Responsible purchasing policy: why and how to implement it to improve the company's impact?

Responsible purchasing policy: why and how to implement it to improve the company's impact?

For many companies, indirect emissions linked to purchasing are the main part of their GHG balance. As regulatory obligations concerning Scope 3 become stricter, it is becoming urgent to establish and manage more responsible and efficient purchasing strategies. What are the main steps to achieve this?

Thomas Guyot

Thomas Guyot

Co-founder

Update :
22/7/2024
Publication:
10/3/2023
Contents
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2023, a strategic year for corporate sustainable procurement policies

In France, the V5 of the BEGES methodology methodology, which comes into force on January 1, 2023, makes it compulsory for companies to include significant indirect emissions in their regulatory carbon accounting. At European level, the CSRD will soon oblige some 50,000 companies to report in detail on their greenhouse gas emissions, across all three scopes, requiring them to be able to measure or estimate the impact of their suppliers. The CSRD will also ask these companies to provide a detailed action plan for making the transition to a low-carbon model, particularly with regard to their scope 3 and therefore their purchasing.

The year 2023 will therefore undoubtedly mark the massive consideration by companies of the sustainability of their purchases of raw materials, services and products, which are the main emission items in scope 3.

While the regulatory framework will primarily constrain large organizations and require them to closely link their purchasing strategy to their overall environmental performance, many companies have already anticipated the importance of adopting a serious sustainable purchasing policy. In order toanticipate the tightening of standards but also to gain resilience across their entire value chain . This is not surprising given that purchasing accounts for an average of 50% of a company's turnover (up to 70% in industry) and often accounts for at least 80% to 90% of a company's greenhouse gas emissions.

Optimizing purchasing is the strategy favored by many companies to make their organization more efficient, more resilient and more sober. In a word, more sustainable. Major groups such as SNCF and EDF understood this a long time ago and embarked on the road to sustainable purchasing more than 10 years ago. They are still today forerunners in terms of best practices in this field.

Thinking about sustainable purchasing is therefore becoming imperative for your company. But how can you effectively take action?

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What is the definition of a responsible purchasing policy?

Adopting a responsible purchasing policy starts by rethinking the needs of your company. A purchase that has no environmental impact is a purchase that does not exist. Therefore, any purchase that is necessary for the company to function properly and that integrates, in the supplier selection process, criteria and provisions in favor of the protection or enhancement of the environment and social progress can be qualified as responsible. In this logic, consideration will be given to the life cycle of the products and resources purchased and consumed.

Responsible purchasing criteria can also include quality, ethics, transparency and the integration of stakeholders in the production and delivery process of the purchased product.

A responsible purchasing policy is a global approach concerning the whole company and deeply affecting its business model and organization.

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The direct benefits of implementing a responsible purchasing policy

Implementing responsible purchasing is a unifying project for the entire company, with multiple benefits at several levels.

Questioning the needs of the company, the needs of its production, the composition of its products, their utility and their final uses is a strong vector of innovation and value creation. Associated with an eco-design approach, this questioning will necessarily lead to the creation of synergies with competent suppliers, to reinforce the relationship and mutual trust between these suppliers and the company. This vector of innovation, coupled with the gain of image with consumers linked to the virtuous approach of the company, can create a real competitive advantage in the long run.
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A successful responsible purchasing policy will also limit the risks for the company. Financial risks first of all with a better control of costs and an anticipation of future regulatory sanctions on the environmental aspect. The risks of climate change and damage to the public image by selecting sustainable products that are respectful of people and the environment. Finally, supply risks by favouring a diversified, resilient and local portfolio of partners.

To summarize, the deployment of a sustainable procurement strategy will allow :

  1. Improve the overall performance of the company.
  2. Improve the company's image and make its employer brand more attractive.
  3. Increase the quality of the offer and the capacity to innovate.
  4. Strengthen relationships with suppliers and partners.
  5. To have a better control of the costs
  6. To have a better control of the risks.
  7. Remain in compliance with the regulatory framework on environmental and social aspects.

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The main steps to implement a responsible purchasing strategy in your company

Implementing a sustainable purchasing policy can seem complicated if you don't know where to start. Here are 5 steps that will allow you to start the development of your sustainable purchasing strategy with peace of mind:

🔍 Step 1 - Conduct a diagnostic of your current purchasing policy

Conducting a diagnostic of your current purchasing policy will allow you to clearly identify your company's needs and give them a level of importance, to formalize the current decision criteria when choosing a supplier and to know your support policy for your key suppliers. An internal audit will allow you to identify the good practices you have already put in place as well as the changes that could complement these good practices.

A first diagnosis is fundamental to implement an optimal and efficient strategy that responds to the particularities of your company. To carry out your diagnosis, you can :

  1. Conduct qualitative interviews with your internal and external stakeholders.
  2. Review and interpret your company's key documentation, including your suppliers.

At the end of this diagnosis, you will have a first vision of your current situation and you will have identified the first opportunities for improvement.

