Supply Chain

Sustainability in the Indirect/Goods Not for Resale Supply Chain

By Sam Hummel | Published 11 years ago | About a 3 minute read

Indirect procurement is an area we hope to highlight in this Issue in Focus series on sustainable supply chains. While sourcing raw materials, components and goods-for-resale (GFR) has gotten the lion’s share of sustainable supply chain attention in the corporate world to date, an increasing number of companies are focusing on opportunities to advance their enterprise’s financial, social and environmental sustainability through the purchases they make for their own operations. One driver for this new sustainability focus is the economic aspect of sustainability. Traditionally decentralized and undermanaged indirect procurement is being given increased scrutiny as companies realize the tremendous potential for savings and efficiency. After all, indirect spend represents 50% of the average Fortune 500 company’s total expenditures. As management and data systems are put in place to evaluate the financial impacts of indirect spending decisions, new opportunities are opening up to measure the social and environmental impacts of that spend as well.

But perhaps the biggest driver for the rising emphasis on sustainability in indirect purchasing is the greater attention that environmental, social and corporate governance is receiving thanks to investor initiatives, such as the UN Principles for Responsible Investing and CERES, and reporting initiatives, such as the Global Reporting Initiative and CDP. Companies can no longer afford to focus their sustainability efforts solely on the attributes of the products or services they market. Investors want to know about the risks in the enterprise’s total operations, and that is bringing to indirect procurement the same level of scrutiny that the sustainability of direct and GFR purchasing has been getting for some years now. As a result, companies are increasingly recognizing and valuing indirect procurement’s vital importance to every enterprise environmental goal — from climate neutrality to zero waste, to green building and energy efficiency. The same is true for social sustainability goals related to increasing supplier diversity, supporting local economic development and protecting human and worker rights, just to name a few.

Chief procurement officers everywhere are finding that delivering indirect procurement’s piece of enterprise CSR goals is not easy. They are forming new teams focused on figuring out what they should be doing and how they can know when they’ve succeeded. New processes, systems, tools and metrics have to be created. New supplier collaborations need to be forged. There’s a lot of trailblazing left to be done, which makes this an exciting time to be working in indirect procurement.

Does your company have a story to tell about integrating sustainability considerations into indirect purchasing, creating new tools or processes, and/or figuring out how to measure success? Could you share a case study about an indirect purchasing effort that achieved great triple bottom line results? Have you participated in any multi-sector or multi-stakeholder collaborations from which you can share lessons? If you have such a story to tell, we’d like to hear about it.