The global climate is changing faster than what most people realise, and businesses are taking note. In fact, 46% of the world’s largest companies publicly report their greenhouse gas emissions and more than half of them plan to reduce their emissions significantly in the next 5 years.
Furthermore, a study by Simon-Kucher & Partners found that environmentally friendly purchase decisions have become front-of-mind for consumers in the past five years, with 85% making an effort to be more eco-conscious. Companies who conduct green procurement practices are more likely to see improved growth, so let’s get straight down to business and learn all about it.
A global shift to being more “green”.
Demand from consumers and a global shift to being more “green” means that organisations are prioritising recyclable products, eco-friendly materials, clean energy sources, fuel-efficient systems and more, in a bid to offset their carbon emissions.
What is Green Procurement?
Green procurement specifically refers to the practice of businesses acquiring products and services that have the least adverse environmental impact. It refers to purchasing practices that value the total cost of ownership of a product from cradle-to-cradle (throughout the life cycle of the product). As we’ve mentioned before, demand from consumers and a global shift to being more “green” means that organisations are prioritising recyclable products, eco-friendly materials, clean energy sources, fuel-efficient systems and more, in a bid to offset their carbon emissions.
You may have possibly heard the term “sustainable sourcing”, too. Sustainable sourcing refers to the procurement of suppliers who align with social, ethical, and environmental performance factors. Sustainability sourcing and green procurement are often used interchangeably and work to minimise a company’s environmental impact and offset carbon emissions, while further aligning with the company’s corporate social responsibility.
Green procurement is a smart, cost-efficient way to decrease your carbon footprint, though there are cost benefits and challenges associated with it and it is therefore essential that you make informed decisions about your purchasing habits.
Green procurement is smart and cost-efficient.
Green procurement is a smart, cost-efficient way to decrease your carbon footprint, though there are cost benefits and challenges associated with it and it is therefore essential that you make informed decisions about your purchasing habits.
Communities in the vicinity of green organisations benefit from quality air and water in their environments and thus live healthier lives.
Four Benefits of Green Procurement
- It’s cost-effective. “Green” products and services are comparable on a quality level and, while their initial cost may be more expensive than alternatives, the lifetime cost of these products and services is where they outcompete in terms of value. These products use less water, electricity and fuel and require less extensive waste management systems, if any at all.
- It generates positive publicity. Organisations that implement good business practices prosper in the marketplace as more consumers seek out environmentally friendly products and services, and actively shun those with larger carbon footprints.
- It protects the environment. Practising “green” purchasing helps to mitigate climate change as it preserves natural resources, conserves water, and reduces waste. Research by McKinsey highlighted that “strong ESG credentials drive down costs by 5 to 10 percent, as these companies focus on operational efficiency and waste reduction.”
- It can positively influence an employee's health. Communities in the vicinity of green organisations benefit from quality air and water in their environments and thus live healthier lives. It not only impacts their physical wellbeing but mental wellbeing as well; everyone wants to feel as though they are contributing to a better tomorrow and thus are happier in their work lives for it.
Four Challenges Associated with Green Procurement
- Lack of knowledge. The lack of knowledge regarding sustainability can be seen throughout the company hierarchy, from procurement managers who aren’t sure of how to assess their suppliers, right through to shareholders who do not know enough about the benefits of sustainable sourcing. The only way to address this challenge is through education and training on sustainable practices.
- Lack of internal resources. Time and funding are two of the largest contributing resources to green procurement and businesses need to provide both if their procurement teams are to successfully evaluate suppliers and monitor the company’s sustainability practices.
- Limited support from suppliers. Just as it takes time and funding for your procurement team to understand and affect sustainability processes within your organisation, so too will it require those same resources for your suppliers. Your options are to either offer support to existing suppliers or switch to suppliers who align with your sustainability goals.
- Higher initial costs. The initial costs of green procurement, and the costs involved in amending internal policies and procedures to align with these new sustainability goals are high, but the investment into your company’s, and the globe’s, future is where the true value lies.
More companies are making the shift to reduce the negative environmental impact of their business operations and have come to realise just how much their supply chains affect their carbon footprints.
Analysing these supply chains opens the door for them to shift focus to green procurement with an emphasis on social, ethical, and environmental performance factors, to reduce those carbon emissions and gain a larger portion of the market share.