There was a time when it wasn’t unusual to see people toss trash out their car windows. Today, littering isn’t only abhorrent, but it also carries a hefty fine. A similar trend is emerging for sustainable procurement. While some companies and individual consumers are still unaware of the origins of the products and services they purchase—not to mention their impact on the environment and workers—an increasing number realize the importance of understanding a product’s journey from its raw materials and manufacturing process to its transportation and eventual use. This growing awareness is driven by both ethical considerations and the potential risks of ignoring sustainable procurement practices, including reputational damage, loss of business, and, in some cases, regulatory penalties for noncompliance with specific environmental laws or corporate social responsibility standards.

What Is Sustainable Procurement?

Sustainable procurement is the practice of considering the social, economic, and environmental impact of sourcing and purchasing along the supply chain. This involves everything from purchasing recycled materials and choosing vendors that pay fair wages to selecting local suppliers to reduce transportation costs and support regional economies.

But sustainable procurement is more than just taking care of the environment, society, and the economy; it’s also about supporting business longevity. For example, sustainable procurement practices include carefully vetting suppliers to verify that they source materials ethically, treat workers well, follow sound business practices, and can reliably deliver what’s promised. Sustainable procurement practices also include diversifying the supplier base to reduce the risk of supply chain failure, as well as enhancing transparency and traceability to mitigate risk and minimize damage should setbacks arise. These practices involve building strong partnerships with suppliers, which results in both a stronger supply chain and enhanced brand reputation.

Key Takeaways

  • Sustainable procurement can reduce costs, support small businesses, protect the environment, and uphold workers’ rights.
  • Sustainable products may cost more up front but often save money over time.
  • Metrics for measuring sustainable procurement practices include environmental impact, social responsibility, economic performance, and governance standards.
  • It’s important for companies to vet suppliers carefully and conduct regular audits to avoid “greenwashing.”
  • Organizations can leverage existing technology platforms to measure sustainable procurement metrics and improve procurement operations.

Sustainable Procurement Explained

Procurement is the process of sourcing the goods and services a company needs, with the goal of obtaining them for the best value. Sustainable procurement extends this concept by integrating environmental, social, and economic factors into purchasing decisions and processes. It considers a wide range of factors, including raw materials, labor, manufacturing, packaging, distribution, reuse, maintenance, and disposal.

Organizations getting started with or expanding their sustainable procurement initiatives should evaluate their current sustainability efforts (even if that means acknowledging that they currently have none). They can then set goals based on factors such as business needs, customer expectations, regulatory mandates, and industry benchmarks. No matter what areas organizations focus on, a successful sustainable procurement program requires buy-in from across the business. This hinges on thorough education about the costs, as well as the direct and indirect benefits of making a sustainable procurement commitment. Benefits often align with the “triple bottom line,” a sustainability framework that evaluates business performance in terms of people, planet, and profit.

Why Is Sustainable Procurement Important?

Sustainable procurement practices protect organizations from supply chain disruptions and enable them to effectively and flexibly adapt to changes in pricing, supply and demand, regulatory mandates, and societal shifts. Also, sustainable procurement can help companies reduce costs and increase savings. This can be achieved by choosing reusable materials and strategically sourcing from suppliers located closer to delivery destinations.

Lastly, as industry, government, and customer demand for more sustainable practices grows, organizations committed to sustainable procurement will be better positioned to respond to changing regulations and laws. They’ll also stand out among competitors as customers and partners seek to purchase from and work with companies that demonstrate tangible efforts to address environmental and social concerns.

Why Are Businesses Turning to Sustainable Procurement?

Businesses are turning to sustainable procurement because it delivers both protection and upside. Embedding environmental and social criteria into purchasing helps companies diversify their suppliers, reduce exposure to climate- and labor-related disruptions, and stay ahead of fast-evolving regulations around carbon disclosures, waste reduction, and human rights due diligence. Together, these benefits help keep operations running smoothly, even in the face of volatility.

At the same time, sustainable sourcing helps earn customer loyalty and attract investor capital, both of which can help differentiate brands in crowded markets. It can even uncover long-term cost-savings and increase innovation. Partnering with suppliers to cut waste, improve efficiency, or use recycled materials can lower costs and spark new product ideas.

