ISO 20400 for Sustainable Procurement: A framework for better global citizens

The ISO 20400 standard for sustainable procurement is beneficial to today’s manufacturers as it will help you improve your sustainability, environmental impact, ethical behavior, and social responsibility. We introduce the standard with a summary of its key points here…

What is the ISO 20400:2017 Sustainable Procurement Standard?

Today pressure is increasing on businesses to become more environmentally conscious and socially responsible and we know that when procurement is done sustainably and responsibly it leads to a higher number of suppliers in the supply chain who comply with local laws and sustainable practices, as well as lowering the supply chain’s environmental footprint.

Implementing the framework provided by the ISO 20400 standard can help you get to this point and become a more responsible business and is sometimes seen as a logical ‘next step’ for ISO 14001-certified businesses: A win-win for the environment, people, and your business.

As discussed in this episode of our podcast here’s a quick introduction quoted from the standard itself:

The ISO 20400:2017 standard provides guidelines about how to make changes to the procurement function so it allows for more sustainability, building on ISO 26000 that focuses on social compliance and environmental protection. Sustainability in manufacturing is, at its peak, where resources used can be used forever without harming the planet. Most companies try to do less harm rather than following a fully circular and sustainable model. Sustainable purchasing focuses on how buyers can get closer to the sustainable ideal and is defined as:

“Procurement that has the most positive environmental, social and economic impacts possible over the entire life cycle.”

In short, businesses of any type and size can reduce their environmental impact, improve social compliance, and be more ethical when implementing sustainable sourcing practices. ISO 20400 is a guidance framework that, while not being a certifiable standard, gives businesses the ability to manage their supply chains more sustainably and be better global citizens.

Note: Quotes throughout are courtesy of the ISO standard document. You can purchase your own copy here.

Important definitions in the ISO 20400 standard

The ISO 20400 defines some key terms in Section 3, terms and definitions, which are useful to review as they help us understand the standard and its goals better. Here are a few:

• Social responsibility
  responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour thatcontributes to sustainable development, including health and the welfare of society; takes into account the expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behaviour; and is integrated throughout the organization and practised in its relationships.

• Ethical behaviour
  behaviour that is in accordance with accepted principles of right or good conduct in the context of a particular situation and is consistent with international norms of behaviour.

• Sustainabilitystate of the global system, including environmental, social and economic aspects, in which the needs of the present are met without compromising the ability of future generations to meet their own needs.

• Transparency
  openness about decisions and activities that affect society, the economy and the environment, and willingness to communicate these in a clear, accurate, timely, honest and complete manner.

Which issues might drive your business to implement sustainable procurement?

The standard lists a number of issues in a checklist (in Annex A) that might apply to your own business goals. Here is a selection of some of the problematic issues that can occur in supply chains that may be important to you:

• Environmental Impact is an attractive driver, as there are multiple reasons to reduce it, both ethical and financial. For instance, mitigating climate change benefits all living things, but being a sustainable brand may be financially lucrative. But there are others like preventing pollution, restoring natural habits, and focusing on using sustainable resources.
• Customer expectations about your business being more sustainable in terms of the environment, but also about the health and safety of workers and your attention to social responsibility.
• New legislation or industry regulations force your hand and insist that you make changes to improve sustainability,  for example, requiring a reduction in carbon footprint across your entire supply chain, not just your business.
• Ethical and Legal Compliance as there are more and more new legislations coming into effect that demand that businesses behave in a more sustainable manner, making implementing sustainable procurement an attractive proposition. A good example of this is respecting IP rights.
• Stakeholder expectations, such as from a parent company or associated business or community, where your business is expected to make a tangible effort to become more sustainable.
• Access to investment might improve if you can put yourself in front of would-be investors as a more sustainable option than other competitors.
• Better organizational ethics because you’re encouraged to become a more ethical business and work on your internal culture. Topics here include tackling corruption.
• Obtaining a competitive advantage over the competition in your markets because you can state that your products and supply chain are sustainable.
• Spurring innovation in the supply chain because the actors in it are encouraged to consider sustainability, ethics, and social responsibility far more than before and lead to new solutions being found. For example, from a sustainability perspective, they may source materials and products that are more environmentally friendly, energy-efficient, or have a lower carbon footprint. An additional benefit from this kind of innovation may be cost savings and increased competitiveness, too.
• Better control over finances thanks to improved husbandry of the costs of materials, components, and services and more sustainable options being actively sought you may end up with a cost reduction and more efficient supply chain.
• Reducing risks, as businesses that are branded as ‘bad for the environment’ or as ‘abusers of human rights’ unsurprisingly see their reputation damaged and can accordingly lose profits.
• Improving staff welfare and health and safety standards due to improved working practices and conditions throughout your supply chain in your business and those of your suppliers.
• Becoming a sustainability ‘leader’ may apply if this is a particular interest of your business and you can become a market leader if your competitors are late to the party.
• Avoiding conflict minerals as these tend to go hand-in-hand with illegal working practices and human rights abuses.
• Responsible Consumption and Production are to be promoted over traditional methods that are often less environmentally friendly and can negatively affect people.
• Fair Trade and Responsible Sourcing to give suppliers a better deal than before.
• Transparency and Traceability during procurement help you comply with legal and regulatory requirements, find and address problems in the supply chain which will not be hidden, track sources of environmental impact such as material sources, emissions, etc, throughout the supply chain, and more.

