Has COVID-19 Pushed Sustainable Procurement Off The Agenda?
Is sustainability shelved for now?
The COVID-19 pandemic has caused several of the biggest issues facing the profession before February 2020 – sustainability, social procurement, and supply chain diversity – to plummet in priority while organizations refocus on cost and risk reduction.
Given that 78% of companies anticipate a financial impact due to the crisis, this sudden shift in priorities is understandable, but that doesn’t make it any less disappointing. Every profession, industry, and sector in the global economy is currently shelving sustainability projects while the crisis plays out.
Frankly, many companies are now in survival mode, and their sustainability programs are seen to have no place in that mode. Fine words such as “sustainability was once seen as a ‘nice-to-have’ but is now a business imperative” have been forgotten while corporations tighten their belts and CPOs urgently re-prioritize the two foundation stones of the supply chain: cost and risk.
We were making progress
Until a few weeks ago (which feels like a lifetime), sustainability was high on the agenda of procurement teams in organizations of every size. The global standard for sustainable procurement (ISO 20400) launched with great fanfare and has been gaining momentum, while major procurement conferences such as the now-cancelled ISM2020 boasted several sessions on sustainable or social procurement. Modern CPOs followed the mantra “value beyond cost reduction” while those who were solely focused on cost were seen as old-fashioned and unimaginative.
In the training space, most supply management qualifications and certifications offered by industry bodies such as ISM and CIPS included a sustainability module, ensuring that young people coming into the industry understood and valued this aspect of the job.
The big unknown is whether sustainability initiatives are simply on-hold and will resume once this crisis is over, or if they will be shelved for the long-term as organizations slowly claw their way back to their previous levels of profitability.
It’s difficult to predict timelines as no country (except perhaps China) has yet moved onto the economic recovery stage of the COVID-19 crisis, but the big question is whether the world will actually move backward in terms of sustainability. Take, for example, a mine site that is considering powering its operation with renewable energy rather than fossil fuels. With profits and jobs under threat, the decision will likely be driven less by environmental concerns and more by cost and risk: decision-makers will choose to stick with what they know, for the lowest-possible cost.
Environmental consequences aside, the thriving network of small to medium-sized suppliers that has sprung up in response to organizations’ wish to source from sustainable, ethical, social, and diverse suppliers will now be in dire trouble. With sustainability no longer a priority for their customers, their market is disappearing as we speak.
Rebuild the foundations, but don’t neglect sustainability
Realistically, we cannot expect organizations to reanimate their sustainable procurement programs until they feel like they are back on solid ground in terms of cost and risk. The feeling I have received in the past two weeks when talking with Una’s members is that sustainability is once again a “nice to have” that will have to wait patiently while the building blocks of the procurement pyramid – cost down and risk mitigation – are cemented back into place.
It is possible, however, to do both at once. Joining a Group Purchasing Organisation (GPO) can complement and amplify the strategies organizations have in place to tackle immediate cost and risk concerns such as:
- dealing with inevitable price rises as the supply/demand equilibrium changes
- securing access to high-demand goods and services as suppliers are overwhelmed
- connecting with $100 billion in buying power to help ensure suppliers prioritize your organization when volume is running low.
Beyond these immediate concerns, a GPO can work on your behalf to maintain and improve critically-important relationships with suppliers. Already, supplier relationship management (SRM) is proving to be a defining factor in maintaining continuity of supply amid massive global disruption. It is also a channel through which sustainability discussions can continue.
An increase in buying power means more choice: sustainability and social procurement will not necessarily have to fall by the wayside, while ensuring diversity in the supply base is a key strategy in reducing risk and increasing resilience throughout the supply chain.