How can commercial departments embed sustainability into procurement activity?
Recent government changes to the UK’s net zero policies have once again brought the ambitious targets into the spotlight. Despite the partial roll-back of certain interventions, the UK is committed to a breadth of demanding targets spanning all areas of sustainability. This includes addressing carbon emissions via the UK government’s Net Zero Strategy, supporting the natural environment via the 25 Year Environment Plan, and progressing increasingly important social value commitments.
Government departments will struggle to meet these commitments without addressing the sustainability of their own operations. With around 80 percent of emissions driven by supply chains (also known as scope three emissions) and greater recognition of the importance of achieving wider positive societal change through procurement, commercial and procurement teams can lead the way in delivering progress. Alongside helping departments address their supply chain impacts, commercial teams are a key player in leveraging the UK government’s £300 billion annual spend to incentivise positive change across industry.
By embedding sustainability holistically across commercial functions, departments can better account for and mitigate environmental impacts while using their buying power to drive sustainability across their supply chains. Here, we explore how.
Make sustainability a strategic priority
Government departments and wider public sector organisations are increasingly realising the need for a clear sustainability strategy to guide their route to net zero. However, there are varying levels of sustainability maturity in the commercial departments of these organisations, often compounded by a lack of alignment between the organisation’s sustainability strategy and the priorities of the commercial function itself. Committed buy-in from commercial leadership is key, alongside a clear draw-down from the organisation-level sustainability strategy into that of the commercial directorate.
As part of this, it is important for commercial functions to clearly articulate their sustainability priorities, identifying key risks and opportunities that sit within the relevant categories of their supply chain (reflecting the current procurement approach taken by the Environment Agency). This ensures procurement category teams have clear guiding principles to shape how they address sustainability for each procurement within their area of spend. These priorities can be translated down into a set of measurable indicators and metrics, driving consistent monitoring, reporting, and evaluation.
Organise to deliver against strategic priorities.
Once a commercial function has identified its sustainability priorities, progression relies on the appropriate operating model capabilities, structure, people, and governance.
This means establishing clear governance routes for reporting progress against key metrics, enabling leaders to hold specific procurement teams to account. This also ensures relevant risks and opportunities can be escalated and addressed at a departmental level.
It’s also critical that departments have relevant sustainability expertise embedded across their teams. While some government commercial functions are beginning to establish central sustainability capabilities (such as the Department for Environment, Food and Rural Affairs), expertise is needed within each procurement team to ensure the full range of sustainability risks and opportunities present in all commercial activities are addressed.
Embed sustainability into end-to-end decision-making processes.
Achieving ambitious targets requires embedding sustainability at every stage of a procurement process, from identifying business need to monitoring throughout the life of a contract. As recognised in Crown Commercial Service guidance, addressing sustainability early in a procurement process based on the strategic priorities of the organisation ensures that targeted sustainability criteria form a key part of the investment decision from the start. When procurement managers have a clear view of the relevant sustainability criteria at all key decision points in the end-to-end process, they can highlight any risks or considerations for specific procurements. Tailored guidance for these areas to support use of existing Government Buying Standards will help ensure key sustainability criteria are met.
Making relevant guidance, tooling, and education available to procurement teams and wider organisational areas will help facilitate more informed purchasing decisions, requirements, and contract evaluations. Tooling to support risk assessments and identification of key sustainability criteria can help to ensure suppliers are properly assessed against relevant sustainability areas, in line with the Greening Government Commitments and Government Buying Standards guidance.
Utilise supply chain partners to accelerate progress
One of the most impactful ways to progress an organisation’s sustainability priorities is through better supply chain collaboration. Aligning to the government’s general desire to promote better collaboration between public and private sectors, departments can engage with key supply chain partners to share sustainability priorities and clearly articulate the organisation’s sustainability expectations for suppliers. With key projects to deliver and substantial budgets, this ensures government departments use their buying power to promote sustainable industry activity and shape the approaches of their suppliers.
Major suppliers into government often have complex supply chains and mature sustainability impact management frameworks. Establishing strategic supplier forums to share best practise, knowledge, and experience about how best to solve cross-supply chain sustainability challenges will help departments to upskill and develop their own sustainable procurement expertise. Incorporating wider knowledge drives more collaborative, effective approaches to sustainability issues, ensuring the best of public and private sector knowledge is channelled into solving industry-wide issues.
The success of such a strategy has been evidenced by Unilever’s Climate Programme. Unilever have worked closely and successfully with 300 of their suppliers to provide guidance and access to tools that facilitate effective measuring, reporting, and evaluating of emission reduction progress. Government is recognising the need to promote similar collaboration, with the Ministry of Defence’s intention to establish ‘outcomes-focused sustainability steering groups’ in their Climate Change and Sustainability Strategic Approach.
It’s imperative for government departments to impactfully address the sustainability of their procurement activity. Commercial functions are the key vehicle for this. By looking holistically across strategy, operating model, processes, and supplier collaboration, organisations will move towards meeting the UK government’s sustainability ambitions.