The Future of Green Procurement and its Role in Sustainability Initiatives

Green procurement plays an essential role in driving sustainability, and is often the missing link between stakeholders, suppliers and commercial teams.

As sustainability goals continue to trend in 2020 and beyond, companies and suppliers need to focus on practical, incremental green improvements.
As sustainability goals continue to trend in 2020 and beyond, companies and suppliers need to focus on practical, incremental green improvements.

Through the first months of 2020, almost every company was pushing broad, long-term sustainability pledges supporting climate change. Then the Coronavirus disease (COVID-19) pandemic hit the United States in March, and sustainability went out the window. Businesses went into survival mode to manage the aftershocks from the major disruptions to global manufacturing and supply chains. And as companies slowly emerge from the crisis, they redirect their focus to earlier pledges on sustainability and an accountability of short-term efforts to meet the outlined goals.

Green procurement plays an essential role in driving sustainability, and is often the missing link between stakeholders, suppliers and commercial teams – enabling both short- and long-term sustainability initiatives. There is a unique opportunity for companies to rebuild their business relationships and supply chains emerging from the pandemic with sustainability strategies at the forefront.

Innovation drives sustainability

As sustainability goals continue to trend in 2020 and beyond, companies and suppliers need to focus on practical, incremental green improvements that balance cost and efficiency in their supply chain to create and meet short term goals. Additionally, many chief procurement officers (CPOs) see sustainability as a key tool to retain top talent passionate about the subject, which bodes well for future sustainability innovation.

A huge amount of innovation is led by smaller organizations that are more agile. But, corporations like with massive investments toward sustainability will need to help them on this journey. With collective collaboration, all companies should capitalize on new growth areas of sustainability.

Certain innovations such as motion sensor or LED lights in warehouses and idle areas could be adopted quickly, saving energy, costs and potential tax benefits. Small changes such as this could create tangible cost benefits whilst also being better for the planet. Other examples of small sustainability innovations include packaging optimization, specifically recycled materials limiting dumping into local landfills. Through measures such as these, businesses and customers would be able to see the local impact, which has been a huge focus across sustainability campaigns. 

As many large companies implement major sustainability strategies and initiatives, there will be a ripple effect throughout industries as they seek to maintain the growing sustainability demands of their customers. While many small businesses will not have immediate access to the resources needed to make these improvements, there will be shifts in innovation that will emerge in the supply chain and lead the way to create a greener future.

Building a game plan

When developing long-term initiatives, large companies are missing opportunities in the short-term and day-to-day to adopt green initiatives into their procurement strategy toward building a savings for the future. While these ambitious, long-term sustainability goals are fantastic, businesses must challenge procurement teams to seek out more immediate opportunities that can make a difference now and continue to be built upon.

Let’s start with an opportunity like packaging optimization. Manufacturing clients need to analyze their full range of packaging to optimize sizing and minimize material waste. As consumers continue to receive unnecessary box sizes and packaging for today’s purchases, especially in a growing e-commerce world, it is important to ensure efficient packaging is available and scalable to improve everything from material cost to space utilization. A troubling statistic is that within the first two quarters of 2020, e-commerce saw almost a 20% growth rate in 2020, up from almost 15% in 2019, according to Digital Commerce 360 analysis of U.S. Department of Commerce data. With those growth numbers, if there are not improvements to packaging, there will be exponential waste and lost cash.

Long-term, massive sustainability initiatives may seem overwhelming, but sustainability teams may be the only ones at the company focusing on these initiatives. Company leadership needs to empower procurement teams to make decisions based on sustainability criteria, or it will continue to be an afterthought with mid/lower level employees at companies.

Recovery and investment

Sustainability-driven businesses have the capabilities to promote economic recovery and take the lead on community development in areas severely impacted by COVID-19. Re-investment strategies in communities, warehousing, technology and environmental protections will be used by companies that want to improve their communities, stabilize their business and meet customer demands.

Large companies have investment funds to help local organizations invest in sustainable approaches, propelling that ripple effect across industries to become more sustainable. Re-investing into warehousing and delivery efficiencies within the supply chain equates to lower consumption of fuel and labor. Efficiency software and technology, transportation management systems (TMS) and warehouse management systems (WMS) improves utilization and efficiency of the warehouse, saves energy, lowers labor cost and lessens physical depreciation of units. Investors prioritize companies who have positive environmental, social and governance (ESG) ratings and need to see companies actively engaging in sustainable approaches concerning the planet, people and profit.

What is green procurement?

To drive sustainability initiatives, supplier relationships are key. Green procurement’s role will be essential as it manages the relationships with the suppliers and influences their outcomes.

Procurement specialists need to ensure that upstream suppliers are adhering to environmentally friendly standards. They also should dive into developing greener outcomes – opportunities like optimized packaging and recycling depots at retail establishments to reinsert materials back into the supply chain. Supplier and buyer relationships need to mature from transactional manufacturers to collaborative partners to improve sustainable practices, design and materials.

Green procurement helps companies develop and assess their future business goals in sustainability, introducing sustainability initiatives to more companies and communities. Procurement teams should also liaison between the supply chain and commercial teams to identify what sustainability initiatives will actually influence customer purchasing habits.

The future of corporate sustainability using procurement post-COVID-19

COVID-19 has altered the future of procurement, and the trends we can expect in green procurement include risk mitigation within the supply chain, technology as an upstream and downstream visibility tool and a newfound focus on social sustainability due to the cost of underestimating frontline workers.

As businesses look to successfully rebuild, restructure and emerge from the pandemic, leaders cannot overlook the role sustainability will play in cost savings and reputation building. It may decide the success or failure of a company’s future when the “New Normal” begins.