These are actions taken by both government and private companies to acquire goods or services using processes focusing on rational, effective and efficient use of natural, human and economic resources. This yields benefits for the organizations themselves, as well as for the environment, society and the economy.

One of the tools a company can use to implement such actions is the new ISO 20400 standard, which describes aspects to take into account in contracting or procurement processes, valuing sustainability. That is, it provides guidance on how strategies used in procurement processes affect different levels of activity, including aspects related to policy, strategy, organization, and processes, and how such purchases should be implemented. This standard proposes, inter alia, the following:

  • working with suppliers who guarantee the quality of their products and services from a fair practices perspective, which can be measured using ISO 20400;
  • applying methods to avoid excess waste or excessive resources, and making good use of renewable energies;
  • assessing risks and opportunities, in line with company values, to benefit all parties involved, and choosing suppliers with an eye to transaction transparency, ethical behavior and a circular economy.

Sustainable Procurement is not only a beneficial tool for the parties making up the chain, but also generates a positive impact on society, the environment and the economy. Upon assessing the implementation of Sustainable Procurement procedures, companies should bear in mind that their objective as a company must go beyond generating economic benefits at any cost, and that they should develop their business with a triple impact or ESG (Environmental, Social and Governance) focus, aligning their objectives with fulfillment of Sustainable Development Goals (SDGs).

Why is it important for companies to incorporate these practices?

Migration to a sustainable business model is ceasing to be an option and has become a necessity. Staying in the market will increasingly depend on a company’s fulfillment of high standards of conduct demanded by purchasers, investors, the financial sector and the workforce.

Consumers have become aware that, when the acquire a product or service, they are also supporting the company that put it on the market. Plainly speaking, consumers have understood that they have the ability to strengthen companies or projects that share their own ideas. This same notion extends to investors, financers and collaborators.

More than ever, a company’s value is linked to its image and to the perception of its customers, collaborators and the public in general. And to protect its image, the company must take care that its name and brand do not become associated with companies that damage the environment or offer poor working conditions or, more generically, companies that do not share its principles or ideals.

How do companies do this? How can they manage the value chain?

Having appropriate legal advice to review contracts with suppliers and ensure that they are in line with standards like ISO 20400 and, above all, with the company’s sustainability and ESG goals, is essential for avoiding reputation risks and preserving the company’s image.

Moreover, the company must be able to implement a system for selection, verification, control and tracking of its suppliers, to ensure that they are in compliance with those goals. Just as some companies must carry out employment or outsourcing checks, this will be the road they must take to ensure that their purchases are sustainable.

Following are some of the services that companies may require:

  1. Verification that the supplier has prior validation or certification on ESG issues (B Corporation, BIC, GRI, IR, SASB, etc.)
  2. If the supplier does not have prior validation or certification, or in addition to same:
    • Use of existing sustainable value chain management tools (for example, the ISO 20400 Sustainable Procurement guidelines).
    • Generating an own tool (sustainable procurement protocol).
  3. Selecting suppliers based on these criteria.
  4. Periodically controlling compliance with criteria.