5 Steps to Achieve a Climate-compatible procurement practice

A company that wants to efficiently reduce emissions and leverage savings potential has to take the supply chain into account. This is because up to 90 % of a company's emissions does not originate internally, but along the entire value chain through the procurement and further processing of raw materials. Tackling indirect emissions and critically examining the company's supply chain is therefore a decisive step toward decarbonizing the business.

CLIMATE POLICY DEMANDS RESPONSIBLE PROCUREMENT PRACTICES

This is now also being demanded by political regulations. The supply chain protection law passed by the German government initially obliges companies with more than 3,000 employees to comply with environmental and social standards along the entire supply chain from 2023. But companies are not only facing new legal requirements: In the future, businesses will have to meet the growing expectations of a wide range of interest groups. Customers and consumers´ interest in sustainable products and services is increasing. Additionally, investors will also take into account climate-relevant standards in the future. To face all these challenges, a company can implement a climate-compatible procurement practice. 

While a conventional procurement practice is mainly concerned with acquiring high quality at the lowest possible price, climate-compatible sourcing additionally focuses on including ecological factors in procurement decisions, which includes taking responsibility for the social and climate-related practices of suppliers. 

THE OPPORTUNITIES OF CLIMATE-COMPATIBLE PROCUREMENT FOR YOUR COMPANY 

Many companies still underestimate the opportunities of climate-compatible procurement. Yet, sustainable procurement practices and networking with climate-neutral suppliers offers great CO2 savings potential for companies. Close cooperation with suppliers enables reliable supply and reduces risks such as cost fluctuations or supply interruptions. Therefore, responsible resource extraction and processing not only enables energy- and resource-saving working methods, it also enhances a company's reputation and employer attractiveness. Companies that implement climate-relevant procurement as a central component of supply chain management are also increasingly achieving competitive advantages and minimizing risks.

CLIMATE-RELEVANT PROCUREMENT – HOW DOES IT WORK?

Implementing a climate-compatible purchasing practice means to integrate social, ethical and environmental factors into the supplier selection process and the overall procurement strategy. The aim is to source products and services in a way that will not negatively impact the environment and society. For this, ecological, social and economic factors need to be taken into account in the whole process of a product, from production to disposal. 

Above all, a sustainable procurement operating model is designed to ensure that every element of the conventional procurement process is complemented by climate-relevant activities. This not only includes building strong and long-term supplier relationships. Furthermore, employees need to be trained in accordance with the underlying goal. Also, investing in digital tools is helpful to facilitate both cost and sustainability transparency throughout the supply chain. Transparent climate-relevant data and key figures along the supply chain is the basis for developing specific solutions and adapting processes. In the following, we will show you five relevant steps that help your company to facilitate a responsible sourcing practice and building stable long-term relationships with suppliers.

5 PRACTICAL STEPS TO IMPLEMENT SUSTAINABLE PROCUREMENT

1. Analyze supply chain and set targets

Despite growing awareness, the supply chain and its influence on a company's own climate performance often remains a "black box". Therefore, the first step for climate analysts and procurement leaders is to create an overview of the company's climate performance by collecting climate-relevant data from their suppliers. Not only are company-wide emissions relevant - a critical examination of internal climate management and the established climate strategy is also part of a comprehensive overview. Based on this, your company can set targets and define individual measures. In accordance with your own business policy, you can develop a clear vision of how climate-relevant procurement should be implemented in your company.

2. Communicate expectations to suppliers

​​By laying out your own requirements for suppliers within a code of conduct, for example, you can transparently communicate your expectations and introduce your suppliers to the company's climate targets. The code acts as a benchmark for the desired level of performance and provides binding guidelines for climate-related standards for suppliers. While selecting suppliers, it is also important to consider their climate performance alongside the set criteria, and use it as a metric for the procurement process.

3. Climate-compatible procurement through cooperation with suppliers

Based on transparent climate-relevant data, your company can build trusted business relationships with suppliers and shape a climate-compatible transformation in the long term. Such business relationships are particularly successful if requirements are set and conveyed and furthermore, suppliers are supported in implementing them.

The goal is to cooperate proactively and systematically with all suppliers and to collectively outline challenges, in order to develop customized approaches to solutions. This also ensures that suppliers are well-aware about business benefits and are incentivized to pursue a climate-compatible business model. Additionally, you motivate them to increasingly take social and environmental standards into account in their own procurement practices.

4. Monitoring and evaluating measures

By continuously monitoring ongoing measures, your company can make successes quantifiable and highlight positive developments. In addition, processes can be adjusted and if necessary, further measures can be developed. Moreover, ensure that your company constantly revises its goals in order to further challenge and motivate itself and its suppliers.

5. Create transparency

In order to be sustainable as a company, it is not only important to develop climate-compatible corporate activities, but also to communicate them transparently to the outside world. In this way, you can build trust with all stakeholders and set an example to inspire others. Moreover, political regulations such as the EU taxonomy increasingly oblige companies to disclose their own climate performance in annual reports.

Conclusion: A climate-relevant procurement strategy offers your company the opportunity to reduce emissions along the entire supply chain and to operate in a climate-compatible manner. For this, transparency is the most important prerequisite for successful cooperation along the supply chain. Comprehensive CO₂ reduction in procurement cannot be achieved without an understanding of the own climate performance and that of the cooperating partners. In the future, there will be a significant need to increase transparency and devise simple ways to identify both providers of climate-relevant solutions and suppliers based on their outstanding climate performance. With our CLIMATE Data Platform, THE CLIMATE CHOICE is pursuing this goal. Companies from different industries can use the platform to validate themselves by undertaking the CLIMATE Readiness Check and receiving a climate performance rating. Today, this service enables companies to make climate-relevant procurement decisions based on transparent climate data, find new business partners and integrate existing suppliers into their successful climate transformation.

You want to know more? Schedule a free consultation with us now and learn about our software for decarbonizing companies and their supply chain.