Sustainable Procurement: a strategy for resilience and growth

Procurement decisions increasingly influence corporate risk — from supply disruptions to ESG non-compliance. Audit & Risk Committees can shift procurement away from short-term savings towards long-term value protection by asking:

• “Which parts of our supply chain pose the greatest ESG or continuity risk?”
• “Do we know which suppliers have weak environmental or labour practices?”
• “What contingency plans exist if a critical supplier fails due to sustainability issues?”
• “Organisationally, do we have particular supply chain relationships that present significant risk to our bottom line that can be addressed in partnership with the public sector?”
• “What do we see as the main risks to pursuing alternative procurement options and how are these accounted for in our governance?”

Boards can push the organisation beyond “lowest price wins” to decrease Total Cost of Ownership (TCO) through lowering energy spend, ensuring the purchase of longer-lasting products, and reducing waste disposal fees. ESG Committees can challenge the executive to invest in durable, efficient, and lower-waste alternatives by asking:

• “What costs (waste, downtime, maintenance, disposal) are we not accounting for today?”
• “Do we know, and are we tracking, the durability of our products and tracking the lifetime costs?”

NEDs can encourage procurement teams to build a roadmap for supply-chain transparency and consider how utilising these data-driven business insights can help guide policymakers to create a procurement policy framework that reflects industry priorities. It may also be beneficial to give procurement a seat at the board table, as explored in this case study of Biffa:

• “Do we as a board have sufficient insight on our existing procurement practices and relationships? How is this insight fed in? Could we benefit from more direct representation from our procurement team, e.g. Chief Procurement Officer?”
• “Have our sustainable procurement practices delivered measurable value to our organisation, if so, how?”
• “What proportion of our spend is with suppliers who meet our sustainability criteria?”
• “Do we have a clear mechanism to audit or verify supplier claims?”
• “Where are the data gaps in our supply chain (Tier 2, Tier 3 suppliers)?”

If sustainable procurement doesn’t show up in ESG metrics, it won’t gain traction. Strengthening accountability through ESG and Audit Committees can connect procurement actions to board-level priorities:

• “Are procurement-led improvements reflected in our ESG reporting and disclosures?”
• “Are we confident our procurement process is monitored and evaluated for effectiveness and efficiency?
• “Is our approach responsive to environmental and regulatory demands?”
• “Are we proactively responding to signals set out in the Procurement Act 2023, National Procurement Policy Statement, and Procurement Policy Note on social value?”

• “Which sustainability KPIs are directly influenced by procurement?”
• “How is procurement performance measured?”
• “Do our incentives reward long-term value creation, not just cost reduction?”
• “Is supplier sustainability performance embedded in contract renewals?”

The public procurement market could represent an untapped opportunity for some firms, particularly those looking to transition towards low-carbon products and services. NEDs can challenge the board and Chief Strategy Officer to consider:

• “Where does procurement sit strategically within our planning? What do we understand our relationship with the public procurement market to be?”

• Heavy reliance on a single supplier in a high-risk region
• High spend with vendors lacking ESG accreditation
• Increases in waste, defects, or supply disruptions
• Supplier audit failures
• Lack of traceability for critical inputs
• Compliance with emerging obligations, e.g. ongoing revisions to the ISO 14001 standard which sets the Environmental Management Systems (EMS) framework

Asking for regular reporting on these issues builds oversight.

A regional hospital system was struggling with rising costs in its surgical units. One surprising source was disposable surgical instruments and single-use medical devices, resulting in high waste disposal costs, quality issues, increased Scope 3 emissions, and delays in the supply chain.

In parallel, national policy signals were strengthening around green public procurement, particularly encouraging organisations to consider total cost of ownership over lowest unit price and reporting on environmental criteria in procurement decisions. Considering these policy signals and quality issues, the ESG Committee recommended that the procurement team develop an implementation plan with measurable KPIs to address cost, waste, Scope 3 emissions, and efficiency and supplier compliance.

