How we buy matters just as much as what we buy. Trillions of dollars are spent each year globally, so how do we guarantee that money is spent on products and services that don’t harm people or the planet?

Around two thirds of the average company’s environment, social and governance (ESG) footprint lies with its suppliers. This means the procurement function should play a central role in every organisation’s sustainability strategy.

But most companies struggle to translate their very genuine sustainability commitments into clear procurement strategies. Why is this? And what can we do about it? Answering these questions is at the heart of the Sustainable Procurement project led by the Sustainable Built Environment National Research Centre (SBEnrc).

Purchasing and supply managers are increasingly scrutinising their supply chains to ensure they meet ESG objectives.

But as they look closely with an ESG lens, they are confronted with a challenge so enormous they don’t know where to start. There so much to consider:

  • supporting ethical manufacturing and fair labour practices
  • minimising modern slavery risks
  • promoting education and training opportunities for locals and disadvantaged groups
  • increasing the use of recycled content
  • reducing waste
  • eliminating products that destroy biodiversity or are made with toxic chemicals
  • choosing low-emissions logistics options

The list is seemingly endless.

How do we procure value-for-money products and services that genuinely support these goals? SBEnrc’s Sustainable Procurement project (P2.76) is examining key issues across the procurement lifecycle to find practical ways to improve ESG outcomes in Australia’s housing, building and infrastructure sectors. 

Focus group discussions with participants from the Australian Government, state governments, private companies and industry associations explored drivers, barriers and enablers of sustainable procurement. Here’s what we found…

What drives sustainable procurement?

Both internal and external drivers are at play. Government requirements and policies are an obvious driver that can influence the decision making of organisations. Governments can impose mandatory environmental and social requirements or offer incentives.

Client requirements can also drive sustainable procurement. Customer needs, investor confidence, stakeholder expectations and value creation are underlying factors that encourage sustainable procurement.

One focus group participant from a private client commented that: “market research on customers is a way to assess the value of sustainability for private companies; and customer needs and share price are considered to balance sustainability cost and future benefits”.

Internal organisational pressure – whether to mitigate risk, gain competitive advantage, report to investors, drive down cost premiums for sustainability, engage with long-term suppliers, foster innovation and technological advancement, or improve efficiencies – are also drivers.

A public client participant commented that, “In the context of the government client, people are not willing to pay a premium for sustainability. However, if sustainability is phrased as a better risk management, people would be more willing to pay.”

What impedes the successful implementation of sustainable procurement?

The focus group discussions revealed several barriers that impede the implementation of sustainable procurement practices. These barriers are classified into three groups: 

  1. Organisational constraints: The internal work environment can inhibit the integration of sustainability into procurement. Focus group participants cited several constraints, including lack of dedicated staffing, resources, training or communication, a disconnect between sustainability targets and performance indicators, financial pressures and tight budgets.
  2. Contextual constraints: These external barriers include traceability, transparency and visibility of supply chains, lack of understanding of broader social or environmental co-benefits and shortened product lifespan due to fast development of technology. 
  3. Process constraints: This relates to procurement processes. Key barriers in this category include lack of tools and data to objectively evaluate the value and impact of sustainability, lack of clear and simplified guidance on sustainable procurement, and lack of post completion reviews that impede understanding around the benefits of sustainable procurement and competing targets. 

How can organisations enable sustainable procurement?

The feedback from our focus group was crystal clear. Organisation-wide sustainability targets can only be achieved with the help of sustainable procurement strategies, policies and action plans. Here are a few ways to get the ball rolling:

Invest in the right tools: Measurement leads to better management. To demonstrate the value of sustainable procurement, we must start with tools which can effectively evaluate social, financial and environmental outcomes we are trying to achieve. 

Don’t underestimate contract management: Contractual documents must clearly describe the sustainability criteria that should be met by suppliers. A good post-contract evaluation will offer valuable data to verify sustainability outcomes and support future decisions.  

Engage suppliers early: Working together from the planning phase can improve environmental and social outcomes while also achieving financial and time savings. 

Align business and sustainability objectives: Making organisational changes to internal governance structures, aligning individual performance targets to sustainability objectives, and ensuring sustainability commitment starts at the top can build internal organisational capabilities and optimise resources.

Collaborate to catalyse innovations: Australia’s property and construction industry is world-renowned for its collaborative approach. One focus group participant from a listed entity referred to the Property Council of Australia’s collaboration with its core members to develop the online supplier platform to minimise modern slavery risks across the building and construction supply chain as an example. 

The biggest takeaway from the focus group sessions? Elevating the role of sustainable procurement requires leadership from government and client organisations and collaborations between all stakeholders along the value chain. 

Acknowledgements: This research has been developed with funding and support provided by Australia’s Sustainable Built Environment National Research Centre (SBEnrc) and its partners. Core Members of SBEnrc include BGC Australia, Government of Western Australia, Queensland Government, Curtin University, Griffith University, Western Sydney University and RMIT University.

Yingbin Feng, Western Sydney University

Associate Professor Yingbin Feng, Western Sydney University and Project Lead, Sustainable Built Environment National Research Centre, P2.76 Sustainable Procurement. More by Yingbin Feng, Western Sydney University

Davina Rooney, Green Building Council of Australia

Davina Rooney, Chief Executive Officer, Green Building Council of Australia and Chair, Sustainable Built Environment National Research Centre, P2.76 Sustainable Procurement. More by Davina Rooney, Green Building Council of Australia

Vasilios Papastamoulis, Western Sydney University

Dr Vasilios Papastamoulis, Post-Doctoral Researcher at the Sustainable Built Environment National Research Centre, Western Sydney University. More by Vasilios Papastamoulis, Western Sydney University

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