Sourcing Smart: The 5 Biggest ESG and Sustainability Risks in Procurement

🔥👀 Procurement and sourcing managers are crucial in integrating sustainability and Environmental, Social, and Governance (ESG) initiatives into supply chains. However, miscalculations in this area can lead to significant risks. Here are the five biggest risks where procurement or sourcing managers might miscalculate when handling sustainability and ESG initiatives:

👉 1. Inaccurate Supplier Assessment

  • Risk: Many companies rely on third-party audits or supplier self-assessments to measure ESG compliance. However, these reports may be incomplete, biased, or inaccurate.
  • Impact: If procurement managers overestimate a supplier’s commitment to sustainability based on faulty data, they might unintentionally support unethical practices, like labor violations or environmental harm, leading to reputational damage and potential regulatory fines.
  • Solution: Develop rigorous, independent supplier audits and invest in real-time supply chain monitoring.

👉 2. Underestimating the Cost of Sustainability

  • Risk: Sustainable materials or processes often come with higher upfront costs. Procurement managers may underestimate these costs, assuming that sustainability can be achieved without significantly spending more or making tough trade-offs.
  • Impact: This can lead to budget overruns, cost inefficiencies, or even project failure if the sustainability initiatives become financially unsustainable.
  • Solution: Properly forecast and model the long-term cost-benefit analysis of sustainable choices, including potential savings from energy efficiency, waste reduction, and improved brand loyalty.

👉 3. Lack of Supplier Diversification

  • Risk: Reliance on a limited number of suppliers for sustainable products or raw materials can lead to disruptions in the supply chain if these suppliers face challenges such as resource scarcity, regulatory issues, or geopolitical risks.
  • Impact: Reliance on a single source can lead to severe delays, increased costs, or even failure to meet sustainability targets if alternative suppliers cannot be found.
  • Solution: Build a diversified supplier base to meet ESG goals, and create contingency plans for potential supply chain disruptions.

👉 4. Misaligned ESG Priorities

  • Risk: Not aligning ESG goals with the company’s overall strategy or misjudging stakeholder expectations (customers, investors, regulators) can lead to prioritizing the wrong initiatives.
  • Impact: This can result in wasted resources on initiatives that are not in line with the company’s core values or do not meet stakeholder requirements, which can damage the company’s reputation and ESG ratings.
  • Solution: Involve stakeholders early and often to ensure that ESG initiatives are aligned with business objectives and market expectations, appropriately balancing environmental, social, and governance factors.

👉 5. Greenwashing or Overpromising

  • Risk: Overstating the company’s sustainability achievements or underestimating the complexity of achieving real, meaningful ESG outcomes can lead to accusations of “greenwashing.”
  • Impact: This can erode trust among consumers, investors, and regulators, damaging the company’s credibility and exposing it to legal risks.
  • Solution: Be transparent about ESG goals, progress, and challenges. Please ensure measurable and verified data back sustainability claims.

In summary, each of these risks requires careful planning, transparency, and a deep understanding of the sustainability landscape to avoid missteps that can harm both the organization and its broader environmental and social impact.

Written by Gert 

Last time edited: 06.10.2024

—————————————————————————————————————————–

👉 Check it out and follow the BzCall.com platform LinkedIn homepage https://lnkd.in/dZcfbymW

Can procurement auctions help fight against greenwashing?

🔥👀 In recent years, greenwashing has received considerable attention in the field of sustainability and responsible sourcing. Greenwashing is the deception of presenting a company, product, or activity as more environmentally friendly than it is. It often involves misleading marketing or communication that exaggerates the environmental benefits of a product or service, leading consumers or stakeholders to make decisions based on false or incomplete information.

In the context of procurement, the use of greenwashing can be particularly problematic. Companies may claim to prioritize sustainability in their supply chain practices, but in practice, their procurement activities may not be in line with their stated commitments. This can have serious consequences not only for the environment but also for a company’s reputation and profits.

To avoid greenwashing in procurement activities, it is important to pay attention to several key aspects and implement robust processes to ensure transparency and accountability. In this story, we highlight three important aspects that should be taken into account and discuss how procurement auctions can play an important role in this work.

⭐ 1. Transparency and Traceability: Transparency and traceability are key aspects of responsible procurement. The entire supply chain must be visible, from the sourcing of raw materials to the delivery of the final product. This includes understanding the environmental impact of each stage of the supply chain and ensuring that suppliers follow sustainable practices.

Procurement auctions can contribute to transparency by providing a range of criteria, including sustainability indicators. Through auctions, buyers can specify their sustainability requirements, such as using environmentally friendly materials or compliance with specific environmental standards.

