What is Sustainable Procurement?

Do you often wonder what obstacles prevent companies from implementing sustainable procurement practices? Is it possible to get our suppliers to adopt the same practices and how can we influence their sustainability agenda?

Today’s procurement decisions are going to make a difference tomorrow. No wonder, sustainability has become the central theme of the procurement decision-making game.

In today’s episode of our Procurement Game Changers series, we have sustainable procurement expert Thomas Udesen who will speak on the progress made in this space, obstacles of implementing sustainable practices, ways to include suppliers in companies’ agenda to drive sustainability in supply chains and many more.

Key Takeaways

It’s difficult to assume that the sellers will be influencing change in their own portfolio just out of altruism. It must originate from the network of procurement experts positioned throughout each value chain.

The Major issue that comes when implementing sustainable procurement is that there’s a major knowledge gap and at Sustainable Procurement Pledge is making those tools available.

There’s a need for a support network. People don’t see many role models who have gone through it, who fell on their noses, got themselves up and are now sharing their learnings at an eye to eye level.

Sustainability has three dimensions, right? it’s the Environmental E, the S for social and G for Governmental. Certainly when it comes to the indirect services, there is a big role to play when it comes to the social, and to governance.

Transcript

Helene:

Welcome to the procurement game changers, the podcast for procurement leaders that make a difference today, we will be talking about sustainable procurement.

And for that topic, I have the great pleasure to receive Thomas Udesen, chief procurement officer at Bayer, one of the largest life science companies in the world.

But Thomas is also the co-founder of the Sustainable Procurement Pledge, a bottom-up nonprofit organization for procurement professionals, academics, and practitioners, driving awareness and knowledge on responsible sourcing practices and empowering people in procurement for free.

Helene:

Okay. Welcome to the show, Thomas.

Thomas:

Thank you, Hélène.

Hélène:

Could you tell us what led you to procurement?

Thomas:

I think, as many other people who have joined this amazing function, it wasn’t a long-term plan that enabled, that I landed up in procurement; some 20 odd years ago when I finished my MBA.

I happened to talk to the future CPO of Johnson and Johnson as part of the interview panel and, you know, the chemistry worked and what they were doing sounded amazingly interesting. I joined the J&J procurement team in Switzerland and have not left the function, as I’m so convinced that there’s much more we can do.

But even before that, if I can say, I have always been in B2B and international trade and had the benefit and pleasure of working with people from remote places. This business to business setting has always been part of who I am and what I’d like to do.

Hélène:

Thank you. So sustainability is becoming trendy, right? There are many companies that are now investing in sustainability and social responsibility initiatives, and of course, procurement is the frontline on those topics.

So, what is sustainable procurement? What are the resources available for procurement professionals in this area?

That’s what we’re going to talk about today. So let’s start with a simple question like Thomas, what made you passionate about sustainable procurement?

Thomas:

I’m passionate about the topic, because I am deeply convinced that, in all organizations, we are at the best position to drive this change of how business is conducted and what criteria are being used for decisions to be made. The world consists of sellers and buyers. And in that forum, it’s very hard to imagine that the sellers will, in a way, be driving change in their own portfolio, just out of their good intention. It has to come from the network of procurement professionals that sit in all those value chains; From the mines, from the farms, from the oceans to make sure that it reflects itself into the iPhones and the Samsungs that we are all buying. The only one function who objectively can make that happen is procurement.

Hélène:

All right. So how did you come up with the idea of co-founding the sustainable procurement pledge.

Thomas:

You mentioned that it’s becoming trendy. Yes and no. It’s true that we hear quite a lot about it. But if you look at the data, it’s still pretty scary what is going on.

We know that amongst the 15,000+ companies who have signed the United Nations Global Compact principles, many of them, if you talk to their procurement teams, actually are not really applying those principles in their day to day job.

If you look at the annual Ecovadis report, a rating agency that conducts around 65,000 assessments, you see that all other aspects of sustainability: environmental, social, and governance has increased over the last couple of years – and that’s good news.

The bad news is that sustainable procurement has consistently gone down over the last five years, which means that the people who have to make sure that the tier-2, tier-3 and tier-3 suppliers have mature practices have been underfunded and that’s just not okay.

