Part Three: Navigating the Ever-Evolving World of Sustainable Procurement

08/20/2024

In this final instalment of the 3-part series, we navigate the complexities of ESG and sustainable procurement.

As climate-related goals transition from voluntary actions to mandatory commitment, ESG reporting is becoming increasingly vital. While various frameworks and guidelines exist, there is no standardised metric to follow, adding pressure due to limitations and potential biases. While the European Sustainability Reporting Standard (ESRS) is emerging as a potential benchmark, it's essential to remember that ESG regulations are evolving and new trends keep coming up, so organisations will need to adapt to keep up on what to focus on and how to report it.

ESG-Driven Procurement: Our Key Considerations

Conduct a Materiality Assessment: Identify the Sustainable Development Goals (SDGs) your organization can significantly impact.
Adopt a Category-Centric Approach: Develop tailored RFx questionnaires and assessments for different product or service categories to engage suppliers on sustainable practices. Eg: We can ask suppliers on the number of overseas trips utilised to deliver a consulting project, the end-of-life treatment of Capex equipment, etc.
Leverage Existing Frameworks: Utilise guidelines like ISO 20400

Sustainable Procurement A Journey that Requires Endurance

As Chee Kin mentioned “Sustainable procurement is a journey, not a destination, just like the pursuit of value/savings as a procurement practitioner has no end.” As the Procurement community may celebrate a significant achievement in financial savings from one initiative, market and business needs evolve, requiring constant re-contracting and renegotiation with suppliers. Similarly, ESG standards are constantly evolving, making it impossible to declare it fully implemented.

Fast Forward to 2030: Envisioning the Future of Sustainability

As stated by Garry, “decarbonization has often been taken for granted, but our biggest priority will be how procurement practices can create positive social impact to the wider community.”

By carefully considering the social implications of purchasing decisions, Chee Kin believes in a need to perform supplier assessment for reduction in Scope 3 emissions - like adopting the GHG Protocol for reporting. If there were any differences in their stakeholders’ standards, these will be immediately addressed.

Nina adds on that ISO 14067 is a tool that can be used as well. Understand scope of PCF calculation, e.g. which scope 3 categories are considered. Sustainability specialists in procurement can help to assess and guide the PCF data.

By fostering open communication, providing the necessary resources and support, and using recognized standards, you can effectively engage your supply chain in measuring and reducing Scope 3 emissions. If discrepancies arise, use collaborative approaches to bridge gaps and ensure consistent and reliable emissions data.

As we progress down the road, sustainability specialists within procurement (esp. for on-site assessments and decarbonization) will emerge. Nonetheless, as more and more firms aim to achieve their net-zero targets and there is heavy reliance on renewable energy sources, there may be intensified competition and increasing constraints in the availability of such resources and new technologies e.g. hydrogen, ammonia, slag.

A Darker Side of ESG: A Potential Threat in Modern Slavery

Around 40% of the global supply of polysilicon – an integral component of solar panels – comes from Xinjiang Uyghur Autonomous Region, where it is reported to practice in state-sponsored forced labour.

As mentioned by Nina, a direct mitigation strategy in avoiding this is to perform supplier screening. Make sure you know the source of the products and ask them to sign COC, self-assessment, Conflict minerals report, etc.

Violaine feels conflicted between carbon, plastic pollution and the social impacts. When pursuing sustainability goals, the reality of not being able to account for every aspect of ESG remains. All aspects need to be considered and ""weighted"" and select the solution that has the least effect on other sustainability issues, or at least short-term issues that can be fixed.

The EU taxonomy's "do no significant harm" principle offers a valuable framework for navigating these complexities but its guidelines are not fully substantial on the "how". By considering both the environmental and social impacts of a decision, organisations can make more informed choices.

Our Contributors: