A study on Sustainability as part of modern Procurement and Supply Chain, its benefits, key challenges and best practices.

1. Sustainability in Modern
Procurement and
Supply Chain
An Evolving Practice
and A Key Challenge
31/3/21
Thalia Katsari, Independent Consultant – Procurement and
Supply Chain

2. Introduction
It’s a fact that Sustainability as a concept is a both a hot topic and a growing
concern for individuals and businesses alike in a massively consumerist global
market.
There are many different definitions and viewpoints on how to achieve it, all
depending on the needs and values of each person and Organisation, but how is
it defined within the context of Modern Procurement and Supply Chain (SC)
specifically, what are the benefits, and why is it a key challenge for the sector?
So, what is Sustainability within Procurement and SC?
In simple terms, it’s the practice and process an Organisation follows to acquire
goods and services by factoring in long term impacts on Society, Economy and
the Environment. These are otherwise known as the “3 Ps” - People, Profit,
Planet - and form the 3 Pillars of Sustainability.
Why is It Important?
Because it adopts the macro vision towards gradually transforming traditional
and often antiquated Procurement/SC models that strictly focus on meeting
Bottom Line contribution targets, by promoting ethical standards, Health and
Safety (H&S), environmental protection initiatives, and ultimately achieving
wider Profitability efficiencies and all-round Future-Proofing.
What are Some Application Examples per Pillar?
•Sourcing Ethically and Responsibly
•Pursuing Human and Worker Rights
•Minimising Occupational/Industrial Accidents
•Investing in Training and Learning & Development (L&D)
•Investing in Community Improvement Programs
People
• Promoting Open Competition and Supplier Diversity
• Hedging Materials to protect against Price Volatility
• Investing in R&D and Innovation
• Establishing Anti Bribery / Extortion / Corruption practices
• Creating Strategic Supplier Joint Business Plans
Profit
•Recycling and Reusing
•Reducing energy consumption, waste and carbon footprint
•Minimising/Eliminating single-use plastics
•Sourcing greener materials, goods and services
•Investing in renewable energy
Planet

3. It sounds pretty straightforward; on a personal level most people understand
Sustainability as a concept, acknowledge its importance and do their bit by way
of recycling, driving electric vehicles etc. For those of us who work in
Procurement and SC, we’re happy, if not eager, to apply it on our day to day,
especially when our Organisation has a Sustainability vision, strategy and set
goals around it, which should in theory streamline things.
On a business level, awareness has grown in the last years and there’s a
pressing need, often driven by consumers, to not only adopt Sustainability
practices, but to also formulate an official strategy and publish regular results
against their goals.
The ultimate question is, how well does Procurement and SC Sustainability
work in practice and why is it proving to be a key challenge?
How do you go about evaluating and selecting a prospective supplier? How do
you ensure compliance beyond your Tier 1 supplier level? How
feasible/financially viable is it to switch from traditional materials to greener
ones?
Key Shortcomings
• Ignorance and Absence of Due Diligence will most definitely lead to
selecting unfit Tier 1 suppliers. This poses a great risk and leaves an
Organisation directly exposed to malpractice, whether that be in the form of
unethical labour, bribery and corruption, or use of non-sustainable
resources.
When I worked in the Food industry, the biggest FMCG and very heavily
regulated at that, I witnessed Procurement professionals overlooking the most
basic and crucial requirements when assessing a supplier and their
Sustainability practices, ie use of palm oil, MSG additives, ethical commodity
sourcing. In many cases these professionals were not aware of the regulations
and requirements, due to lack of training and Business Intelligence availability,
but that can never be an excuse.
• Visibility and Compliance mostly stop at Tier 1 supplier level. Even if you’ve
done your due diligence in evaluating a first-tier supplier, you rarely have
visibility of the lower-tier ones and their practices; as such, compliance is
questionable - if non-existent – down the Supply network. This can have a
massively negative impact on a Company’s brand and reputation, but also on
its Bottom Line.

