Sustainable Procurement in Europe – Critical Success Factors
The Hackett Group Principal David Ketchin talks with Senior Director Hiten Parmar and Principal Georg Bach about their perspective on sustainable procurement in Europe, how the pandemic has helped move the topic to the top of the procurement agenda, and critical success factors for sustainable procurement initiatives.
Welcome to the Hackett Group’s Business Excelleration Podcast, where – week after week – we hear from experts on how to avoid obstacles, manage detours, and celebrate milestones on the journey to world-class performance. This episode of the podcast is hosted by David Ketchin, Managing Director of Europe for the Hackett Group. His guests for the episode are Principal Georg Bach and Senior Director Hiten Parmar. Georg helps lead the Hackett Group’s operations in Germany, Austria, Switzerland, and the Nordics, working with senior executive clients. Hiten is the Hackett Group’s procurement transformation leader based in the UK. Both guests join David to discuss the topic of sustainable procurement, and given their contexts and roles, there is a distinct European flavor to some of the challenges discussed.
As David and his guests launch into their discussion, they first consider the fragile state of Europe’ supply chain right now before turning to a basic definition of procurement. The primary goal for procurement is cost management, which involves obtaining the right supplies at the right time for an optimal price. In the present moment, there is a particularly high demand to do this job well and, in doing so, to meet relevant regulations – especially in the high-profile area of sustainability. Sustainable procurement is multi-faceted and involves two broad themes. The first theme, that of looking at ESG and strategic imperatives, centers on three key pillars: environment, social, and governance.
The other broad theme is possibly even more important than the first, and it is to extend the CPO’s impact in the decision-making process at the board level, CEO level, and beyond. Because of changes in consumer behavior and investor attitudes, a company CEO has to access innovative profit pools with smaller carbon footprints. The CPO and procurement department generally manage supplier innovation, so they are now presented with both the challenge and the opportunity to effectively contribute to business markets and carbon footprints.
Moving forward, the group talks about how to get started in forming and implementing an effective strategy. It is such an exciting time for procurement leaders, as they have great opportunity to innovate, challenge, and identify strategic partners to accelerate business change. Effective engagement with suppliers is of primary importance, and leaders should also consider what is in their control in relationships with suppliers (such as the cultivation of relationships with suppliers that share the company’s values). Procurement leaders have opportunity to work toward a sense of mutual value creation, a robust insistence on company values, and even diversity on multiple levels.
Of course, when preparing to move toward a stronger sustainable procurement practice, it’s helpful to see how other companies are handling similar shifts. However, it is not entirely clear at this point what companies are and are not doing well in this area, and the realm of sustainable procurement is constantly evolving and demands flexibility. That being said, there are critical success factors to bear in mind. First, those trying to secure rapid benefits should treat procurement as a true business partner. Procurement leaders should leverage their asset (expertise and data), live the visible strategic priority of sustainability in procurement, keep an eye to tangible value, focus on business alignment, and establish structures of collaboration.
- 0:43 – Welcome to this episode, hosted by David Ketchin.
- 2:06 – The first goal for procurement is cost management.
- 3:16 – A definition of sustainable procurement involves three pillars.
- 8:08 – More broadly, sustainable procurement involves two themes.
- 12:09 – How can procurement leaders get started?
- 17:16 – The group considers how other companies are doing and critical tips.