Sustainability in Procurement – When the Price Tag is No Longer What Really Matters

Sustainability in procurement is no longer optional and is more and more becoming an essential practice for organisations. Businesses today have more knowledge accesible, helping them realise that what they procure not only impacts their budgets but also the environment and society in which they operate. Integrating sustainability practices into Procurement Functions is helping organisations create a positive impact on the three main pillars of sustainability: economy, society, and environment. This shifts organisations away from a narrow focus on cost reduction to a broader one that includes waste reduction, resource preservation, and a fair, positive contribution to society.

Integrating sustainability into procurement is a journey that needs to be part of a business’s strategy and, subsequently, part of the Procurement Function’s strategy. This journey must consider procurement’s impact on the economy, society, and the environment. Here are five key considerations for organisations looking to embark on this journey.

1.        Supplier Selection

Choosing suppliers who share your organisation’s sustainability values is important. It is essential to state your sustainability priorities when reaching out to the market. This can be translated into practices such as prioritising vendors that focus on using eco-friendly materials, adopt fair labour practices, and minimise their carbon footprint. Working with suppliers that adhere to sustainable principles ensures that your Procurement Strategy broadens to support environmental and social goals. A practical way to achieve this is by selecting vendors who hold sustainability certifications, such as ISO 14001 or Fair-Trade certifications.

2.        Lifecycle Costing

Procurement Functions must stop focusing solely on the initial price of a product or service. They should consider the total cost over the product’s lifecycle, from production and use to disposal. While some products may seem cheaper upfront, in practice, they can lead to higher costs due to inefficiency, maintenance, or disposal (waste) after use. Opting for durable, energy-efficient, recyclable products with the potential for a second life will help reduce long-term expenses and environmental impact.

3.        Reducing Waste

Procurement Functions must prioritise the waste hierarchy: reuse before recycling. This encourages selecting products designed for reuse or repurposing at the end of their lifecycle rather than disposal. Organisations should consider sourcing products with minimal packaging, selecting reusable or recyclable materials, and, where possible, extending their focus to include environmentally friendly transportation methods to reduce emissions.

4.        Ethical Sourcing 

Ethical sourcing is a crucial aspect of sustainable procurement. It ensures that products and services are obtained considering fair labour practices, human rights and supporting diversity by engaging with small, local, and Aboriginal-owned businesses. Procurement Functions must undertake their due diligence to ensure suppliers can demonstrate their commitment to supporting diversity and that their supply chains are free from any acts of modern slavery, forced and child labour, or unsafe working conditions.

5.        Transparency and Accountability

Transparency is a key factor, especially in sustainable procurement. Procurement Functions must clearly state their transparency expectation with the market and work with suppliers willing to openly share information about their environmental and social practices. Establishing accountability through regular audits and reporting gives Procurement Functions a clear overview of their supply chain and offers the opportunity to mitigate any risk that may arise.

Sustainability in procurement requires a shift in mindset—from focusing solely on cost to considering the broader environmental and social impacts. By selecting responsible suppliers, adopting lifecycle costing, reducing waste, sourcing ethically, and promoting transparency, businesses can align their procurement practices with long-term sustainability goals. Sustainable procurement is not solely an organisational goal but also a goal for our society and our environment.