Core Principles of Sustainable Procurement

Sustainable procurement aims to balance social progress, economic development, environmental protection, and organizational value. Core principles of sustainable procurement may differ depending on the nature of an organization’s business and industry, but they commonly include the following:

  • Environmental stewardship: This principle involves making purchasing decisions that minimize negative environmental impact, such as purchasing products from manufacturers that use clean production methods to reduce pollution. Environmental stewardship also promotes conservation and sustainable resource use throughout the supply chain. This is achieved not only by prioritizing suppliers and manufacturers that innovate in these areas, but also by developing internal processes and products that utilize and optimize environmentally responsible materials.
  • Social responsibility: Commitment to sustainable procurement considers how purchasing impacts and is impacted by labor rights; diversity, equity, and inclusion; human rights; and community development. For example, an organization demonstrating social responsibility throughout the procurement process might consider prioritizing small, local, or diverse suppliers. Organizations also might work to confirm that a supplier’s workers are being treated fairly.
  • Economic viability: Organizations must balance sustainability criteria with the financial viability of their procurement process. While some sustainable procurement practices may lead to immediate cost savings, others may involve higher up-front costs. For example, sourcing products with longer lifespans or selecting suppliers closer to the point of use might be initially more expensive but can result in long-term savings and reduced environmental impact.
  • Ethical sourcing: Organizations that prioritize ethical sourcing strive to align their purchasing decisions and processes with the greater good of society and the environment. This principle involves maintaining transparent procurement practices and implementing robust governance structures to maintain accountability throughout the supply chain.

What Is the “Triple Bottom Line”?

The triple bottom line measures success on three fronts—people, planet, and profit—rather than focusing on financial results alone. In sustainable procurement, applying the triple bottom line means asking the following:

  • Does this choice support fair labor, safe working conditions, and healthier communities up and down the supply chain? (People)
  • Does it conserve resources, cut emissions, and avoid unnecessary waste? (Planet)
  • Does it create lasting economic value for the supplier, the buyer, and, ultimately, the customer? (Profit)

By taking this broader view, procurement teams shift from a narrow cost mindset to one of value creation. The three dimensions are weighed together to avoid short-term trade-offs that appear cheaper today but carry financial and reputational costs tomorrow. In other words, a sustainable procurement decision might favor a slightly more expensive component because the supplier offers verifiable living wages, uses renewable energy, and guarantees lower defect rates that reduce warranty claims.

7 Advantages of Sustainable Procurement

Sustainable procurement is important for many reasons—some for the good of the organization, some for the greater good, and some for both. For example, working with vendors to check that orders are strategically packed and delivered to maximize shipping logistics and vehicles may lower shipping costs for the organization while benefitting the environment. The following are seven key benefits of sustainable procurement:

  1. Positive social impact and community engagement: By prioritizing small, diverse, and/or local suppliers that adhere to fair labor standards, sustainable procurement supports organizations and people that might not otherwise have equal opportunity for economic growth. Food service company Aramark’s sustainable procurement practices and targeted purchases, for example, helped improve working conditions for farmworkers within its Florida tomato supply chain.
  2. Cost efficiency and savings: Sustainable procurement has the potential to reduce costs and increase savings. Sourcing from local vendors can reduce shipping costs and speed up delivery times, supporting a leaner inventory model that boosts cash flow. Selecting suppliers with sustainable practices may lead to more stable prices over time. Investing in reusable products, such as metal straws, will initially cost more than disposable counterparts, but reusable options won’t need ongoing purchases.
  3. Improved risk management: The integration of environmental, social, and governance (ESG) criteria into the procurement process can help organizations manage risk by increasing supply chain resilience. Identifying—and planning for—supply chain vulnerabilities caused by environmental impact, labor issues, and changing regulatory mandates can mitigate the risk of disruption, for instance.
  4. Regulatory compliance: Regulatory mandates can be a moving target as local, federal, and global laws are put into place and expanded. Organizations that uphold sustainable procurement processes are better positioned to remain compliant with new and existing regulations, regardless of future changes in policy focus or government leadership.
  5. Strengthened brand reputation and market position: Almost 80% of consumers say that a sustainable lifestyle is important to them. A company that implements sustainable procurement principles improves its brand reputation and attracts like-minded customers. Clothing company Patagonia’s website, for example, provides information on its commitment to sustainable procurement practices, as well as its participation in groups, such as the Fair Labor Association and Better Buying Institute. This transparency and commitment to sustainability can be a powerful differentiator. Consumers who prioritize sustainably sourced goods are more likely to choose brands with a demonstrated track record in this area—even if it means spending more to do so.
  6. Competitive edge and business growth: Committing to sustainable procurement practices can help a company stand out in a crowded market, expand its customer base, and grow the business. By focusing on local suppliers, for instance, companies can reduce the risks—and costs—associated with cross-country or overseas shipping. This makes it much more likely that an organization will have the goods and services necessary to expand its product base, serve its current customers, and attract new ones. Working with like-minded partners can also result in the development of new products, services, and strategies that leverage sustainability for business growth.
  7. Long-term business resilience: What’s good for the environment and society is also good for the company. Sustainable procurement increases long-term business resilience by encouraging supplier diversity, which prevents the possibility of single points of failure in the supply chain. It focuses on long-term value, rather than just low cost, which saves money and builds financial resilience over time. Sourcing from reputable providers also guards against the kind of debilitating brand damage associated with unethical or environmentally harmful practices.

