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The significance of sustainability in the Procurement and supply chains are:

  • $23T reduced annual global economic output worldwide because of climate change.

  • 35% revenue losses due to climate-related disruptions to specialty supply chains, well-prepared players only risk ~5% revenue losses.

  • $970B in extra costs due to factors incl. hotter temperatures, chaotic weather, and pricing of greenhouse gas emissions.

  • With sustainable procurement 5-10% costs down,

  • 57% of consumers are willing to change their purchasing habits to help reduce negative environmental impact. Sustainability as #1 concern amongst Millennial and Gen Z jobseekers.

  • Procurement has a significant impact as 2/3 of a company’s ESG footprint lies with their suppliers.

  • Comply with increasing regulations such as Extended Producer Responsibility or ban on plastics.

  • Receive sustainability targeted Investments ,10-20% faster growth and higher valuation.

Following sustainability factors in the procurement and supply chain can support your organization to achieve the Sustainability Objective and improve corporate value.

  1. Transitioning from “Low to No” carbon across your suppliers and procurement spend.

  • Carbon footprint of materials at product level

  • Carbon performance of suppliers

  • Supplier-level certifications and data tracking (i.e., renewable energy usage)

  • Water-emission at product level 

  1. Contribute to a zero-waste world by incorporating resilience and circularity into your procurement processes and supply chains. 

  • Percentage of recyclable materials

  • Percentage of recycled materials

  • Percentage of bio-based plastic

  • Tracking and quantifying reusability

  • Asset transfer for internal use 

  1. Ensure zero incidents, accidents and harm to communities, people, and the environment. Guarantee diversity and fair working conditions. 

  • Supplier ownership, e.g., woman-owned, veteran-owned, minority-owned etc.

  • Measures of diversity in management

  • Social impact of the enterprise

  • Human-right violations in the supply chain

How to promote sustainability in the Procurement processes and how to enable it in your organization?

To promote sustainable procurement, it is important to pay attention to the following 3 points.

  1. Formulation of a company-wide procurement policy that incorporates sustainable procurement.

  2. Establishing a procurement process that enables sustainable procurement.

  3. Continuous monitoring of business partners with respect to progress on sustainability KPIs. Supplier evaluation management/improvement including sustainability KPIs.

SAP Procurement turn sustainability insights into action as a dimension across end-to-end procurement processes and decision making. SAP Business Network having more than 8 million trading partners, plays critical role in driving sustainability program , as 2/3 of ESG footprint come from trading partners in the supply chain ecosystem.

Following functionalities of SAP procurement solutions enable the sustainable procurement processes.

Sustainability in source to contract Process.

  • Leverage SAP Ariba Category Management solution defines and track the sustainability Goals and objective and key sustainability Indicators like Carbon footprint of materials, Carbon performance of suppliers, Supplier-level certifications and data tracking, Water-emission, Percentage of recyclable materials, Percentage of recycled materials, Percentage of bio-based plastic etc.

  • SAP Ariba sourcing enables capturing the ESG related parameters from suppliers during sourcing process.

  • The different data points and information required for sustainability for different categories can be configured in sourcing templates.

  • Sustainability questionnaire library can be available for category buyers to use and re-use for capturing sustainability related data points during sourcing process.

  • The SAP Ariba sourcing application can automate the scoring and grading of sustainability questionnaire and support buyers in the decision making to drive organization’s sustainability objective.

  • SAP Ariba contract Management can enforce usages of sustainability clauses in different procurement contracts.

  • SAP S4HANA Product sourcing for direct material has inbuilt capabilities for capturing the carbon footprint information in the sourcing process and provide early insights into carbon footprint associated with the procured material/service. 

Sustainability in Supplier Management Process

  • Leverage SAP Ariba Supplier Lifecycle Management solutions to collect the substantiality initiatives related information, supporting documents and certifications from suppliers as part of supplier on-boarding and Qualification process. Sustainability KPI based vendor evaluation and qualification.

  • The sustainability should be one of the KPIs for supplier performance evaluation process.

  • SAP Ariba has formed a global partnership with  EcoVadis is a rating agency specializing in sustainable procurement. With more than 700 CSR (social consideration) professionals and supporting 45 countries around the world.

  • SAP Business Network and SAP Ariba Supplier Risk solutions have standard Integration with EcoVadis for the suppliers to get the Sustainability rating. This enables buyers in the procurement decision making considering the substantiality aspect.

  • SAP Business network enable suppliers to perform the assessment of human rights and environmental risks in the supply chain as per the LKSG – the supply chain act and share the assessment details to the connected buyers. 

Sustainability in Business User procurement ordering process.

  • SAP Ariba Guided buying enables the business end users to search and compare the catalogue items based on sustainability rating while ordering the items. This promotes the sustainable purchasing in the organization.

  • SAP Ariba Guided buying enables enhanced workflows based on sustainability variables including “diversity and Inclusion” like woman-owned, veteran-owned, minority-owned etc.

The below is the simplified process flow driving sustainability program in the procurement to pay processes.

Sustainability Process in Procurement