That’s why we decided to launch the Sustainable Procurement Pledge to find another way of getting to these 1 million procurement people sitting out there who unfortunately doesn’t get sufficient help from the companies that they work for. And we believe we can democratize the knowledge, make all the knowledge available for people who need to make better decisions. And that’s what it is.

Hélène:

So how far have you guys come and what are your future goals?

Thomas:

What we have seen, thankfully, is that since we launched just over two years ago, the world has come together. We are today 7,700 ambassadors from 142 countries. So the desire to do something better and learn how to do it better and meet peers who have done it better is universal. It’s literally almost every country on the planet.

So what we are now doing is to make sure we have the institutional horsepower to also meet the demand of this community. And that is by registering a nonprofit and making sure we have access to some funding. We are hiring the first executive director.

We will start making sure that there is an infrastructure that makes all this knowledge available to the practitioners for free so that they can just make better decisions. And at the end of the day, make sure that the planet that we live on is more fair, equitable, and that we can also make sure future generations have healthy air and food to eat.

Hélène:

What would be some practical examples on how you personally implemented those sustainable procurement practices in your job?

Thomas:

I happen to be lucky, I work for Bayer and we were one of the first companies who signed the UN Global Compact in year 2000. And just by the nature of our industry being very process and energy intensive, a lot of these topics around carbon and decarbonization, have always been part of the agenda here. So it’s not that I had to invent everything as a lot of it really existed from the past.

What most people are asking for is how do you then harmonize these principles, the UN Global Compact Principles into your processes? How do you make sure it’s institutionalized in your contracts, in your purchase orders, that it’s part of the decision criteria once to award business, that it’s part of your category strategies, supplier management, how you segment, and well, that’s what we have done.

Thomas:

A lot of that leg work already happened. But 10 years ago, in 2011, Bayer co-founded two organizations, two industry collaborative networks; Together for Sustainability, for chemicals and the Pharma Supply Chain Initiative for pharmaceuticals.

Here the philosophy is that our supply chain sustainability practices are pre-competitive, it’s not something we need to compete on, and it’s something we need to collaborate on so that we have the biggest impact for all the efforts that we have.

We started those two industry initiatives as we are strong believers in doing a lot of these things together and not doing them as standalone companies. There’s an African proverb: “If you want to move fast, you go alone. If you want to move far, you go together”.

This really institutionalize the fundamental belief on how do we address, big human challenges like climate change and inequality.

Hélène:

I really like that point of saying, if you go alone, you go fast. If you go together, you go far. It’s a very good way to say that.

What’s the major issue when you try to implement sustainable procurement practices.

Thomas:

What we hear from our Ambassadors, and there is commonality across the world; there is a real knowledge gap. How do you make sure that you actually understand those practical steps and in a way, take this challenge and make it into more digestible bites and help everybody on the path.

So, there’s a knowledge gap and that’s of course what we are doing with the Sustainable Procurement Pledge. We make all those tools available for people. Then there is a leadership gap where we see, unfortunately in many organizations, that the long-term topic of sustainability is one that gets sort of forgotten in the heat of the moment.

There are many organizations where, as you say, it’s a bit of a hype, it’s very popular, but when push comes to shove and decisions needs to be made, you would swing back to a more short-term objective. We hear that there is a vacuum in many organizations around leadership and making sure this is strategic.

Then there’s a bit of a courage. There’s a need for a support network. People don’t see many role models who have gone through it, who fell on their noses, got themselves up and are now sharing their learnings at an eye to eye level.

That’s what we are able to do: reminding everybody that it’s not going to be perfect, but you have to start; take the first step and with that, you will become better and better. That’s the third major dimension that people talk about. So it’s knowledge, it’s leadership and it’s community. That’s what we are trying to institutionalize and make available.

Hélène:

That’s very interesting. We see how you can bring tools and support to those professionals who want to implement sustainable procurement practices. But to what extent can we get our suppliers to adopt the same practices and how can we influence their sustainability agenda?