4. One recent example was in 2019 when a lawsuit was brought against Apple,
Google, Microsoft and Tesla for aiding and abetting in the death and serious
injury of children who were working in cobalt mines in their Supply Chains in
Congo. None of these COs had direct contracts with the mines, but they were
deemed to have the ultimate responsibility for practicing modern slavery. All of
these COs faced a major backlash by consumers and investors alike, and saw a
decline in both their sales and stock price as a result.
• Clashing agendas and one-sided focus between different Business Units
(BUs) result in systemically damaging an Organization's overall Sustainability
effort and undermining its credibility. It’s a fact that each BU has its own KPIs
and annual targets to meet. It’s also the norm that most businesses focus on
only one of the “3 Ps”, namely Profit, which very often trumps People and
Planet.
In 2020 I consulted on a project for a Manufacturing CO, that aimed to develop
its Sustainability strategy, among other deliverables. As part of that project I
identified an opportunity to resource the full scope of packaging materials with
recycled & recyclable-only ones. Top Management was happy to sign off on the
caveat that they might ultimately face an on-cost due to the premium element.
Upon completion of a full-on tender that would deliver fully green and top
quality materials, enhanced SC efficiencies, but also a fractional on-cost, the
project was approved by all other stake-holding BUs (Regulatory, Engineering,
Quality, R&D), except for Finance, who resisted it. This example showcases how
the lack of alignment on Sustainability goals can potentially waste valuable
resources and also hinder the practice as a whole.
To address such challenges, best practices are essential.
Best Practices
• Build awareness, educate and train both your employees and your suppliers
towards establishing a cascade system of Sustainability practices and
compliance.
 Deploy L&D focus programs, hold joint conferences, work with your
suppliers towards joining Sustainability platforms.
• Develop a realistic Strategy and Code of Conduct, set clear and convergent
Sustainability Goals.
 Publish and communicate those transparently and widely across your
business and your supply network.
 Establish KPIs aligned to the Sustainability Goals that monitor
performance beyond Profit. Publish those regularly to enhance awareness
and drive improvement.

5. • Never underrate Due Diligence.
 Join Sustainability platforms like Sedex/BSCI/Eco Vadis to acquire Market
Intelligence on economic, societal and environmental metrics and scores
for your current and prospective suppliers.
 Develop a robust Request For Information (RFI) document that will give
you visibility on potential first-tier suppliers’ current practices, lower-tiers’
practices, and will highlight room for improvement and red flags.
 Create a cross-functional Supplier Evaluation process that will require sign
off by your key stakeholders, such as Finance, Quality, Regulatory,
Communications, Legal.
 Make adherence to your Code of Conduct a contractual requirement.
 Create joint supplier Sustainability plans.
 Establish an annual Audit system with your suppliers to monitor their and
the lower-tiers’ performance against set Sustainability goals.
Key Benefits of Sustainable Procurement and SC
INTERNAL
• Brand & Reputation - As people become increasingly aware of the
importance of Sustainability, they steer clear of products/services that don’t
meet best practice standards. Sub-par practices can have a blowback on a
CO’s brand equity and loyalty.
• Revenue Growth - Consumers that buy into Sustainability will become new
and returning customers.
• Cost Reduction – Creating Joint Strategic Plans with sustainable suppliers
will result in innovation, increased productivity and cost savings, which in
turn allow for re-investment into an Organization.
• Continuity of Supply & Risk Mitigation – Sustainable Procurement practices
allow Organizations to future-proof themselves against scarcity in supply and
changes in social, economic and environmental factors.
EXTERNAL
• People - Inclusion And Diversity - Equal Opportunities / Ethical Trade /
Human And Worker Rights / Occupational Health & Safety / Training And
Education / Community Engagement
• Profit - Fair Trade / Innovation Research / Investment / Open Competition /
Information Transparency / Supplier Diversity
• Planet - Resource Optimization / Biodiversity Preservation / Climate
Adaptation
Conclusion
Sustainability is ultra-important for the preservation of the planet, the well-
being of individuals, communities and societies, and the financial strength of
the global market as a whole.
And although a growing number of Organizations worldwide are actively
working towards it, Sustainability is very much a key challenge which offers
great room for improvement, even for the market leaders.

6. From a modern Procurement and SC standpoint, the aim is to create a cascade
system of best sustainable practices that flows smoothly throughout the entire
supply network.
In order to enable Procurement and SC to deliver on Sustainability,
Organizations need to be clear on their strategies, set realistic and convergent
goals, be willing to make investments and take on some good costs in the
process, but also educate and train their employees, who will in turn apply
these best practices and work collaboratively with internal stakeholders,
suppliers and their wider SC networks to instill visibility, governance and
compliance.
Only the Organizations that are 100% committed, acknowledge the
shortcomings and are prepared to take corrective action will ultimately be
sustainable themselves.
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