Low emissions procurement is an important strategy for businesses looking to make a positive environmental impact and drive value through supplier sustainability. By taking a proactive approach to reducing emissions in the procurement process, companies can not only contribute to a healthier planet but also reap economic benefits and gain a competitive edge in the market.
Understanding Low Emissions Procurement
Low emissions procurement focuses on selecting suppliers and sourcing products and services that have a low carbon footprint. This means prioritising suppliers who highlight sustainability in their operations, such as using renewable energy sources, minimising waste, and implementing energy-efficient practices.
In essence, low emissions procurement considers the greenhouse gas emissions generated throughout the entire supply chain, from raw material extraction to manufacturing, transportation, and disposal of products. It’s the cradle to grave that we see in the whole of Scope 3. By evaluating and reducing emissions at each stage of the chain, businesses can significantly contribute to global efforts to combat climate change.
The Importance of Supplier Sustainability in Low Emissions Procurement
Supplier sustainability plays a crucial role in low-emissions procurement. By partnering with environmentally conscious suppliers, businesses can ensure that they are procuring goods and services that align with their sustainability goals.
A sustainable supplier would often have measures in place to minimise their environmental impact. Such measures include:
- High-use renewable energies
- Implementation energy-efficient processes
- Robust waste practices
- Strong circular economy principles
- Credible 3rd-party certification around emissions disclosures
Choosing sustainable suppliers can also enhance a company's reputation and brand image. Over the past 5 years, there has been a 71% increase in interest for sustainable goods globally. As consumers now gravitate towards brands that resonate with their values and priorities, companies that prioritise supplier sustainability can attract environmentally-conscious customers and gain a competitive advantage.
Moreover, collaborating with sustainable suppliers can foster innovation and drive positive change within the industry. These suppliers are often at the forefront of developing and adopting new technologies and practices that reduce emissions and promote sustainability. By engaging in meaningful partnerships with such suppliers, businesses can not only reduce their own carbon footprint but also contribute to the overall advancement of sustainable practices.
The Economic Benefits of Sustainable Procurement
Beyond the environmental impact, sustainable procurement can yield significant economic benefits for businesses. By adopting low emissions procurement practices, companies can achieve cost savings, efficiency gains, and effectively manage risks.
Low emissions procurement can lead to cost savings in the long run. By prioritising suppliers with energy-efficient processes and waste-reduction strategies, businesses can reduce their operational costs associated with energy consumption and waste disposal.
Through an emissions lens, low emissions in the products you procure will lead to a lower cost of offsetting your business intends to achieve carbon neutrality. These cost savings can then be reinvested in other sustainability initiatives or used to enhance the company's overall competitiveness.
Cost Savings and Efficiency Gains
Sustainable procurement often involves streamlining supply chains, optimising processes, and reducing waste, leading to lower operational costs and improved resource management. By implementing energy-efficient practices and waste reduction strategies, businesses can decrease energy consumption, and minimise waste disposal costs.
With enough foresight and integrated supply chain management, there is the potential to generate revenue from recycled materials. Moreover, sustainable procurement puts forth long-term cost savings by stabilising energy costs and mitigating risks associated with volatile prices and resource scarcity, leaving room for better financial planning and performance.
Risk Mitigation and Management
By working with suppliers who prioritise sustainability, companies can avoid penalties and fines associated with non-compliance with environmental regulations and build resistance against supply chain disruptions.
Through sustainable procurement, businesses can mitigate risks related to:
- regulatory compliance such as ISSB, IFRS, and AASB reporting
- reputational damage for working with suppliers who have weak environmental, modern slavery, and WH&S policies,
- supply chain disruptions from extreme weather events that can impact production times or service deliveries
- price variability for critical supplies, services, or materials
For instance, by sourcing materials from suppliers with sustainable practices who have completed their robust risk management and materiality assessment regarding climate change, companies can reduce the risk of supply chain disruptions caused by extreme weather events or resource scarcity. This proactive approach helps businesses maintain business continuity, avoid production delays, and prevent revenue losses.
