April 22, 2022, marks the fifth anniversary of the ISO 20400 standard, which provides guidelines for integrating sustainability into your organization’s procurement processes. The anniversary falls on Earth Day and, in line with this year’s theme of “Invest In Our Planet”, now is the time to invest in your sustainable procurement program to scale positive impact. To date, companies from 188 countries have drawn on resources developed by the ISO 20400 community to accelerate their sustainable procurement journey. But although the standard has played an important role in expanding the adoption of better procurement practices, there remains much to be done to build more sustainable and equitable global supply chains.
ISO 20400: Meet the Standard
ISO 20400 is the fruit of the hard work of representatives from more than 40 countries and global organizations such as the United Nations Environment Programme, the Organisation for Economic Co-operation and Development and the International Trade Union Confederation. It provides guidance on how entities can effectively align sustainable procurement with broader organizational goals and objectives, and how they can create a culture of sustainability. The standard defines several overarching principles such as accountability, transparency, respect for human rights and ethical behavior. Furthermore, it highlights the importance of some useful tools such as risk management and priority setting.
On the fifth anniversary of ISO 20400, we would like to reflect on the growing importance of sustainable supply chain management and what has changed since the standard was introduced in 2017.
Signs of Progress: EcoVadis Global Performance Data
Sustainable procurement is the process of finding, sourcing, and acquiring goods and services while considering environmental and social factors. It brings tangible benefits to both engaged companies and broader society. For businesses, it helps build resilience to future environmental risks via enhanced risk management and can save them from reputational and regulatory risks associated with CSR-related controversies. For society, the benefits include reducing negative impacts on local communities and the environment while improving working and living conditions in the most vulnerable societies.
Since the launch of ISO 20400 in 2017, businesses have become increasingly aware of the importance of sustainable procurement, a dynamic reflected in the EcoVadis ratings database. Among the 29,619 companies assessed in 2021, for example, almost 28% had a supplier code of conduct in place, compared to just 13% in 2016. Furthermore, nearly 20% contractually obligated their suppliers to adhere to social and environmental clauses, compared to just 12% in 2016.
Policies on sustainable procurement issues are also on the rise, with 6% of assessed companies having integrated such measures into their management systems in 2021 compared to less than 2% in 2016. Likewise, regular supplier assessments were conducted in 30% of cases in 2021, compared to 20% the year before ISO 20400 was implemented.
Scope for Improvement
But while the general trends are positive, there are areas in which progress has been slower over the previous five years and which, consequently, require closer attention from companies globally. This includes actions such as supporting suppliers in building due diligence capacity on environmental or social issues, a criteria in which engagement has increased by less than a percentage point since 2017 (4.3% to 4.9%). Likewise, rated companies have been slow to obtain specific certifications on sustainable procurement – just 1.9% in 2021 compared to 1% in 2016.
It is important to note, however, that these two actions are contingent upon companies already possessing a robust understanding of the sustainable procurement landscape. For example, building the capacity of suppliers is only possible when the purchasing company’s procurement department is already engaged on material issues affecting its supply chains. Likewise, certification usually follows a multi-step process, which requires considerable investment in terms of time, people and finance. Therefore, both measures are reliant on purchasing companies possessing sustainability management systems with a high level of maturity.
An Evolving Procurement Landscape
Both the ISO 20400 Progress Report and the EcoVadis ratings dataset paint a similar picture of the current sustainable procurement landscape: While corporate interest in sustainability topics has grown rapidly in recent years, so have the challenges related to implementing sustainable procurement practices. On the one hand, organizations are facing increasing pressure from consumers, governments and supranational organizations to take on more responsibility for mitigating the climate crisis. On the other, the supply chain regulatory landscape is growing increasingly complex and difficult to manage alone.
To stay on top of regulatory requirements, meet customers’ expectations, and provide future-proof products and services, companies need to learn how to procure more sustainably.
Know Your Options: How to Manage Your Supply Base Effectively
To start, take a look at the resources of ISO 20400 Global Community of sustainable procurement practitioners. Subscribers can benefit from peer learning experiences in the form of numerous case studies, tools and guides. Moreover, the platform enables companies to take full responsibility for advancing their sustainable procurement journey, for example, by completing a self-assessment. It is a useful tool that helps companies reflect on their current sustainable purchasing practices.
The ISO 20400 standard itself has a wide scope of application as it provides guidance on sustainable procurement for entities independent of their size, sector, industry or geographical location. This format can benefit companies with varied business activities or those who are just beginning their sustainable purchasing journey and need a clear starting point.
If your company requires additional support to get started, EcoVadis offers a full suite of enterprise solutions for sustainable supply chain management. Our sustainability assessments are tailored to each supplier based on their sector-specific industry risks, company size and countries of operations. While every evaluation is unique, the overall results of the entire supply base are transparent, comparable and allow suppliers to understand and work on the deficiencies detected in their management system. Additionally, companies can leverage the EcoVadis Carbon Action Module to gain insights on supplier GHG and carbon management practices and, ultimately, meet decarbonization goals.
Another tool is EcoVadis IQ, which profiles and maps the entire supply base, providing companies with predictive intelligence to proactively manage sustainability risks. To develop the procurement team’s expertise on sustainability topics, companies can enroll in EcoVadis’ e-learning offering, the EcoVadis Academy.
These are only a few examples of EcoVadis’ wide range of sustainability solutions and intelligence. Get in touch to learn more about how EcoVadis can help your company build a more sustainable supply chain and manage it effectively.
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