The Business Case For Sustainable Procurement
There are plenty of reasons why you should want to focus on ESG and sustainable procurement.
The most obvious is that it’s the right thing to do. We all live on Earth together and businesses have a massive impact on both the environment and people’s well-being.
Unfortunately, sentiment doesn’t pay the bills. Or at least that’s what your CFO will say.
It’s the age-old battle that procurement must fight. Making the business case.
Whether it’s a new technology, headcount or sustainable procurement strategy, you have to be able to make the business case otherwise nothing is going to happen.
Luckily, ESG has jumped up the agenda at many companies, but if you’re still trying to take that next step, here’s exactly how I would make the business case for sustainable procurement.
Step One: Know Your Audience
Before we do anything else, let’s decide who our target audience is.
Do you need to convince your manager, department head, CFO, CEO, Board of Directors?
For the sake of this guide, let’s go with CFO, I’m the Director of Procurement and I want to make sustainable procurement a priority next year.
Most business cases fail because of a simple reason: we aren’t speaking their language.
What matters to us probably doesn’t matter to them the same way.
The key here is to find what they care about and frame the case around that.
So, for the CFO, they care about revenue, cost savings, margins, EBITDA, the bottom line.
Let’s use it.
I’m not going to talk about recruiting better talent to the CFO. I’m not going to talk about material efficiency. I’m not going to talk about brand image.
I’m going to talk about savings and value.
Step Two: Figure Out Your Strategy
Take my advice, don’t rush in with a half-baked plan.
I used to do it all the time. I read an article, I get inspired, I start envisioning how great this new strategy will be, and I rush to go tell someone.
Unfortunately, in my excitement I forgot a key detail: no one can read minds.
The person I just ambushed with my idea didn’t read that article. They aren’t seeing what I’m seeing in my head, and I didn’t take the time to really think through the strategy enough to explain it.
So instead of that awkward scenario, wait a few days. Think it all through.
Collect your thoughts, write them down and ideally map them out visually.
You need to be able to tell a coherent story and that takes time to put together.
Better yet bring in other stakeholders and get their opinion too.
Step Three: Get Support
That brings me to my next step, involve other people.
Procurement alone can only do so much. We need other people bought-in to make sustainable procurement a reality.
You’re likely going to have to repeat steps 1 and 2 unless they’re already passionate about sustainability.
Put it in them terms. What will they get out of it?
You want to do this for two reasons:
- Your plan is probably going to get shot down if other stakeholders aren’t on board. C-Suites will sniff out a poorly thought-out plan.
- Your plan, even if it gets approved, will never work if other stakeholders aren’t bought in.
Procurement’s job is to provide value to the business. We need other stakeholders to feel a part of the process for any sustainability strategy to work.
Step Four: Map Your Tactics and Strategy Together
You know your overall strategy, but do you know how to get there?
Do you have a current technology suite to support this kind of strategy? What types of supplier development programs are you going to need? What kind of internal training needs to happen?
While you don’t need to get this granular during a CFO pitch, it will help you be confident and prepared if you think about these things up front.
This is also a good time to look out to peers or solution vendors. What does best practice look like? What kind of KPIs should you be setting? What does success look like?
For me, I’m going to look for a company that I think is nailing sustainable procurement, I’m going to reverse engineer why, and then I’m going to present that to my CFO.
People like proof.
Step Five: Making the Business Case for Sustainable Procurement
I’ve practiced, I’m prepared, my key stakeholders are on board, I know exactly how sustainable procurement is going to impact revenue and our value chain.
Now I just need to make the case.
Keep in mind that nothing is going to change overnight. You might have to keep trying to win over leadership. It can take time, but if you follow these steps, you’ll get where you need to go.
Other Benefits of Sustainable Procurement
Here are a few of the key benefits of sustainable procurement that will help you frame your own case.
- Customer Satisfaction: Consumers are putting more and more emphasis on sustainability and ESG when making buying decisions. Suppliers too. This trend isn’t going away, we need to embrace it.
- Talent: People want to work somewhere purpose-driven. Having a focus on ESG and sustainability will help attract and retain top talent.
- Compliance & Risk: Governmental regulations will continue to become the norm for environmental and workers’ rights issues. Especially in supply chains, look no further than the Supply Chain Due Diligence Act in Europe for proof.
- Brand value: According to the World Economic Forum, sustainable procurement practices lead to a 15-30% measurable increase in brand value. This also makes you more attractive to potential investors.
- Cost: Adopting a mindset of total value or total cost of ownership instead of simply frontline cost can lead to savings throughout the value chain. Think utility savings and more valuable supplier relationships.
- Efficiency: Ideas like the circular economy can lead to reduced waste, higher resource efficiency, and this kind of thinking breeds innovation and creativity which can become a source of competitive advantage.
Sustainability and ESG are going to continue growing. It’s great that those of us in procurement recognize that and see the potential, but everything hinges on getting the rest of the organization bought in.
Luckily there are plenty of benefits to convince even the most skeptical of people