No matter what industry you operate in, procurement can create immense value — in some sectors, for instance construction, as much as 80 percent of revenue goes into the supply chain. It is not surprising then that not only procurement professionals but also CEOs and heads of public organizations are increasingly looking for ways to understand their supply chains. And given that sustainable procurement benefits go way beyond cost savings, organizations worldwide are embracing the principles of transparency, fairness and collaboration when developing their procurement strategies.
All this has become much easier since a new international standard for sustainable procurement was introduced in April 2017, outlining clear guidelines on how to align with sustainability goals. A result of four years’ work and international negotiations, including active participation in France from EcoVadis’ Sylvain Guyoton, Vice President of Research, ISO 20400 involves 37 participating and 14 observing countries.
Unlike many other standards, ISO 20400 is not intended for certification, but it may lead to performance assessments. It is relevant to organizations of all sizes, in both the public and private sectors, and applies to any purchasing decision and every stakeholder in the procurement process.
In other words, ISO 20400 helps organizations make sustainable purchasing decisions as they can now more easily:
- Gain an understanding of what sustainable procurement is;
- See how to make the most of different aspects of procurement activities (policies, strategy, organization and process);
- Standardize the entire sustainable procurement process.
What Are the Key Benefits?
ISO 20400 provides guidelines through each step — from strategy to implementation — that help achieve sustainability goals and improve supplier relationship management. Following the standard can specifically help:
- Ensure supply chain security;
- Prevent financial, environmental and reputational risks;
- Foster investor and customer confidence;
- Contribute to opening new markets for products and services.
In addition, drivers for sustainable procurement not only include stakeholder expectation or a competitive advantage but also an increasing demand for compliance with legislation throughout entire supply chains (e.g. UK Modern Slavery Act).
How Does ISO 20400 Work With Other Standards?
Sustainable procurement is a material aspect of Corporate Social Responsibility and as such it complements the guidance standard on social responsibility, ISO 26000. The seven core subjects of ISO 20400, based on ISO 26000, are: Organizational governance, human rights, labor practices, the environment, fair operating practices, consumer issues, and community involvement and development.
Section 6 of the ISO 20400 also provides organizations with guidelines on sustainable procurement reporting (6.5.2 Reporting). The new GRI Standards (global standards for sustainability reporting) can support organizations in reporting on their procurement practices, GRI 204: Procurement Practices 2016 sets out reporting requirements on the topic of procurement practices and the disclosures in this standard provide information about an organization’s impacts related to procurement practices, and how it manages these impacts.
The Guidance Standard also suggests periodic audits of suppliers throughout the life of the contract as good practice example (7.5.4 Managing performance and relationships), these can be conducted via recognized on-site audit standards, examples here can be SMETA or Together for Sustainability. Since audits are no guarantee for compliance, other monitoring measures should be used as well.
Are Your Sustainable Procurement Policies in Line With the Standard?
Public and private organizations can find out to what extent their procurement processes are aligned with ISO 20400 by using a gap analysis methodology. And when developing sustainable procurement policies, ISO 2600 can be used as a starting point when taking into consideration all seven core subjects and 37 sustainability issues.
The standard makes it easier to prioritize, for example by applying the list of sustainable procurement issues in Annex A, while ensuring that all the relevant stakeholders are involved. This way organizations can focus their efforts on managing risks and opportunities to achieve the best possible contribution to sustainable development.
Making the Most of ISO 20400 and EcoVadis
Applying ISO 20400 to supplier selection and contract management (Section 7.4 and 7.5 of the standard) is where EcoVadis can step in. Our CSR rating methodology offers buyers a comprehensive assessment of their supply chain in order to identify and manage risks, increase transparency and improve performance. With this in hand, organizations around the globe can make the most of the standard and build value through a holistic sustainable procurement process.
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