suppliers and giving ICV suppliers higher ratings or offering incentives to suppliers who offer sustainable alternatives. Social procurement is centered on fostering inclusivity and stronger communities. This entails doing things like collaborating with local, diverse, and ICV-focused suppliers. We also need to incorporate social impact goals into our procurement strategies and incorporate labor standards into the procurement process, such as auditing suppliers' worker conditions prior to onboarding them. Global estimates of modern slavery survey exposed a total of 49.6 million people living in modern slavery in year 2022. Many suppliers find their ways to increase their profit level at the cost of labor standards. Through integrative social procurement practice, we can create a positive impact not just to promote local economy but also empower underrepresented groups and make a tangible difference in society. Social procurement doesn't just benefit our organizations; it actively supports communities in need and contributes to a fairer, more equitable world.

Raman emphasized that sustainable procurement goes beyond buzzwords; it's about embedding these three elements into the very fabric of our procurement processes. By practicing ethical, green, and social procurement, we harness the power of our purchasing decisions to drive positive change and shape a better future for all. Raman also believes that while COP sessions represent critical steps in addressing climate change, but the ultimate success depends upon the concrete actions taken by each and every individual like us”

.