Over the last few years, the procurement departments have undergone significant changes in terms of sustainability requirements for suppliers. Companies are now looking beyond traditional supplier criteria, such as cost and quality, and are prioritizing sustainability, ethical practices, and environmental responsibility.
From an RFx (Request for Proposal, Request for Quotation, etc.) and procurement perspective, sustainability requirements can be defined as:
“The set of criteria and guidelines included in procurement processes to ensure that suppliers meet specific environmental, social, and ethical standards. These requirements aim to minimize negative impacts on the environment, promote responsible resource use, uphold human rights, and contribute to long-term economic viability. They typically encompass considerations such as carbon footprint reduction, waste minimization, energy efficiency, use of sustainable or renewable raw materials, fair labor practices, and compliance with relevant sustainability certifications or regulations.”
These requirements ensure that suppliers align with the company’s broader sustainability goals, covering both environmental and social responsibility throughout the supply chain.
Here are some examples of how procurement has changed its sustainability requirements towards suppliers over the last three years.
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Increased Focus on Environmental Impact
In recent years, the environmental impact of procurement practices has come into sharper focus as businesses recognize their responsibility to protect the planet. The way companies source materials, work with suppliers, and manage their supply chains can have significant effects on the environment, so many organizations are making sustainability a top priority in their procurement strategies.
This shift means that companies are no longer just interested in getting the best price or the fastest delivery; they are now also demanding that their suppliers show a strong commitment to sustainability. Suppliers are expected to reduce their carbon emissions, use energy more efficiently, and minimize waste during production and transportation.
Take, for instance, Walmart, one of the largest retailers in the world. Walmart has pledged to reduce its carbon emissions by one billion metric tons by 2030—a goal that cannot be achieved alone. To reach this ambitious target, Walmart requires its suppliers to actively work on cutting down their own emissions and adopting environmentally friendly practices. Suppliers must prove that they are aligned with Walmart’s sustainability goals by sharing their progress and making tangible improvements in their operations.
Walmart is not alone in this effort. Many companies across different industries are recognizing the importance of working with responsible suppliers who prioritize sustainable practices. By doing so, these companies not only protect the environment but also strengthen their brands, meet customer expectations for greener products, and prepare for a future where regulations around carbon emissions and waste management will likely become stricter.
The growing trend of sustainable procurement helps businesses build stronger, more resilient supply chains that can adapt to environmental challenges. By demanding accountability from suppliers and encouraging innovation in sustainability, businesses are taking critical steps toward a cleaner, more sustainable future.
Ethical and Social Responsibility
In recent years, procurement has evolved to prioritize not just cost and efficiency, but also ethical and social responsibility. This means that companies are taking a closer look at how their suppliers treat workers, ensuring that labor practices are fair, safe, and respectful of human rights. As public awareness grows around issues like unsafe working conditions, child labor, and exploitation, businesses are being held accountable for what happens throughout their supply chains—not just within their own operations.
One of the key areas of focus is working conditions. Companies want to make sure that workers in factories and production sites are treated fairly, with safe environments, reasonable working hours, and fair wages. Beyond basic working conditions, there is growing attention on the elimination of child labor and ensuring that no human rights abuses are taking place, particularly in regions where regulations may be weaker or enforcement is inconsistent.
A notable example of this increasing focus on ethics in procurement came in 2021, when the UK government introduced new legislation aimed at addressing modern slavery in supply chains. Under this legislation, companies are required to publicly report on the steps they are taking to prevent modern slavery—a term that encompasses forced labor, human trafficking, and other forms of exploitation—within their supply networks. This kind of legislation reflects a broader global trend where companies are being called upon to take responsibility not just for the products they sell, but also for the way those products are made.
To comply, businesses are conducting more thorough audits of their suppliers, asking for proof of fair labor practices, and demanding transparency in how goods are produced. Many are also developing codes of conduct that suppliers must follow, and they may terminate relationships with suppliers who fail to meet these ethical standards. The result is a stronger emphasis on socially responsible procurement, where companies work only with suppliers who uphold human rights and treat their workers with dignity and respect.
By focusing on ethical procurement, businesses are protecting their reputation and meeting the expectations of consumers who are increasingly concerned about where their products come from. In doing so, they help drive positive change in global supply chains, ensuring that the people who make the products we use are treated fairly and ethically.
Circular Economy and Sustainable Packaging
The concept of the circular economy is becoming increasingly influential in procurement sustainability requirements as businesses seek ways to reduce waste, extend the lifecycle of resources, and minimize reliance on non-renewable materials. In contrast to the traditional linear model, where products are made, used, and then discarded, the circular economy focuses on keeping resources in circulation for as long as possible. This means designing products that can be reused, refurbished, or recycled, ultimately reducing the environmental impact of production and consumption.
