Sustainable Procurement: Unveiling the Essence of Operating Models for Optimal Business Systems
Embarking on the sustainability journey integrating environmental and social considerations within procurement activities demands a comprehensive understanding of your current procurement models.
To seamlessly integrate sustainability into your operations, one must decipher the intricacies of the existing procurement operating models, whether decentralized, centralized, or center-led.
These models intricately govern the procurement system, encompassing People, Tools, Processes, and Technology.
Deciphering Procurement Operating Models
The maturity level of procurement within a business often dictates the choice of operating models. For instance, businesses in goods industries might have a centralized Procurement department for optimal value delivery, yet their marketing and IT teams may function independently, constituting a decentralized tactical model.
To facilitate clarity, the following table illustrates the nuances between the three procurement operating models.
Once the understanding of different procurement operating models is established, businesses can strategically evolve towards more mature models, such as a hybrid approach. Drawing inspiration from the earlier goods industry example, a hybrid model allows procurement teams to collaborate with marketing and IT, leveraging data analytics in segmentation and category management practices.
Decoding Procurement Systems
The type of procurement model chosen significantly influences the steps required to infuse sustainability into operations. The table below highlights evaluation criteria within a procurement system across the three operating models.
Harmonizing Sustainability and Procurement Models
The culmination of each procurement model yields distinct outcomes in terms of sustainability governance, for instance:
Decentralized: Organizations prioritize tactical operations for operational efficiency, often procuring without due consideration for policies, processes, or practices that mitigate risk exposure. This lack of a strategic pathway complicates the implementation of environmental and social criteria, hindering the seamless integration that benefits the triple bottom line.
Centralized: The exclusive governance of procurement activities by the Procurement department may introduce rigidity that hinders alignment with external customer requirements. The addition of further criteria may exacerbate these barriers. It is advisable to involve operations in the transformation process, facilitating the seamless integration of sustainable procurement practices and ensuring a successful implementation.
Hybrid: Procurement assumes a leadership role, overseeing the entirety of the organization's procurement requirements. This approach streamlines processes into easily navigable structures. Procurement adds substantial value to the organization through the implementation of strategic plans crafted with the aid of data analytics techniques. This model emerges as the most manageable, allowing for effective implementation, monitoring, measurement, and continuous improvement of sustainable procurement performance.
Concluding Insights
The integration of sustainability within Supply Chain and Procurement activities are facilitated by various resources, among which ISO20400 guidelines stand out for their comprehensive value. From building a business case to operationalizing sustainability, ISO20400 offers a detailed roadmap.
For a deeper exploration of the benefits operationalizing sustainability brings to organizations, refer to my post on ‘Navigating Business Evolution: The Power of Operationalizing Sustainability’ which also guides the evaluation of internal and external operations with environmental and social considerations.
