By Suchismita Dhal
The International Organization for Standardization has recently released ISO 20400, a standard for sustainable procurement. It provides guidelines that can lead to improved economic, social and environmental outcomes. Sustainability goals are of high priority for most organizations. There is often an equivocation between “sustainable purchasing” and “green purchasing”. Whereas the former is built on three pillars (i.e., the environmental, social and economic aspects of procurement) the latter does not.
The new ISO 20400 creates a standard that will enable every organization globally, regardless of size, industry, and location to have a flexible guidance framework on sustainable procurement. Unlike ISO 26000, guidance on social responsibility, ISO 20400 focuses specifically on the purchasing function. The Standard includes seven core subjects, including the environment, fair operating practices, labor issues and human rights.
Currently, the discussion has moved beyond sustainability where companies used to focus on doing the right things with selective objectives. Business leaders now understand that there is a whole spectrum of concrete benefits, ranging from supply flexibility, building brand and reputation for the organization, managing sustainability risks and getting ahead of future regulatory requirements. This new standard offers guidelines for developing, documenting and implementing a sustainable procurement policy to govern all purchasing decisions in the upcoming years. This provides a platform to differentiate oneself from the competition and demonstrate leadership and innovation within the industry. Problems such as carbon emissions, water shortages, rising temperatures and climate change directly affect resources. It is not another accreditation but a guide to develop procurement goals, plan, and source and manage procurement sustainably.
As per ISO 20400 standards, sustainable procurement focuses on the sourcing of goods and services that
have the most positive environmental, social and economic impact across their life cycle. According to the standards, the procurement goals should align to principles such as accountability, transparency, ethical operation, fair opportunity, labor rights and health work conditions, economic resource optimization, and innovative solutions. The sustainable procurement objectives should complement business objectives; it should be relevant, measurable and target oriented.
An organization’s sustainable procurement strategy should address the following elements:
- Good governance: Planning, reporting, control and monitoring
- Fair Operating Practices: anti-corruption, fair competition
- Labor Practices: Labor protection, safe and healthy working conditions
- Human Rights: avoidance of unethical collusion; encouraging diversity
- Environmental Impact: climate change , pollution control, saving water, recycle waste
- Consumer Rights: Transparent and unbiased information
- Community: Giving back to the community, cycling economy
Sustainable procurement though sounds to be relatively new term, however it is not absolutely new. The approach to embracing sustainable procurement has changed. Sustainability is no longer only seen as a means to gain competitive advantage, but is now considered a prerequisite to business survival. After only a few short years of implementation, it has proven to deliver operative and financial results, in addition to enhancing brand reputation and supplier relationships. In the global age of business operation, when companies are dealing with suppliers across the globe, procurement has no boundaries. Apart from adhering to international trade rules, regulations and addressing risk avoidance, businesses need to acknowledge their social responsibilities as sound sustainability and corporate social responsibility practices are considered to be crucial to supply chains. Many Fortune 500 companies are currently investing heavily to ensure that sustainability is ingrained across all aspects of their supply chain and procurement
Institutions and standard accreditation bodies from 38 countries across the world worked together with ISO to develop this standard. There are a few organizations that started their journey years back, that have placed themselves in a position to help write the standard. As a matter of fact, the early movers get rewarded. ISO 20400 can provide sources of inspiration for companies that decide to get onboard for a sustainable procurement journey.
Suchismita Dhal is a Senior Procurement Consultant and an author specializing in sourcing and procurement consulting related to indirect spend categories, specifically capital equipment and MRO services. She has worked along with many fortune 500 organizations across globe, for multiple industries such as metal and mining, oil and gas, construction, pharmaceutical, chemical, and CPG.
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