As the sustainability crises affecting our planet and its people grow, procurement has an enormous role to play in embedding the ESG agenda at the heart of business operations. But in order to secure sponsorship for any sustainable procurement initiative, it’s key to build a robust business case that demonstrates its benefits, along with the risks and costs it might incur. Here we look at the growing sustainability pressures facing enterprise organisations, the key characteristics of a strong business case, and we offer further free content from CIPS Fellow and former President, Peter Smith, on building the business case for Procurement with Purpose.
Pressure is mounting on enterprise organisations from all angles to address their impact on the planet and its people. A diverse set of stakeholders – customers, investors, courts, and regulators alike – are all calling for significant sustainability improvements from the world’s largest businesses.
The demands being made by these key stakeholders are wide-ranging. Whether it’s reducing greenhouse gas emissions or protecting biodiversity and raw materials, to eradicating child labour and modern slavery or closing the gender and racial pay gaps, organisations are being asked to tackle multiple complex problems simultaneously under the ESG agenda.
With most of a large company’s impact on the environment and our communities sitting in its value chain, procurement has an enormous role to play in satisfying these demands. Given we cannot operate sustainably without our suppliers, the function that sits at the interface between the business and its wider ecosystem will be instrumental in embedding sustainability into business processes and practices. Procurement is being presented with the opportunity to steer the future of the business, ensuring it satisfies stakeholder demands and delivers on its strategic goals.
In order to meet this challenge, the Sustainable Procurement movement has been growing quickly. This approach to the procurement process places environmental, social, and governance practices at its heart, enabling the business to embed sustainability principles across its value chain.
Despite the growing pressure on organisations to address the ESG impact of their supply chains, it can be difficult to get Sustainable Procurement initiatives off the ground, to preserve their initial momentum, or to scale initial successes.
This is where a strong business case becomes crucial. By providing an overview of costs, benefits, risks, alternatives, and resources required, a strong business case aids the initiative by helping to:
For any large scale procurement initiative to get off the ground, it is necessary to have the support of the procurement leadership team, in close alignment with the wider executive leadership team. Sustainable Procurement projects frequently require significant resource to accomplish – resource that cannot be secured without the buy-in of senior stakeholders. Effectively communicating the costs, risks, and benefits of a Sustainable Procurement programme with a clear business case helps justify this sponsorship and investment to leadership, securing trust by providing a clear picture of the expected return.
Any Sustainable Procurement programme will involve multiple stakeholder groups – executive leadership, procurement, supply chain, sustainability, operations, and technology functions are all likely to be involved, in addition to a cast of suppliers and partners. A strong business case helps to provide the “north star” for these diverse stakeholders, cementing alignment around what the purpose of the initiative is, how success will be measured and attributed, and how the work of their individual functions will benefit the business.
By stating the key performance indicators for a Sustainable Procurement programme in advance, a robust business case aids in scaling the programme. Frequently senior stakeholders will want to see initial successes in a pilot programme or in a specific initiative. By clearly laying out what success will look like in addition to the expected return on investment, the business case helps justify scaling the programme once these initial successes have been achieved.
Effective Sustainable Procurement requires four key steps: baselining & ongoing measurement, alignment with suppliers, collaboration, and innovation. All four steps can be streamlined with technology to improve visibility, efficiency, and governance. Though commonly used disclosure frameworks and platforms exist to support Sustainable Procurement initiatives, these tools come at a price. A business case which clearly outlines where further efficiencies can be found with technology and expresses the benefits of this investment helps to secure the tools needed for robust Sustainable Procurement. This technology is especially crucial for Sustainable Procurement at scale.
Though the approach to constructing a business case can vary based on the project, there are some key elements that it is key to include:
A brief description of the programme or project, its scope (such as which segment of suppliers it applies to), and its main objective, e.g. “reducing scope 3 emissions from purchased goods and services amongst our strategic supplier segment”.
These objectives should be aligned to the strategic goals of the organisation and apply to all stakeholder groups who are involved in the project or programme, e.g. “reduce our scope 3 emissions by x%, keeping us on target to our Net Zero 2030 pledge.”
Key assumptions help to provide the rationale for why the specific project or programme has been identified as valuable, e.g. “Our science-based target as an organisation dictates that we disclose our scope 3 emissions”, “85% of our total emissions sit in scope 3”, “purchased goods and services accounts for x% of our scope 3 emissions, signalling considerable opportunity for reduction.”
Though not necessary to include, it can be beneficial to provide stakeholders with a sense of the timeliness or urgency of the project, contextualised in relation to recent events within or outside of the business, e.g. “The upcoming EU Sustainable Corporate Governance initiative is expected in the coming months, which will see large organisations such as ours obliged to conduct environmental due diligence in our supply chain.”
A robust business case for a Sustainable Procurement programme should include a clear breakdown of how success will be measured, of key performance indicators, and of target performance by a given date. These KPIs should include both soft benefits and hard benefits to the business, both of which should be accompanied by measurable metrics.
A clear breakdown of the costs associated with the programme, including tools, technology, data, and any additional personnel resource required, alongside a breakdown of the funding requested if applicable.
Any potential risks associated with pursuing the programme, project, or initiative as described in the business case, along with an assessment of how likely these are to occur.
As Sustainable Procurement initiatives can lack a solid projected revenue figure to articulate a return on investment, it is beneficial to articulate the risks the organisation is liable to face if the project is not pursued.
A clear outline of who – both within the organisation and within its extended ecosystem – will be involved in the initiative. This list may cover organisations, functions, smaller teams, or individuals, should include a named executive sponsor, and should be accompanied by an overview of how responsibilities will be divided amongst these stakeholders.
At Vizibl we find Gartner materials to be an excellent resource in our strategic planning. Existing Gartner customers can access their “Business Case on a Page” template here.
To give you further guidance in constructing the business case for your Sustainable Procurement programme, we are offering free access to a recent paper from CIPS Fellow Peter Smith, “Procurement with Purpose: Eight actions that will pass the business case test.”
In this paper, Peter – formerly Procurement Director of Dun & Bradstreet Europe, the Department of Social Security, and Natwest Group – offers his insights into the Sustainable Procurement movement, first outlining four specific areas that enterprise organisations should prioritise within the ESG agenda, then making his recommendations for the infrastructure and investment needed for successful sustainable procurement.
You can access this recent paper for free at the link below.
Peter is also the co-author of a book on the topic, Procurement with Purpose, which he wrote alongside Vizibl CEO Mark Perera. The book contains a mixture of case studies, interviews, and best practice in Sustainable Procurement, covering issues from GHG emissions to supplier diversity, waste management, and fair employment practices. You can purchase your hard copy here.