Who benefits from ISO 20400?

When a business implements ISO 20400 for sustainable procurement, it benefits a number of different stakeholders:

• Your business: You ultimately benefit from having an improved purchasing strategy with reduced environmental impact and social risks, and a better reputation.
• People and the environment: Sustainable procurement will hopefully lead to lower environmental impacts such as greenhouse gas emissions and water pollution which is good for the environment and people, and also better business practices that treat workers from the local community fairly.
• Suppliers: Every link in the supply chain can implement sustainable procurement practices to upgrade to better practices and become more sustainable. For instance, your suppliers will benefit because you mindfully place orders in good time so they don’t have to rush and illegal overtime is encouraged to fulfill them, or by placing orders throughout the year in order to help keep their businesses going through quieter times which benefits everyone in the long term.
• Consumers: They love products and services which are gentler on the environment, and come from businesses that are ethical and provide good conditions for workers.
• Regulators and governments: Businesses that implement sustainable procurement can be seen positively by governments and regulators that take environmental pledges such as net zero seriously, helping them to see which businesses are more forward-thinking.

Step-by-step ISO 20400 practices implementation

Implementing ISO 20400 is a step-by-step process (that is spread out across clauses 5, 6, and 7 of the standard):

1. Leadership buy-in

It would be best if you had leadership buy-in. They will outline what your company’s sustainability priorities and objectives must be, and these remain the front-and-center focus during your journey to implement sustainable procurement and hit the goals.

The standard says this about what a sustainable procurement policy should be like:

A sustainable procurement policy should:

• reflect the organization’s values, principles, objectives and goals;

• reflect the organization’s commitment to sustainability;

• align clearly and precisely with the organization’s policies;

• take into account the three pillars of sustainability: environmental, social and economic considerations;

• address the principles of sustainable procurement.

Top management and procurement management should also take on the responsibility for driving this initiative and be accountable for its success.

2. Engage stakeholders in the supply chain

Internal and external stakeholders in your supply chain must be spoken to regarding the drive to become more sustainable, and their responses will help you to identify key challenges and solutions which you can then focus on in your new sustainable procurement strategy. Internal stakeholders are your staff, for example. External include suppliers, subcontractors, and consultants. Additionally, other external stakeholders may include local communities, governments, trade unions, and more (see section 6.3.1 of the standard).

3. Assess your current procurement practices

Audit your current procurement practices and consider how they measure up in the context of sustainability. It should be apparent where improvements can be made and how these areas fit into your overall plan.

4. Establish sustainable procurement goals

Now you understand your current practices, you’ll set sustainable procurement goals that align with your overall sustainability goals driven by top management and the areas where improvement is most helpful and build on your existing processes.

5. Integrate sustainability into purchasing decisions

Traditionally, purchasing decisions might largely focus on cost and quality in RFQs and RFPs, but companies implementing ISO 20400’s practices will need to integrate environmental, social, and ethical factors into them. Therefore, sourcing will now also need to include assessments of new suppliers’ environmental certifications, labor practices, sustainability focus, and if they follow ethical standards.

6. Engaging and working with suppliers

Suppliers need to be made aware of your new sustainability goals and you should work with them to help them improve their own sustainability performance by training their staff and educating them. You might even reward them for becoming more sustainable, too. This perseveres throughout the lifetime of the cooperation.

7. Tracking performance

You will devise KPIs appropriate to your sustainability goals and track and measure these throughout your implementation journey. Transparency and reporting at regular intervals will keep the business accountable and make sure that management and stakeholders understand where progress is being made and hitting or missing goals.

9. Continuous Improvement

Sustainable procurement is not a single task, it is ongoing and will lead to continuous improvement. As such, you will regularly review and update your strategy and goals based on your results, learnings, and best practices along the way.

Conclusion

ISO 20400 is a particularly useful standard for today’s businesses due to the move to more sustainable practices for people and the environment, as you can use its framework to become a more environmentally, ethically, and socially responsible business.

Rather than standing still and doing things ‘the way they’ve always been done,’ your business will be spurred to innovate in order to comply with new environmental and social legislation, and actually exceed their requirements, thereby future-proofing your business. Furthermore, your business culture is transformed because you have built a culture where sustainable and ethical procurement, social responsibility, and reducing environmental impacts are its cornerstones.

Benefits include standing out from your competitors by having a recognized sustainable brand, being preferred by consumers and governments for that reason, reducing your supply chain risks (such as supply disruption when a supplier’s factory is closed due to unsafe environmental or business practices), and being a positive force for change in the world.

This is an introduction to the standard. If you’re interested in learning more it’s worth reading the standard itself, and the team here at Sofeast is always here to help if you need advice about implementing sustainable procurement in your business.