Sustainable Procurement -

Introduction
Module 3
ELECTRONIC WARNING NOTICE FOR COPYRIGHT
STATUTORY LICENCES
Outlines
• What is purchasing and procurement?
• What is sustainable procurement?
• Changes in procurement for sustainability
• A framework for sustainable procurement
Purchasing and Procurement
Purchasing
To buy materials of the right quality, in the right quantity from the right
source, delivered to the right place at the right time at the right price.
Procurement
The process undertaken by the organizational unit that, either as a
function or as part of an integrated supply chain, is responsible for
procuring or assisting users to procure in the most efficient manner the
required supplies at the right time, quality, quantity and price and the
management of suppliers, thereby contributing to the competitive
advantage of the enterprise and the achievement of its corporate
strategy.
Procurement’s Goal
Procurement’s goal at the most basic level is to obtain third party goods
or services at the most competitive price and the best quality needed
for the everyday functioning of the business.
Sustainable Procurement
Sustainability:
• is a key driver for procurement operations, along with quality and
price
• should be embedded into the company culture
• should be integrated into procurement processes
• is an individual’s (employee’s) behaviour to align their decisions with
sustainability
All stakeholders (including employees and suppliers) should
understand the purpose, the strategy, and the roles of sustainability
Role of Procurement in Improving Sustainability
• Corporations are responsible for sustainability and
• Procurement is the front line of corporate sustainability
• Real challenges lie where the raw materials are extracted along the
supply chain
• Procurement of goods should not come at the expense of damage to
the environment or people who live where extraction takes place
• There is a call for responsible procurement by different sections of
society – manufacturers, consumers, governments, regulators,
investors
Changes in Procurement for Sustainability
Unprecedented and powerful forces for change:
• Intense consumer pressure
• Insistence from investors and the financial markets
• Increasing legislation
• An impending climate catastrophe
• Employee expectations from the company they work for

Sustainability as a corporate agenda

Sustainability as a Corporate Agenda
• Procurement can push the sustainability agenda by:
• responsible corporate spending
• selecting sustainable suppliers
• creating KPIs that connect to sustainability objectives
• developing a partnership with suppliers
• New challenge for procurement
• How value can be created beyond price in the sourcing process?
• Transformation of processes
• Changing procurement processes to sustainable processes
Consumers – The Main Driving Force
• A staggering 71% rise in popularity of searches for sustainable goods
• over the past 5 years (WWF, 2021).
• A surge in consumer clicks for sustainable goods in high-income
countries
• USA, UK, Germany, Australia, and Canada
• The trend is also increasing in developing and emerging economies
• Ecuador (120%), Indonesia (24%)
• India (190%), Pakistan (88%) Dramatic increase
New Regulations for Sustainability
• Under a new law agreed between member states and the EU
Parliament, the bloc will cut carbon emissions by at least 55% by 2030
• Achieved by major overhauls of energy and transport sectors
• Renovate and retrofit buildings to energy-efficient
• Introducing electric vehicles in warehouses
• New law requires companies to disclose information on:
• How they operate?
• How they manage social and environmental challenges?
• A collaboration between Global Reporting Initiative (GRI) and
European Financial Reporting Advisory Group (EFRAG)
Capital Markets Reflect Corporate Sustainability Trends
• Sustainability Accounting Standards Board (SASB), GRI and Task
Force on Climate-related Financial Disclosures (TCFD) working
together to:
• define sustainability standards to incorporate into investment process

• Sustainability reporting for responsible investment

• reporting for investors, regulators, and stock exchanges
• to create sustainable capital markets
Sustainable Procurement Definition
Sustainable procurement can be defined as:
“the consideration of environmental, social, ethical and economic issues
in the management of the organization's external resources in such a
way that the supply of all goods, services, capabilities and knowledge
that are necessary for running, maintaining and managing the
organization's primary and support activities provide value not only to
the organization but also to society and the economy” (Miemczyk,
Johnsen, & Macquet,2012, p. 489)
Sustainable Procurement Definition
Sustainable procurement is the integration of sustainable development
and social responsibility into the acquisition processes of private and
public organizations. It consists of integrating environmental, social
and economic criteria into the procurement processes of goods and
services as a means of reducing the impact on the environment,
increasing social benefits and enhancing the economic sustainability of
organizations throughout the product life cycle.
Source: ECPAR - Sustainable Procurement
Sustainable Procurement and TBL