Despite developments in formalising green public procurement frameworks, businesses continue to face a lack of clarity in terms of the practical delivery mechanisms, e.g. mandatory environmental criteria. ESG and Audit & Risk Committees can help translate policy signals into practice by:

• • Supporting the executive to establish clear purchasing criteria, e.g. reduced packaging, supplier transparency on energy use and emissions reporting, take-back schemes, percentage of low carbon and/or recycled materials, compliance with ESG reporting frameworks, and assessing supplier resilience to climate risks and disruptions.
  • Establishing board-level KPIs and working with the Remuneration Committee to incentivise the Chief Procurement Officer in accordance with these.

In the case of the hospital, this led to the introduction of formal vendor screening standards. Suppliers had to show reduced packaging, lower energy use in manufacturing, and clear recycling or take-back programmes for devices.

In cases where low-carbon products or services options are available in the market, there is often the ‘automatic perception’ that these cost more. However, there is a growing evidence base that the monetary difference between traditional public procurement and climate-aligned procurement is much smaller than expected – the total cost increase for a typical project is “a small percentage point” even under conservative estimates. Overcoming this barrier to action requires recognition that these investments deliver – with businesses seeing increases from 10% in productivity – reduced risk, and enhanced resilience – a mindset which can start in the boardroom through:

• • Aligning financial reporting with sustainable procurement goals.
  • Mandating that procurement bids are evaluated based on total cost of ownership, factoring in elements, such as durability and waste disposal fees, and environmental externalities.
  • Encouraging innovation through pilot schemes, trialling new products and suppliers.

In the case of the hospital, this meant that instead of purchasing based on unit price, the Finance Committee considered durability, sterilisation cycles, waste generation, and disposal costs. A pilot scheme was introduced for reusable surgical trays and refurbishing services, resulting in 15% cost savings, based on total cost of ownership.

• Capacity gaps: Capacity remains a challenge, as limited skills, knowledge, and cross-department coordination can slow the integration of sustainability criteria into purchasing decisions. Boards can address this by:
  • Fostering internal dialogue between procurement and strategic teams to identify the insights and skills needed for effective collaboration.
  • Considering how the government schemes, such as the UK government’s recent consultation on ‘Public procurement: growing British industry, jobs and skills’ can support their businesses’ procurement skills needs.
  • Evaluating if they have the right complexion of skills on the board to face these challenges and asking whether procurement functions need to be better represented in governance structures, e.g. adding the Chief Procurement Officer to the ESG Committee.

In the case of the hospital, they instituted regular briefings for ESG and Finance Committees on the benefits of more sustainable products and embedded quarterly cross-functional reviews to jointly track KPIs and risks. This resulted in increased transparency and a faster uptake of the criteria across the organisation.

Supply chain management: Supply chain relationships span multiple tiers and regions, making it difficult for organisations to assess and influence suppliers’ carbon impact. NEDs can signal the board’s green procurement priority by:

• • Mapping high-impact suppliers and routes to engagement.
  • Setting the strategic ambition to work with suppliers to improve their sustainability practices before considering alternatives and committing to long-term contracts with performance clauses linked to the sustainability KPIs.
  • Fostering stronger collective progress with both parties sharing knowledge, resources, and innovations.
  • Recognising that suppliers are instrumental in developing low-carbon technologies and bringing them to the market.

In the case of the hospital, this led to stronger supplier relationships and improved quality as suppliers were incentivised to respond to surgeon feedback and were encouraged to create take-back programmes that cut hospital waste and Scope 3 emissions.

Low-carbon considerations occur at every stage of the procurement cycle. Audit Committees can play a vital role in:

• • Monitoring and verifying the emissions performance of suppliers and establishing systems for ongoing data collection, independent verification, and periodic audits.
  • Working with ESG, Finance and Remuneration Committees to incentivise continuous improvement and ambition, e.g. through performance-linked payments and contract extension options.
  • Requiring quarterly dashboards for cost, waste, emissions, and efficiency.

In the case of the hospital, this resulted in 20% reduction in surgical waste, emissions reductions, and fewer equipment failures.