In procurement sustainability requirements, this shift toward the circular economy has led companies to re-evaluate their supplier relationships. Businesses are now actively seeking suppliers who can provide products and services that contribute to a closed-loop system. This includes sourcing materials that are recyclable, durable, or made from renewable resources, as well as adopting processes that reduce waste during manufacturing. Companies also prioritize suppliers who have the capability to take back products at the end of their life cycle for recycling or repurposing, ensuring that nothing goes to waste.
A prominent example of a company embracing this approach is Nestlé. In 2020, the global food and beverage giant announced a commitment to invest $2 billion in sustainable packaging solutions. This investment is part of Nestlé’s broader goal to make all of its packaging recyclable or reusable by 2025. By partnering with suppliers that specialize in innovative, eco-friendly materials, Nestlé is helping to drive the development of packaging that supports the circular economy. This not only reduces the amount of plastic waste entering the environment but also conserves valuable resources by promoting the use of recycled content.
The push toward a circular economy is more than just an environmental responsibility; it also makes good business sense. By reusing materials and reducing waste, companies can lower costs, improve supply chain resilience, and meet growing consumer demand for sustainable products. For procurement professionals, this means focusing on sourcing strategies that align with circular economy principles, such as working with suppliers who can offer products with a longer life cycle, facilitate repairs, or provide recyclable and compostable alternatives.
Ultimately, the circular economy is reshaping how companies think about value—focusing not just on the immediate use of resources, but on how those resources can continue to provide value throughout their life cycle. This change is driving innovation in supply chains and encouraging more sustainable and responsible sourcing practices across industries.
Sustainable Raw Materials
Raw materials are the foundation of many products, making them a critical focus in the procurement process and possible to describe using sustainability requirements. As companies strive to become more environmentally and socially responsible, they are placing a growing emphasis on sourcing sustainable raw materials. This shift not only helps reduce the environmental impact of production but also supports ethical labor practices, making sustainability a key criterion when selecting suppliers.
Sustainable raw materials refer to resources that are either renewable, have a reduced environmental impact, or are produced in ways that prioritize social responsibility. This can include materials sourced with lower energy use, fewer emissions, or in a way that helps protect ecosystems and promotes biodiversity. Additionally, the working conditions of laborers involved in harvesting or extracting these raw materials are an important consideration, as companies increasingly recognize the need to address social issues like fair wages, worker safety, and human rights.
A great example of this shift can be seen in the fashion industry, where major clothing retailers like H&M and Adidas are making significant investments in sourcing sustainable cotton. Cotton is one of the most widely used raw materials in fashion, but traditional cotton farming has long been associated with high water consumption, pesticide use, and poor working conditions for farmers. In response to these challenges, both H&M and Adidas have committed to sourcing organic cotton or cotton grown under more sustainable conditions, reducing their environmental footprint while also improving the livelihoods of cotton farmers.
For instance, H&M has been working through initiatives like the Better Cotton Initiative (BCI), which promotes sustainable cotton farming practices that use less water, reduce chemical inputs, and ensure better working conditions for farmers. By doing so, H&M is helping to shift the industry toward more responsible cotton sourcing. Similarly, Adidas has committed to using 100% sustainable cotton across its product lines, ensuring that the cotton it sources is produced in a way that protects natural resources and improves the well-being of workers in the supply chain.
These efforts to source sustainable raw materials not only reduce the environmental impact of products but also appeal to consumers who are increasingly looking for ethical and environmentally responsible options. The growing focus on sustainability in raw material sourcing is also driving innovation in the development of alternative materials, such as recycled fibers, plant-based plastics, and other eco-friendly options that reduce dependence on finite resources.
In conclusion, sustainable sourcing of raw materials is rapidly becoming a standard in procurement across industries. For companies like H&M and Adidas, choosing sustainable cotton is just one part of a broader strategy to create a more responsible and transparent supply chain. By prioritizing sustainability, companies are not only helping to protect the environment and support workers but also positioning themselves to meet the evolving demands of consumers who want to buy products that align with their values.
Supplier Diversity
Supplier diversity is an emerging trend in procurement, with companies seeking to work with suppliers that are owned by underrepresented groups, such as women, minorities, and small businesses. In 2020, Walmart pledged to spend $350 billion on goods and services from diverse businesses over the next decade.
Conclusion: Procurement changed its sustainability requirements
In conclusion, the procurement industry has undergone significant changes in terms of sustainability requirements for suppliers over the last three years. Companies are increasingly prioritizing environmental responsibility, ethical practices, and social responsibility when selecting suppliers. This shift towards sustainable procurement practices is likely to continue, as companies recognize the importance of sustainability in building a resilient and responsible supply chain.
Learn more in Dr Aurora Dawn Benton’s courses. This bundle of courses include all the basics a buyer (and others) need to know to get started on journey towards a sustainable supply chain. From definitions to tools needed to get started.
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