Source: ECPAR - Sustainable Procurement

Sustainable Procurement Definition
Another definition by (O'Brien, 2023, p. 116) is:
“A structured and systematic approach to assess the supply base relative
to the firm’s stated direction and objectives for sustainability, as informed
by its stakeholders, and to work in concert with the wider organization to
identify, implement and embed new procurement approaches and
improvement programmes for what we buy, who we buy from and what
happens in the entire supply and value chain network, prioritized
against available resource so as to deliver the required social and
environmental value alongside economic value as appropriate to make a
strategic contribution to realizing the firm’s mission overall.”
Areas of Focus for Sustainable Procurement

Source: Figure reproduced from O'Brien (2023, 117)

OMEIA Sustainable Procurement Process
• O'Brien (2023) introduced a sustainable procurement process or
framework called OMEIA
• O – Objective
• M – Measure
• E – Evaluate
• I – Implement
• A - Augment
What is OMEIA?
• OMEIA is a structured approach to sustainable procurement
• OMEIA is a methodology for sustainable procurement
• It is a five-step process for driving business improvement
• It covers the wider organizational goals for sustainability, informed by
the firm’s stakeholders
• The process starts with sustainable procurement strategy and goals
and is translated into three focus areas of ‘what we buy’, ‘who we buy
from’ and ‘what happens in our supply chains’
• The focus areas lead to specific initiatives and projects
Source: Figure reproduced from O'Brien (2023, 121)
‘What we buy’
• An important part of OMEIA is category management
• Category management relates to the first focus area, ‘what we buy’
• Category management is important for spend analysis
• The focus of category management is not only to reduce cost but also
to reduce supply-side risk and unlock new value and innovation at the
same time achieving sustainability
• For OMEIA, we use 5i Category Management (discussed later in the
unit)
1. Initiation 4. Implementation
2. Insight 5. Improvement
3. Innovation
‘Who we buy from’
• Supplier Relationship Management (SRM) relates to the second focus
area of OMEIA, ‘who we buy from’
• Various different components of SRM are critical to the success of
sustainable procurement.
• Therefore, we look at SRM from a sustainability lens
• This includes supplier performance management, supplier
development, and managing supplier risks
• For OMEIA, we use 5S and 5A SRM methodologies (O'Brien, 2022)
5S SRM Methodology
• 5S derived from Japanese lean methodology
• It stands for:
• Sort, Simplify, Scan, Standardize, Sustain
• When applied to SRM it means:
• Sort the suppliers who have the best potential to build end customer value
• Simplify how we work and interact together to make it more effective
• Scan supplier performance using KPIs derived from customer expectations
and act where needed
• Stabilize with new processes, procedures and ways of working
• Sustain through ongoing monitoring, measuring and review
5A SRM Methodology
• 5A is a five-stage Strategic Collaborative Relationship (SCR) process
• It stands for:
• Activate, Analyze, Ambition, Accomplish, Advance
• Stage 1 – Activate is concerned with kicking off the project
• Stage 2 – Analyze is concerned with data gathering and internal goal setting
• Stage 3 – Ambition is about defining the SCR strategy and engaging with the
supplier
• Stage 4 – Accomplish is about realizing the strategy and putting in place
joint working as needed
• Stage 5 – Advance is about working towards new goals as well as ongoing
relationship management
Summary
• The module started with the definitions of purchasing, procurement
and sustainable procurement.
• The module discussed why procurement practices need to be
changed (stakeholder pressure)
• The importance of procurement in improving sustainability has been
discussed.
• A sustainable procurement framework, called OMEIA, is introduced.
• We continue exploring this framework for the rest of the unit.
References
Aichbauer, Stefan, Martina Buchhauser, Agnes Erben, Sven Steinert,
Detlef Tietze, and Emilia Wiking. 2022. Responsible Procurement :
Leading the Way to a Sustainable Tomorrow. Management for
Professionals Ser. Cham: Springer Nature.
O'Brien, Jonathan. 2023. Sustainable procurement : a practical guide to
corporate social responsibility in the supply chain. 1st. ed. London:
Kogan Page.
WWF. (2021). Search for sustainable goods grows by 71% as ‘eco-
wakening’ grips the globe. Retrieved from WWF Press Release
https://www.worldwildlife.org/press-releases/search-for-sustainable-go
ods-grows-by-71-as-eco-wakening-grips-the-globe
Miemczyk, J., Johnsen, T. E., & Macquet, M. (2012). Sustainable
purchasing and supply management: A structured literature review of
definitions and measures at dyad, chain and network levels. Supply
Chain Management: An International Journal, 17(5), 478–496.
O'Brien, Jonathan. 2022. Supplier Relationship Management :
Unlocking the Value in Your Supply Base. London, UNITED KINGDOM:
Kogan Page, Limited.