Considerations of Sustainable Procurement

A sustainable procurement lifecycle requires buy-in from stakeholders across the company, training in best practices, purposeful technology purchases and integrations, and a long-term view of return on investment. Here are some of the most important considerations—and biggest challenges—when it comes to sustainable procurement:

  • Maintaining supply chain visibility: Any company can claim that a product meets sustainability criteria, but the only way to know for sure is to follow that product’s journey from idea to production to delivery. Supply chain visibility is critical to achieving this goal and requires close collaboration with suppliers. Advanced technology, such as AI and data analytics systems, can improve transparency—and resilience—by automatically identifying patterns and anomalies that indicate blind spots, providing data on supplier performance and energy usage, and recommending suppliers that align with energy-saving initiatives. by automatically identifying patterns and anomalies that indicate blind spots, providing data on supplier performance and energy usage, and recommending suppliers that align with energy-saving initiatives.
  • Engaging and collaborating with suppliers: Once organizations have identified, evaluated, and partnered with suppliers that meet their sustainability criteria, it’s important to continually measure and monitor suppliers’ performance on these metrics and other key performance indicators (KPIs) using tools such as AI and data analytics. Organizations can also use this data to more tightly align with suppliers on sustainability criteria and develop new products and strategies for improving sustainability.
  • Tracking, measuring, and reporting sustainability metrics: Effective sustainable procurement performance assessment begins with identifying which KPIs are most relevant for the business. Common categories of KPIs include environmental, social, economic, governance, process, outcome, supplier, and transportation. Specific KPIs include energy consumption, supplier diversity, cost savings from sustainability initiatives, regulatory compliance, carbon emission reduction, percentage of suppliers meeting sustainability standards, and vehicle reduction. These and other KPIs can be tracked through supplier assessment tools, sustainability scorecards, and regular audits.
  • Navigating the trade-offs between cost and sustainability: Sustainable procurement often requires balancing immediate costs against long-term benefits. Some sustainable practices may carry higher up-front costs, such as sourcing products with longer lifespans; however, they can lead to savings over time through reduced frequency of purchases and lower disposal expenses. Other sustainability efforts, such as partnering with smaller local suppliers, may not directly recoup costs but can mitigate risks of regulatory noncompliance and attract environmentally conscious customers with like-minded sustainability goals.
  • Mitigating the risk of greenwashing: Labeling products and processes as “sustainable” doesn’t guarantee that they are. To avoid this so-called greenwashing, organizations should set clear and measurable sustainability goals, conduct thorough supplier assessments, and prioritize transparency. Using standardized reporting frameworks like the Global Reporting Initiative, implementing product lifecycle assessments, and seeking third-party verification can help evaluate a product’s full environmental impact. Continuous improvement, supplier collaboration, and ongoing education for procurement staff can also help prevent the acquisition of products that are sustainable in name only.
  • Managing initial investment costs: While sustainable procurement offers long-term benefits, initial investments can be challenging. To manage costs, start with small, discrete projects that can be easily controlled and monitored via performance metrics. Companies can also balance environmental and governance initiatives with projects that are more directly focused on cost savings to help manage overall expenses. Collaborating with suppliers can also help reduce the costs associated with sustainable procurement, for both the buyer and the seller. For example, by sharing data about things like supply chain logistics, anticipated spikes in business, and planned product releases, buyers and suppliers can work together to identify the most cost-effective transportation schedules and routes.
  • Addressing the complexity of global supply chains: The complexity of global supply chains is a major challenge for sustainable procurement. Dispersed locations, differing regulations, and multiple supplier tiers all complicate the jobs of procurement teams. Organizations can mitigate these challenges by strategically integrating products and best practices. Leveraging Internet of Things (IoT) devices, data analytics, and ERP systems enables real-time data tracking and sharing, while AI helps make sense of the data to provide supply chain visibility. Ongoing training for procurement staff is also crucial to upholding sustainability priorities amidst these complexities.

Real-World Examples of Sustainable Procurement

In practice, many organizations are already weaving sustainability into everyday procurement decisions, as evidenced by the aforementioned Aramark and Patagonia examples. But they’re not the only companies making waves. The following are three more examples of what excellence can look like, each one different in scale and sector but united by a commitment to sustainability.

