Responsible Purchasing Policy: Why and How to Implement It to Improve Company Impact?

For many companies, indirect emissions related to procurement are dominant in their GHG emissions footprint. However, as Scope 3 regulatory obligations tighten, it is becoming urgent to establish and manage more responsible and effective procurement strategies. What are the main steps to achieve this?

Thomas Guyot
Chief Strategy Officer
Publication : 
10.03.2023
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‍2023, a strategic year for corporate responsible procurement policies

In France, the V5 of the BEGES methodology which came into force on January 1, 2023, made it mandatory to include significant indirect emissions in their regulatory carbon accounting. At the European level the CSRD will soon require nearly 50,000 companies to provide detailed reporting of their Greenhouse Gas emissions across all three scopes, requiring these companies to be able to measure or estimate the impact of their suppliers. The CSRD will also require these companies to provide a detailed action plan to transition to a low-carbon model, particularly concerning their Scope 3 and thus their procurement.

The year 2023 will undoubtedly mark the widespread consideration by companies of the sustainability of their raw material, service, and product purchases, which are the main emission sources for Scope 3.

While the regulatory framework will primarily constrain large organizations and require them to closely link their procurement strategy to their overall environmental performance, many companies have already anticipated the importance of adopting a serious sustainable procurement policy. In order toanticipate stricter standards but also to gain resilience across their entire value chain. This is not surprising given that procurement accounts for an average of 50% of revenue for companies (up to 70% in industry) and often account for at least between 80% and 90% of corporate greenhouse gas emissions.

Optimizing procurement is the preferred strategy for many companies to make their organization more efficient, more resilient, and more resource-efficient. In a word, more sustainable. Large groups like SNCF or EDF understood this a long time ago and embarked on the path of sustainable procurement over 10 years ago and are still today pioneers in the field's best practices.

Embracing sustainable procurement therefore becomes imperative for your company. But how can you take effective action?

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What is the definition of a responsible procurement policy?

Adopting a responsible procurement policy starts by rethinking its business needs. A purchase with no environmental impact is a purchase that doesn't exist. Therefore, any purchase can be deemed responsible if it is necessary for the proper functioning of the company and integrates, into the supplier selection process, criteria and provisions for environmental protection or enhancement and social progress. Following this logic, particular consideration will be given to the life cycle of purchased and consumed products and resources.

The criteria for responsible procurement can also include quality, ethical standards, transparency, or the integration of stakeholders throughout the production and delivery process of the purchased product.

A responsible procurement policy is a comprehensive approach that concerns the entire company and profoundly impacts its business model and organization.

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The direct benefits of implementing a responsible procurement policy

The implementation of responsible procurement is a unifying project for the entire company, with multiple benefits that will be realized at several levels.

Reflecting on a company's needs, its production needs, the composition of its products, their utility, and their final uses is a strong driver of innovation and value creation. Combined with an eco-design approach, this questioning will necessarily lead to creating synergies with competent suppliers, strengthening the relationship with them, and fostering mutual trust between these suppliers and the company. This driver of innovation, coupled with the improved consumer perception linked to the company's ethical approach, can ultimately create a real competitive advantage.
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A successful responsible purchasing policy will also help to limit risks for the company. Firstly, financial risks, with better cost control and anticipation of upcoming regulatory sanctions concerning environmental aspects. Climate risks and public image degradation by selecting sustainable products that respect people and the environment. Finally, supply risks, by prioritizing a diversified, resilient, and local portfolio of partners.

To summarize, implementing a responsible purchasing strategy will enable you to:

  1. Improve the company's overall performance.
  2. Improve the company's image and make its employer brand more attractive.
  3. Increase the quality of offerings and the capacity to innovate.
  4. Strengthen relationships with suppliers and partners.
  5. Achieve better cost control
  6. Achieve better risk control.
  7. Remain compliant with the regulatory framework regarding environmental and social aspects.

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The key steps to implement a responsible purchasing strategy in a company

Implementing a responsible purchasing policy can seem complicated if you don't know where to start. Here are 5 steps to help you confidently start developing your sustainable purchasing strategy:

🔍 Step 1 - Conduct a diagnostic of your current purchasing policy

Conducting a diagnostic of your current purchasing policy will allow you to clearly identify your company's needs and assign them a level of importance, to formalize current decision-making criteria when choosing a supplier, and to understand your support policy for your key suppliers. An internal audit will also help identify existing best practices and potential changes that could complement them.

An initial diagnostic is fundamental for implementing an optimal, effective strategy that addresses your company's specific characteristics. To conduct your diagnostic, you can:

  1. Conduct qualitative interviews with your internal and external stakeholders.
  2. Review and interpret your company's key documentation, especially regarding your suppliers.

Following this assessment, you will have formed an initial understanding of your current situation and identified initial opportunities for improvement.

