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Decarbonization, or reducing carbon emissions, is a critical issue in today's world as we face the threat of climate change. To address this issue, businesses need to take proactive steps toward decarbonizing their operations and supply chains. One area that can play a significant role in decarbonization is procurement. By definition, companies recognize procurement as the process of acquiring goods and services for a business's operations, and it has a significant impact on a company's carbon footprint.
The role of procurement in decarbonization is becoming increasingly important as companies recognize the urgency of the climate crisis. Procurement can influence emissions reduction in various ways, including selecting suppliers with low carbon emissions and promoting sustainable practices throughout the supply chain. The following guide will explore the role of procurement in decarbonization and discuss the challenges, opportunities, and best practices for sustainable procurement.
The Scope of Procurement's Role in Decarbonization
To understand the role of procurement in decarbonization, it's essential to understand the different types of emissions contributing to a company's carbon footprint. There are three main scopes of emissions:
- Scope 1: Direct emissions from the company, such as company-owned vehicles or manufacturing facilities.
- Scope 2: Indirect emissions from a company's purchased electricity, steam, or heat the company consumes.
- Scope 3: Indirect emissions that occur as a result of the company's operations but are not directly owned or controlled by the company, such as emissions from the production of raw materials or transportation of goods.
Procurement plays a significant role in all three scopes of emissions. In Scope 1, procurement can influence emissions reduction by selecting low-emission suppliers or transitioning to low-emission vehicles. In Scope 2, procurement can source renewable energy or choose suppliers with low-carbon electricity. In Scope 3, procurement can work with suppliers to reduce emissions in their supply chains, promote sustainable practices, and select suppliers based on their sustainability performance.
Several case studies demonstrate the success of sustainable procurement practices in reducing emissions. For example, in 2020, Microsoft announced its commitment to becoming carbon negative by 2030. To achieve this goal, Microsoft is implementing a sustainable procurement program that prioritizes suppliers with low-carbon emissions and sustainable practices. Similarly, Ikea has implemented a program to reduce emissions throughout its supply chain by promoting sustainable practices, such as reducing waste. These efforts have helped Ikea reduce its carbon footprint significantly.
Challenges Faced by Procurement in Decarbonization
While procurement can play a significant role in decarbonization, several challenges must be overcome to achieve meaningful emissions reductions. Unfortunately, the industry is plagued with a few challenges related to decarbonization:
- The complex nature of supply chains and the difficulty of tracing emissions: Procurement involves multiple suppliers and intermediaries, making tracing emissions throughout the supply chain challenging. This complexity makes it challenging for procurement to identify high-emitting suppliers or evaluate the sustainability performance of each supplier.
- The need for cooperation between procurement and other departments: Decarbonization requires cross-functional collaboration between different departments, including procurement, operations, and sustainability. However, in some organizations, these departments may work in silos, making implementing a unified sustainability strategy challenging.
- The lack of standardization and measurement frameworks for sustainable procurement practices: There is no universal standard for sustainable procurement practices, making it challenging for procurement to consistently evaluate suppliers' sustainability performance. This lack of standardization makes it challenging to accurately measure and report on sustainability performance.
To address these challenges, procurement must develop a comprehensive sustainability strategy involving collaboration with other departments and suppliers. Procurement should also consider implementing sustainability metrics that can be used to evaluate supplier performance consistently. This can include metrics such as greenhouse gas emissions per unit of production or waste reduction targets. By working collaboratively and implementing sustainable procurement practices, procurement can help drive meaningful emissions reductions throughout the supply chain.
Opportunities and Benefits of Sustainable Procurement
Sustainable procurement is procurement (the process of buying goods and services) in a way that reduces negative environmental, social, and economic impacts. It has become an increasingly important issue for businesses as they seek to minimize their impact on the planet and meet the expectations of consumers and investors. Sustainable procurement offers several opportunities and benefits, which are discussed below.
Cost Savings and Increased Efficiency
Sustainable procurement can help businesses to save money and become more efficient. By choosing suppliers that use sustainable production methods, companies can reduce their energy and water consumption, lower their carbon footprint, and minimize waste. This can lead to cost savings in the long run, as well as increased efficiency in the supply chain. In addition, sustainable procurement can help companies to avoid costly penalties for non-compliance with government-implemented ESG regulations.
Positive Impact on Brand Reputation and Stakeholder Relations
Sustainable procurement can also have a positive impact on a company's brand reputation and stakeholder relations. Consumers, investors and the general population are increasingly concerned about the ESG impact of the products they buy and are more likely to support companies that demonstrate a commitment to sustainability. By implementing sustainable procurement practices, businesses can enhance their reputation and build stronger relationships with their stakeholders, including customers, employees, suppliers, and investors.
Alignment with the UN Sustainable Development Goals
Sustainable procurement is also aligned with the United Nations Sustainable Development Goals (SDGs), which provide a framework for addressing global challenges such as poverty, inequality, and climate change. By adopting sustainable procurement practices, businesses can contribute to the achievement of the SDGs, such as Goal 12, pertaining to Responsible Consumption and Production or Goal 13, Climate Action. This can help to create a more sustainable future for everyone.
Best Practices for Sustainable Procurement
Sustainable procurement is a critical component of any business committed to minimizing its environmental, social, and economic impact. However, implementing sustainable procurement practices can be challenging, especially for companies that are just starting out. To help businesses get started with sustainable procurement, we've compiled some best practices below.
Setting Clear Sustainability Goals and Metrics
One of the first steps in sustainable procurement is setting clear sustainability goals and metrics. This means defining what sustainability means to your organization and identifying specific targets that you want to achieve. As one example, your company might aim to reduce your carbon footprint, increase your use of renewable energy, or reduce waste in your supply chain. By setting clear goals and metrics, you can track your progress and measure the impact of your sustainable procurement efforts.
Engaging Suppliers and Fostering Long-Term Partnerships
Engaging suppliers is another critical component of sustainable procurement. By working closely with your suppliers, you can ensure that they are committed to sustainability and are aligning their practices with your goals. This may involve conducting audits or assessments to evaluate their sustainability performance and providing training or resources to help them improve. Fostering long-term partnerships with your suppliers can also help to build trust and collaboration, leading to more sustainable outcomes.
Finding a Place for Decarbonization in Your Organization
It's clear that procurement plays a critical role in decarbonizing our economy and achieving a more sustainable future. By adopting sustainable procurement practices, businesses can reduce their impact on the planet and contribute to the achievement of the UN's sustainability development goals.
To ensure that sustainable procurement becomes a priority for businesses, it's essential that organizations set clear sustainability goals and metrics, engage suppliers and foster long-term partnerships, and implement sustainable procurement strategies across the entire organization. This requires a commitment from leaders at all levels of the organization and a willingness to invest in the resources and tools needed to support sustainable procurement practices.
We must also recognize that sustainable procurement is not just a nice-to-have; it's a business imperative. By prioritizing sustainability in procurement processes, businesses can improve their bottom line, enhance their reputation, and create a more resilient and sustainable future for all.
In light of this, our team at ConvergentIS is encouraging businesses of all sizes and across all industries to prioritize sustainability in their procurement processes. For a starting place, we have put together a sustainability audit worksheet to help kickstart your next project.