  • Masienda: Heirloom-corn specialist Masienda sources directly from a network of small farmers across several Mexican states. They pay fair prices up front, prohibit the sourcing of pesticide-treated grain, and work to help growers keep their traditional varietals alive. The result is a transparent, regenerative supply chain that protects farmer livelihoods, their local economy, and biodiversity.
  • IKEA: The furniture company insists that suppliers use responsibly managed or recycled timber and have helped expand programs that allow suppliers to audit sourcing of raw materials back to the forest. Their efforts demonstrate how even a global company with mass-produced products can hard-wire strict environmental criteria into contracts—and still keep products affordable.
  • Schneider Electric: Through its “Zero Carbon Project,” the energy-management technology company partners with its highest-impact suppliers to cut emissions by offering training, tools, and data analytics, rather than simply dictating emissions targets. This helps suppliers improve their own capabilities. In turn, procurement turns decarbonization into a shared journey rather than a top-down mandate.

The Future of Sustainable Procurement

There’s no way of knowing how governments will mandate sustainability regulations governments in the future. Companies also can’t predict how consumers’ attitudes and commitment toward sustainability will evolve. However, the demand for sustainable practices across industries and demographics is clearly rising. As global awareness grows, industries may see a future in which all procurement will be sustainable procurement. This trend likely stems from an increasing awareness of the importance of sustainability, including the positive impacts on the environment and people, as well as the cost savings provided by sustainable procurement.

Technological advances are expected to accelerate this shift. For example, in the circular economy, products will be built with a lighter environmental footprint, greater durability, and easier reusability. Meanwhile, in AI-powered, data-driven supply chains, companies will be able to leverage cloud-based supply chain execution systems that provide detailed analytics on supplier performance and environmental impact. These systems may even pull data from equipment sensors and other IoT devices to monitor resource usage and optimize sustainable practices in real time.

None of this will be easy, especially because sustainable procurement can be particularly challenging for certain industries. For example, the electronics industry faces significant hurdles in sourcing conflict-free minerals and managing e-waste, while the fashion industry grapples with the environmental impact of textile production and fast-fashion practices.

That said, significant momentum exists for a more sustainable future, and this movement is increasingly demanding that all stakeholders along the supply chain contribute to sustainability goals—especially procurement, whose role will likely continue to grow. Procurement teams will be expected to evaluate cost and delivery while championing sustainability throughout the supply chain. This takes partnering with suppliers to improve sourcing practices, assessing environmental and social criteria, and helping their companies meet evolving ESG expectations. In other words, procurement will, in many ways, be at the center of the shift toward a more sustainable future.

Grow Sustainability With NetSuite’s Procurement Solutions

NetSuite Procurement helps companies grow their sustainable procurement programs by enabling the purchase of goods and services in a timely, cost-effective manner, while also supporting compliance with ESG benchmarks. The solution provides centralized management of vendors and the procurement process, offering real-time and unified views into company spending and vendor performance. NetSuite Procurement also fosters clear communication throughout the procure-to-pay process, which allows vendors and buyers to collaborate via a portal to determine ways to strategically share costs and risks. Additionally, its cost controls help companies balance the initial expenses of sustainable procurement with the long-term savings provided by these practices.

Sustainable procurement is about more than protecting the environment, workers, and customers. It’s also about protecting businesses by increasing supply chain resiliency, reducing costs over time, and maintaining compliance with global regulatory mandates. Sustainable compliance may be an aspirational goal today, but it may very well become a competitive requirement in the near future.

Sustainable Procurement FAQs

What hinders sustainable procurement?

Lack of visibility and poor communication are two of the biggest hindrances to sustainable procurement. To successfully implement and maintain sustainable procurement practices, organizations must be able to determine the sustainability of suppliers and their goods, as well as collaborate with them to improve sustainability efforts over time.

How do you measure sustainability in procurement?

Sustainable procurement key performance indicators (KPIs) such as environmental, social, economic, governance, process, output, and supplier metrics form the foundation for measuring sustainability. Once organizations define which KPIs to track, they can use supplier assessment tools, sustainability scorecards, and regular audits to gather and verify the data needed to measure those KPIs. These tools provide structured, reliable ways to evaluate supplier performance and track sustainable procurement progress.

What is the sustainability procurement cycle?

The procurement lifecycle refers to the steps involved in obtaining goods or services for a business. These steps can be broadly categorized as defining business needs, inviting suppliers to bid, evaluating and selecting suppliers, managing contracts and deliverables, and refining procurement processes. While both traditional and sustainable procurement lifecycles aim to source the highest quality goods for the best value, sustainable procurement integrates environmental, social, and governance factors at each step.

What is the meaning of sustainable procurement?

Sustainable procurement considers the social, economic, and environmental impact of sourcing and purchasing goods and services.

What are the four elements of sustainable procurement?

Four elements of sustainable procurement are environmental responsibility, social equity and inclusivity, economic viability, and ethical and transparent governance.

What are the seven pillars of sustainable procurement?

The seven pillars of sustainable procurement are as follows:

  • Environmental responsibility
  • Social equity and inclusivity
  • Economic viability
  • Supplier relationships
  • Ethical and transparent governance
  • Innovation
  • Risk management and resilience