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🗺️Step 2 - Mapping your purchases and measuring their impact

A complete mapping of all your purchases and suppliers will allow you to prioritize your future sustainable purchasing action plan . The mapping of your purchases must enable you to obtain the following data, which will be cross-referenced with your future sustainable purchasing criteria:

  • An exhaustive list of your purchases
  • An exhaustive list of your suppliers
  • A grouping of your purchases by purchasing segment or product family
  • The carbon footprint of your purchases, used to calculate your company's Scope 3 balance.
  • The overall environmental impact of each of your purchases: pollution, water use, impact on biodiversity, etc.
  • The Life Cycle Assessment (LCA) of the products you buy.
  • The social impact of each of your purchases.

A relevant mapping is often the result of a collaborative work between the different internal and external stakeholders of the company. Including your suppliers as much as possible in this process is crucial since they hold key information about the impact of their products.

Today, few suppliers are unfortunately able to provide an LCA of their products.

This mapping should enable you to obtain an initial hierarchy of your purchases and suppliers. This prioritization will be reviewed according to new criteria of your purchasing policy that you will define later.

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🎯 Step 3 - Formalize its new purchasing policy and define supplier evaluation criteria.

It is now time to define and formalize your vision, the major orientations and the concrete objectives of your new responsible purchasing policy. This vision will take the form of key evaluation criteria for your purchases and suppliers. How will you judge whether a purchase should be made or not? What aspects do you want to prioritize in the selection of your suppliers?

Your criteria will necessarily be specific to your industry and your organization (size, locations, business model, etc.) and it is important toalign your criteria with your company's CSR policy to ensure the coherence of your actions and the support of your stakeholders for the future deployment of your new purchasing policy.

The mapping carried out in the previous step should also help you define these criteria. If your company wishes to decarbonize its business and your purchases represent a significant part of your Scope 3, you will certainly give more importance to criteria related to the level of commitment and maturity of your suppliers on carbon issues.

To define your criteria, you can also rely on the 7 main principles of the ISO 26000 standard (reference standard on CSR): governance, human rights, working conditions, fair practices, consumers, environment and local development.

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🤝 Step 4 - Define and pilot a sustainable procurement action plan.

Once you have defined your purchasing criteria and your supplier evaluation grid, you will be able to use this analysis prism tofinely evaluate your purchases and your suppliers . This new evaluation will allow you toidentify the purchasing segments on which to focus and the key suppliers to engage in the wake of your overall CSR approach.

This evaluation of your purchases and suppliers, compared with the objectives of your new policy, should enable you to identify a concrete action plan to be deployed .What are the steps to follow? Which stakeholders should be involved in the implementation of this action plan? What are the KPIs that will help you monitor the progress and success of your actions? What is the timetable for carrying out these actions?

Each buying segment has its own particularities, so it will be relevant to plan a buying strategy and a specific action plan for each of the segments you mapped in the previous step.

For example, your action plan could contain actions such as :

  • Ask a supplier to share its CSR policy and impact figures.
  • Accompany a key supplier in improving its environmental impact.
  • Map potential new local suppliers.
  • Directing production and innovation to reduce purchasing volumes of a product category with high environmental impact.
  • etc.

The deployment of your new strategy will surely involve three pillars:

The supplier relationship. To make your responsible purchasing strategy work, your good relationship with your suppliers will be decisive. To make your strategy work, you need to create a relationship of trust with your suppliers by giving them clear guidelines, explaining your approach and supporting them in their own CSR improvement process.

Facilitating a network of players. To optimize your performance, you can suggest to your purchasing department that they visit the production sites of the purchased products to reinforce their understanding of the ecosystem and global performance issues. Raising the awareness of internal and external teams can also be done through workshops, downstream communication (newsletter, etc.) and the transmission of practical information sheets.

Continuous improvement. When piloting a sustainable procurement strategy, it is essential to put in place tools to monitor performance. You can identify friction and improve your internal processes to increase your overall performance and sustainability over time.

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📣 Step 5 - Report and communicate.

Communicating on your sustainable procurement strategy offers many advantages such asa more attractive employer brand and an enhanced external image.

It will be essential to base your communication on a measurement of relevant KPIs: evolution of the % of committed suppliers, of the carbon footprint linked to purchases, of the pollution linked to purchases, of the working conditions within the partner portfolio, etc.

Communicating on your progress is an integral part of your sustainable procurement strategy, the objective of which is to federate the players and society around this important issue.

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Simply take action

Deploying an ambitious sustainable and responsible purchasing policy is one of the most effective and impactful actions you can take in your company to improve your overall performance and your company's impact on the environment.

Such a strategy can still seem complex to implement and to manage without the right tools and the right support. The Supply Chain module of Traace allows you to define in an easy to use interface your own evaluation grid, to map all your suppliers and to quickly identify the suppliers to engage in priority in your improvement process.

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➡️ Learn more about the Traace Supply Chain module

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Sources

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