As sustainability becomes an increasingly important factor in businesses’ strategies, procurement teams are looking to embed sustainability key performance indicators (KPIs) into their goals. Procurement Leaders’ Pulse research: KPIs for sustainable procurement reveals 53% of procurement functions have KPIs that focus specifically on sustainability, but most companies have found these only ‘somewhat valuable’. We discussed this and more in our latest Procurement Leaders’ Virtual Roundtable, a teleconference open to all Procurement Leaders members.
The discussion began by considering which KPIs can be implemented to create the biggest impact. Many procurement organisations fall into the trap of choosing too many KPIs, which inevitably leads to most of them falling by the wayside and staff missing targets. It is better to connect with your key stakeholders and identify the areas of sustainability that are most important to your business, focusing on two or three KPIs that will directly impact this.
High-impact KPI tasks:
- Completion of collaborative projects.
- The number of corrective action plans drafted and executed.
- The number of supplier engagements on sustainability.
How can you achieve sustainability KPIs alongside cost savings?
Nearly every procurement team will have a cost savings target – this isn’t going to change anytime soon. One participant shared the importance of reframing this idea internally – that moving towards sustainability doesn’t necessarily mean costs will rise. By highlighting the potential costs of unsustainable choices – for example, reputational damage or being unprepared for legislative changes – you can demonstrate the value of sustainability as a risk management tool.
Another key point was that making sustainable choices doesn’t have to mean fewer cost savings – this is a common misconception (here’s just one example). One participant brought up the importance of working with suppliers directly to achieve sustainability targets. This level of cooperation has a more positive impact than just running an annual audit, and can lead to innovative solutions. Make the most of the expertise that’s available in the market.
The importance of stakeholder buy-in
As with all strategic projects, securing corporate-level buy-in is key to successfully implementing sustainability KPIs. As not all organisations have senior leadership teams focused on sustainability, participants discussed ideas to get stakeholders on board with sustainability efforts. One participant shared their tactic of identifying their stakeholders’ first key priority and delivering on this, plus meeting their sustainability objectives. If you can meet both goals, it’s unlikely that anyone will push back.
- Don’t encumber procurement with too many KPIs.
- Create an operating model for delivery.
- Match KPI tasks with impact areas, and vice versa.
- Ensure data is being collected and fed back to your procurement teams and internal stakeholders.
- Sustainable Procurement Leaders Microsite
- Why procurement should take the lead on sustainability
- A partnership for sustainability
- How to drive value through supply chain sustainability
Whiteman, C. (2019, september 4). Less is more when it comes to sustainability KPI’s. Retrieved from procurementleaders.com: https://www.procurementleaders.com/blog/less-is-more-when-it-comes-to-sustainability-kpis-684516#.XXY2jCgzZPZ
This article is a piece of independent writing by a member of Procurement Leaders’ content team.