Thomas:

Well, the good thing is, for SPP of course, that you are having access to the procurement people of your suppliers. There are two ways of approaching that. There’s the top down, which I do as part of my day job where I’m part of Bayer. We have very clear expectations to our suppliers. We make sure that if you want to be key and strategic, you have to have commitment and a certain degree of practices. And if you don’t do that, we will probably find somebody else. So that’s the top down. We do it in the industry as well; in Together for Sustainability and the PSCI (Pharma Supply Chain Initiative), where we also try to make it easier and repeat the message, capacity build and we train suppliers. So that’s all through the front door. Now, SPP is all bottom up. It’s a grassroot approach and we want to make sure that it is the same knowledge we are talking about. We want to make sure that it’s available for the procurement teams at our suppliers and at our suppliers’ suppliers, so that they understand, what it is that their colleagues will be telling them once they hear the messages coming through the front door. That’s why we really believe that you need to have both, you need to have the consistency from the established commercial relationship, and you need to have the knowledge available through the community of practitioners. For the family, by the family.

Sustainable procurement in service Industry

Hélène:

So we talk a lot about sustainability in goods and tangible goods actually. But what about intangible? What about, intellectual services like consulting, legal, marketing? What about sustainability in those categories?

Thomas:

Well, I think first of all, of course, that many of them have great insights as far as sustainability is concerned; Some are consulting on sustainability. So, the group is super important – also in terms of the mental capacity and the advocacy for doing good. And yes, it’s true that traditionally, you would think of carbon emissions and you will think of materials and big factories and steel plants.

And of course that is true; the majority of scope 3 emissions lies in the physical supply chains. But sustainability has three dimensions, right? it’s the Environmental E, the S for social and G for Governmental. Certainly when it comes to the indirect services, there is a big role to play when it comes to the social, and to governance.

How do we make sure that the economic power that we hold is being used to minimize inequality, that people have the right conditions, that we also make sure we have the right oversight and we minimize corruption etc. However, I also don’t want to take this group out of the environmental dimension, because of all the data centers having huge needs of energy.

There is a big component linked with that, but most of the people, at least when I remember I traveled on an airplane a few years back, they were also consultants. There’s a huge dimension around travel, hotels, the impact we have on our fleets etc. I do think there is a big role to play.

And with this, we are all in the same game. The same applies for public procurement. It’s not just private procurement and indirect; It’s also public procurement. Your tax money is being procured for certain services in the spirit of the interest of the people. And of course here there is also a lot that can and have to be known.

Hélène:

Absolutely. So it’s time to wrap up. If you wanted our listeners to remember just one thing of our conversation, what would that be?

Thomas:

Don’t wait for perfection. Don’t let perfection get in the way of progress. And don’t try to do it on your own. There are so many people who are happy to help. The knowledge exists.

It’s just a question of democratizing and reaching out if you need help. I’m sure you will find a friend and SPP is certainly one of those places where likeminded people can share knowledge and get practical tips on how do we do this together. Because this is OUR challenge, right? It’s going to impact us and the next generations.

Hélène:

So how, how can they contract SPP?

Thomas:

Go and check out www.spp.earth and follow us on LinkedIn www.linkedin.com/company/sustainable-procurement-pledge. We also have our ambassador group on LinkedIn www.linkedin.com/groups/8845732/ and here we are counting all the Ambassadors. This is a very dynamic community with updates and that’s where you can also be.

We have also regular webinars happening at the chapter level or at the global level. We have the World Sustainable Procurement Day that has been introduced every Equinox, 21st of March, between now and 2030. So mark the date and join for all the fun that we are planning to have.

Hélène:

Thank you. Wonderful. Thank you, Thomas.

Thomas:

Thank you and see you later.

Helene:

So now it’s your turn to tell us about your experience and your challenges with sustainable procurement in the common section. Don’t forget to subscribe if you want to be notified when new episode is out. Thank you for listening.

Thank you again, Thomas, for your time and your energy. I hope you enjoyed this episode, and if that’s the case, don’t forget to give us a thumbs up. Happy sourcing to you all bye et au revoir.

PS: Don’t forget to check out our previous Procurement Game Changers episodes: CLICK HERE TO VIEW!

 

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Helene Laffitte

Hélène Laffitte is the CEO of Consulting Quest, a Global Performance-Driven Consulting Platform. With a blend of experience in Procurement and Consulting, Hélène is passionate about helping Companies create more value through Consulting. To find out more, visit the blog or contact her directly.

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