Responsible & Sustainable Purchasing Practices: Your Future?

Let’s explore responsible and sustainable purchasing and why buyers play an important role in their supply chain’s ESG performance and risks and improvements can’t all be laid at the feet of their suppliers. At times some buyers probably don’t think enough about how their own actions affect the supply chain during the sourcing process, and also probably don’t consider how they can play an active role in improving supply chain sustainability, either. Let’s clarify these points…

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What is responsible purchasing? (+ 3 examples)

Buyers tend to quickly blame suppliers for not being compliant, doing things behind their backs, and so on, but sometimes it’s important to look inwardly and consider how our actions affect suppliers and can cause some negative outcomes as a knock-on effect. Adopting ‘Responsible Purchasing Practices’ is about making buying decisions that will support your supplier to behave in complaince with your requirements and the law, to treat staff well, not to outsource production to some unknown factory due to being under pressure, etc.

Cara Chacon who worked as Patagonia’s VP of Social and Environmental Responsibility said the following:

I strongly suspect that brands that have responsible purchasing practices programs (RPP) have the highest rate of compliant factories. An RPP program is one that ensures that brand business decisions do not put the factory at risk of being out of compliance with their Code of Conduct and local laws. For example, a last-minute change to a design can directly cause excessive work hours and mandatory overtime (a form of forced labor) for workers to ensure the order gets done on time. Without a solid RPP program, important “root causes” at the brand level can be missed leaving you and the supplier frustrated with the same issue coming up over and over again. (Source)

Here are a few examples:

How many buyers consider the impact of a seemingly ‘normal’ request to a supplier to make changes to the order but still ship it at the same time as agreed before? As the quote suggests, this could easily lead to a breach of labor laws and ‘modern slavery’ conditions if workers are forced to work longer hours to fulfil the request. Who is responsible for this problem? The buyer!
Walmart and other large brands sometimes have a tendency to reject large orders due to a defect/s and expect the manufacturer to make a new batch in time for the original shipment date without considering if they have the capacity to do more (they would have been assessed to have the capacity to handle the original order). This leaves the manufacturer scrambling to catch up which can lead to ESG problems.
Toys are a good example, too. Toy factories are very busy from May to September manufacturing the products that will be shipped in time for Christmas. Some buyers will dump their orders on suppliers during this peak time without considering how it impacts them. A question for buyers would be: Can you please your orders a little earlier or level them out over the year to help the supplier cope with everything within their capacity? If you do this you’re cutting the supplier some slack to do the job well, but they also have no excuse if things go wrong; both are beneficial for the buyer.

Time and cost pressure, in particular, lead to suppliers cutting corners which has negative impacts on people and the environment.

Buyers should remember that if they just place purchase orders with no consideration of how suppliers are affected, they might be the problem. Suppliers may be tempted to bend rules, break laws, or even provide fake documentation to prove that ESG performance is sound, even when it is not. (02:44)

Responsible product design practices are a linked topic.

Product design also affects our suppliers. Garment manufacturers insisting on black colors need to be aware that this will require a lot more dying with its associated negative impact on the environment. Choosing aluminum rather than steel for products also has a higher environmental cost as the former metal’s manufacturing processes emit 6 times more carbon. Following the ecodesign principles is where buyers consider the impact of their designs on the environment. (14:34)

What is sustainable purchasing?

The ISO 20400:2017 standard provides guidelines about how to make changes to the procurement function so it allows for more sustainability, building on ISO 26000 that focuses on social compliance and environmental protection. Sustainability in manufacturing is, at its peak, where resources used can be used forever without harming the planet. Most companies try to do less harm rather than following a fully circular and sustainable model. Sustainable purchasing focuses on how buyers can get closer to the sustainable ideal and is defined as:

Procurement that has the most positive environmental, social and economic impacts possible over the entire life cycle (16:29)

How sustainable purchasing affects the supply chain.

If we look at scope 1, 2, and 3 emissions, scope 1 is those attributed to your business, its office, etc, scope 2 is to things like logistics to move your products around, and scope 3 is for the supply chain and manufacturing. Scope 3 emissions represent about 90% of your total emissions, therefore buyers need to work with the stakeholders in the supply chain to make improvements as this is where one of the greatest sustainability wins can be found if emissions can be reduced in different ways.

Aside from emissions, adjustments can go as far as working with a supplier’s individual staff members, for example, some female employees in South Asia who usually would not dare to question male managers’ requests…they need to be trained, made aware of their rights so they can work legally, and maybe given a mechanism so they can complain to a third party about issues and action can be taken.

Risk management also can be worked on. One example mentioned earlier is jerking around suppliers by changing designs or order quantities at the last minute which causes social compliance, quality, and compliance risks.

HR policies can be checked and improved and purchasers can say that paying by the piece, charging staff for their own uniforms, and other negative social compliance practices are simply not acceptable in the supply chain, therefore improving its overall sustainability. (18:55)

‘Big buyers’ are in a position to make positive changes. Small buyers, less so, but you still have options.

Big buyers. Buyers who place an important amount of business have the authority to put some pressure on their suppliers to make positive changes in the supply chain, perhaps starting with a lifecycle assessment which will pinpoint high uses of energy and water that can then be worked on to reduce, for example. Suppliers, wary of losing your business, are more likely to comply with your requests, even if you are buying products that they have designed in large quantities. You may not be able to make them redesign the product following ecodesign principles, but you’ll be able to request that they take steps to make the supply chain ad manufacturing processes more sustainable.

Small buyers. For small buyers adopting sustainable purchasing may be hard if suppliers won’t make changes as your business is not important enough for them to make the effort to comply with your requests. In these cases, trying to adopt responsible purchasing practices outlined earlier will probably be a better way for you to reduce the overall impact on ESG performance through your own actions. So that could include:

Sourcing better suppliers
Doing due diligence on options before you commit
Making sure they understand your requirements and have capacity

This is already likely to give you a better supplier than if you just source based on cost alone.

If you are designing products, try to instruct designers to follow ecodesign principles, such as making the product repairable, easier to disassemble and recycle, etc.

At the supply chain level, even without a lifecycle assessment, try to estimate which materials and practices are likely to be hotspots where sustainability improvements can be made, such as avoiding non-recyclable materials or those that require a lot of energy to produce, like Aluminum. (25:50)

Forthcoming EU regulations will demand buyers to purchase more responsibly and sustainably.

The EU Ecodesign for Sustainable Products Regulation and EU Corporate Sustainability Reporting Directive require supply chains to be transparent and improvements made to their ESG performance in terms of the suppliers themselves and the products being imported into the EU. If buyers are not purchasing more sustainably, this will hinder their compliance and could result in products being barred from sale in the EU. So in Europe, at least for now, responsible and sustainable purchasing practices are a must for importers (and will become ever more important around the world as further similar legislation comes in globally). (30:30)

The good news: You will save money!

A good focus is on tackling the cost of poor quality and reliability, which can be high. Products sourced use fewer materials, consume less energy, and are less exposed to compliance issues are proven to save you money more often than not. The same with products sourced to be of higher quality, as this leads to more durable products, fewer returns, less scrap, etc…also having an impact on cost. (35:06)

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