Case study: CBRE leads the way in supplier sustainability vetting for the Australian building industry
CBRE, a leading construction company in Australia, has started to engage suppliers and vetting them for more than just pricing on the procurement process. They have now ranged and covered robust ESG questionnaires that include more than 100 questions.
While questions cover several topics, particular emphasis is put on the emission disclosures of the suppliers such as:
- Does your organisation measure their corporate greenhouse gas emissions?
- Does your organisation report their greenhouse gas emissions to the Carbon Disclosure Project (CDP)?
- Describe your organisation’s approach to reducing carbon emissions and/or achieving Net Zero.
- Are you currently certified to a sustainable standard e.g. ISO 20400 or Green Star?
The Environmental Impact of Low Emissions Procurement
Low emissions procurement represents a tangible opportunity for businesses to contribute to environmental stewardship and minimise their carbon footprint.
When businesses engage in low emissions procurement practices, they are not only making a positive impact on the environment but also setting an example for others in the industry. By actively seeking out suppliers that prioritise sustainability and emission reduction, these businesses are driving a shift towards a greener and more environmentally conscious supply chain.
Reducing Carbon Footprint
By selecting suppliers that actively reduce their greenhouse gas emissions, businesses can significantly contribute to global carbon reduction efforts. By favouring suppliers who prioritise renewable energy sources and energy-efficient practices, businesses can effectively reduce their Scope 3 emissions and contribute to a more sustainable future.
Furthermore, by forging long-term partnerships with suppliers committed to low emissions practices, businesses can create a ripple effect throughout the entire supply chain. This collaborative approach not only reduces carbon emissions but also fosters innovation and the development of new sustainable solutions.
Promoting Resource Efficiency
Low emissions procurement also focuses on promoting resource efficiency. By selecting suppliers who prioritise waste reduction, recycling, and the use of sustainable materials, businesses can minimise resource consumption and waste production, significantly contributing to a circular economy.
Case in Check: IKEA’s Sustainable Procurement Strategy
A case study about the sustainable supply chain management in IKEA reveals that sustainability practices can definitely be implemented successfully across an organisation’s entire supply chain, including second and third tier suppliers (Scope 3), ultimately achieving positive environmental and social impacts while continuing to uphold a robust economic foundation.
IKEA’s procurement practices are guided by their comprehensive IWAY Standards. The standards include the supplier’s Code of Conduct, setting minimum requirements to ensure legal compliance, confidentiality, and business ethics. Moreover, it highlights the key factors they consider during supplier selection, these include the supplier’s responsibility to:
- Environmental protection
- Waste reduction
- Worker Health and Safety
Through IKEA’s commitment to sustaintable procurement, they achieved:
- Enhanced Brand Image
The company’s transparent approach to sustainable procurement, including the use of certified materials and ethical sourcing practices, has resonated positively with consumers and stakeholders.
- Cost Savings and Efficiency Gains
Through initiatives like IKEA View Cotton and IWAY Forestry Standard, sustainable sourcing practices have led to increased efficiencies and reduced environmental impact across its supply chain.
- Risk Mitigation
By working with sustainable suppliers, IKEA has reduced the risk of reputational damage and legal liabilities associated with non-compliance.
- Reduced Carbon Footprint
The company’s use of 100% energy-efficient technologies and sustainable materials has deducted a significant amount of carbon emissions across its supply chain.
- Promoting Resource Efficiency to Drive Industry-Wide Change
Initiatives like the IKEA View Cotton and IWAY Forestry Standard promote sustainable sourcing practices and reduce supplier emissions throughout the supply chain. This way, IKEA drives industry-wide changes by collaborating and pioneering meaningful engagement with their suppliers towards low emission procurement.
IKEA's sustainable procurement project has yielded significant results, including enhanced environmental stewardship, reduced carbon footprint, and promotion of resource efficiency throughout its supply chain. By integrating sustainability into its procurement practices and partnering with industry stakeholders, IKEA not only ensures ethical sourcing but also drives positive impact across the industry.
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