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🗺️ ÉStep 2 - Map your procurement and measure its impacts

A comprehensive mapping of all your purchases and suppliers will subsequently allow you to prioritize your future responsible procurement action plan. Mapping your purchases should enable you to obtain the following data, which will need to be cross-referenced with your future responsible procurement criteria:

  • An exhaustive list of your purchases
  • An exhaustive list of your suppliers
  • A grouping of your purchases by purchasing segment or product family
  • The carbon footprint of your purchases, notably used to calculate your company's Scope 3 emissions.
  • The overall environmental impact of each of your purchases: pollution, water usage, impact on biodiversity, etc.
  • The Life Cycle Assessment (LCA) of the products you purchase.
  • The social impact of each of your purchases.

An effective mapping often results from collaborative work between the various internal and external stakeholders of the company. Maximally involving your suppliers in this process is crucial, as they hold key information regarding the impact of their products.

Today, unfortunately, few suppliers are able to provide an LCA for their products.

This mapping should enable you to obtain an initial prioritization of your purchases and suppliers. This prioritization will need to be reviewed based on new criteria for your procurement policy, which you will define later.

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🎯 Step 3 - Formalize your new purchasing policy and define supplier evaluation criteria

Now it's time to define and formalize your vision, key directions, and concrete objectives for your new responsible purchasing policy. This vision will notably take the form of key evaluation criteria for your purchases and suppliers. How will you judge whether a purchase should be made or not? What aspects do you want to prioritize when selecting your suppliers?

Your criteria will naturally be specific to your industry and organization (size, locations, business model, etc.) and it's important toalign your criteria with your company's CSR policy to ensure consistency in your actions and the buy-in of your stakeholders for the future deployment of your new purchasing policy.

The mapping carried out in the previous step should also help you define these criteria. If your company aims to decarbonize its operations and your purchases represent a significant portion of your Scope 3 emissions, you will surely place more importance on criteria related to your suppliers' level of commitment and maturity regarding carbon issues.

To define your criteria, you can also refer to the 7 core principles of ISO 26000 (the reference standard for CSR): governance, human rights, labor practices, fair operating practices, consumer issues, environment, and community involvement and development.

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🤝 Step 4 - Define and manage a responsible purchasing action plan

Once your purchasing criteria and supplier evaluation framework are defined, you will be able to use this analytical lens tothoroughly evaluate your purchases and suppliers. This new evaluation will notably help you toidentify priority purchasing segments to focus on and key suppliers to engage in line with your overall CSR approach.

This evaluation of your purchases and suppliers, when compared with the objectives of your new policy, should allow you to identify a concrete action plan to implement. What are the steps to follow? Which stakeholders should be involved in implementing this action plan? What KPIs will help you track the progress and success of your actions? What is the timeline for these actions?

Since each purchasing segment has its own specificities, it will be relevant to devise a purchasing strategy and an action plan specific to each segment you mapped in the previous step.

Your action plan could, for example, include actions such as:

  • Ask a supplier to share their CSR policy and impact figures.
  • Support a key supplier in improving their environmental impact.
  • Map potential new local suppliers.
  • Guide production and innovation to reduce purchasing volumes for a product category with high environmental impact.
  • etc.

The deployment of your new strategy will likely involve three pillars:

Supplier relationships. For your responsible purchasing strategy to work, your good relationship with your suppliers will be crucial. Bringing your strategy to life requires building a trusting relationship with your suppliers by giving them clear directives, explaining your approach, and supporting them in their own CSR improvement efforts.

Engaging a network of stakeholders. To optimize your performance, you can suggest that your purchasing department visit the production sites of purchased products to enhance their understanding of the ecosystem and global performance challenges. Raising awareness among internal and external teams can also involve holding workshops, top-down communication (newsletter, etc.) and providing practical guides.

Continuous improvement. When managing a responsible purchasing strategy, it is essential to implement tools to monitor performance. You can identify friction points and improve your internal processes to significantly boost your overall performance and the long-term sustainability of your company.

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📣 Step 5 - Report and Communicate

Communicating your sustainable procurement strategy offers numerous benefits, such asa more attractive employer brand and an enhanced external image.

It will be essential to base your communication on relevant KPI measurements : evolution of the % of engaged suppliers, carbon footprint related to procurement, pollution related to procurement, working conditions within the partner portfolio, etc.

Communicating your progress is an integral part of your sustainable procurement strategy, aiming to unite stakeholders and society around this crucial issue.

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Take action, simply

Implementing an ambitious sustainable and responsible procurement policy is one of the most effective and impactful actions your company can take to improve its overall performance and environmental impact.

Such a strategy might still seem complex to implement and manage without the right tools and support. The Supply Chain Tennaxia ESG module allows you to define your own evaluation grid in a user-friendly interface, map all your suppliers, and quickly identify which suppliers to prioritize for engagement in your improvement process.

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➡️ Learn more about the Supply Chain module from Tennaxia

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