⭐ 2. Verification and Certification: Verification and certification play an important role in ensuring that suppliers meet the sustainability standards set by buyers. This includes assessing suppliers’ compliance with environmental regulations, certifications, and industry standards for responsible sourcing.

Procurement auctions can integrate verification and certification processes into their auctions by requiring suppliers to provide documentation or proof of compliance with relevant standards. This ensures that only suppliers with verified sustainable practices are eligible to compete, reducing the risk of greenwashing.

⭐ 3. Performance Monitoring and Reporting: Ongoing monitoring and reporting of supplier performance is essential to detect and address greenwashing in procurement. This includes tracking key sustainability performance indicators such as carbon emissions, waste generation, and energy consumption, and holding suppliers accountable to pre-defined targets.

Procurement auctions can set performance target requirements for suppliers, and they are required to report regularly on their progress toward these targets after winning the bidding. 

Summary: In conclusion, avoiding greenwashing in procurement requires a multi-faceted approach that includes transparency, verification, performance monitoring, stakeholder engagement, and ethical considerations. Procurement auctions can be a valuable tool to achieve this goal, as they offer a transparent and competitive market where sustainability criteria are integrated into the procurement process. 

Keywords: #sourcing #supplychain #procurement #greenwashing #sustainability

Written by Gert 

Last time edited: 25.02.2024

Did you know that there are hidden risks in the prices of products and services in long-term contracts?

Did you know that there are hidden risks in the prices of products and services in long-term contracts? Let’s look at the five main risk moments:

1. Cost Inefficiency

👉 The first main risk is cost inefficiency. Without constant or regular price comparison, your organization may be overpaying for goods and services. Prices in the market can fluctuate due to economic changes, industry developments, and competition. If you’re locked into a long-term agreement with fixed prices, you may miss out on cost-saving opportunities. Regular benchmarking helps identify cost inefficiencies and renegotiate agreements when needed.

2. Market Changes 

👉 The second main risk is market changes. Markets are dynamic, and prices for products and services can change significantly over time. Long-term agreements might have been negotiated at a favorable rate initially, but market conditions can shift. If you don’t keep tabs on these changes, you may pay more than the current market rate. Benchmarking ensures that you adapt to market shifts and maintain a competitive edge.

3. Supplier Performance 

👉 The third main risk is supplier performance. The quality and performance of suppliers can change over time. While you may have entered into a long-term agreement with a supplier who met your requirements at the start, their performance might decline or improve. With periodic benchmarking, you will have a clear picture of how well your suppliers are meeting your needs. This lack of insight can lead to suboptimal performance and possible missed opportunities to improve service or reduce costs.

4. Technology and Innovation 

👉 The fourth main risk is technology and innovation. Technological advancements and innovation can significantly impact products and services. If your long-term agreements are based on outdated technologies or practices, you could miss the benefits of newer, more efficient solutions. Regular benchmarking helps you identify opportunities to leverage technological advancements and innovation to your advantage, improving your operations and competitiveness.

5. Neglected Contract Terms

👉 The fifth and last main risk is neglected contract terms. Long-term agreements often come with multiple contract terms, such as service levels, quality standards, and performance guarantees. Without consistent benchmarking, these terms might be overlooked or forgotten. This can lead to compliance issues, as both you and your supplier may not be meeting the agreed-upon terms. Regular benchmarking helps you stay on top of contract compliance and ensures that both parties fulfill their obligations.

Recap

In summary, failing to regularly price benchmark long-term agreement products and services can result in cost inefficiency, leaving your organization vulnerable to market changes, supplier performance fluctuations, missed opportunities for technology and innovation adoption, and neglected contract terms. To mitigate these issues, it’s crucial to implement a robust benchmarking process that continuously assesses the cost, quality, and performance of your long-term agreements. This proactive approach ensures that your organization remains competitive, adapts to market dynamics, and maximizes the value derived from your supplier relationships.

Youtube: https://www.youtube.com/watch?v=fEcDvSu0bI0&ab_channel=BzCall

Keywords: #sourcing #supplychain #smallbusiness #procurementprofessionals #Construction #Machining #CNC #sourcingandprocurement #procurement #procurementleaders #supplychainmanagement #savings #costcutting

Written by Gert 

Last time edited: 07.11.2023

We are open!

Tallinn – 22 September 2023

We are happy to finally announce that our procurement auction web application prototype BzCall.com is ready for use. It is a fully functioning platform, where is possible to reduce costs and expenses via the reverse auction method. Please see a short overview of how it works. A properly prepared procurement auction can reduce costs and expenses by 10-30% or even more. There are no limits on which expenditures can be trimmed or no limits for industries. The service pricing is reasonable, with no hidden fees,  clear, and straightforward. 

Main value propositions using the service

  • Reduction of costs and expenses
  • Sourcers will save working time for other tasks
  • Fair and transparent competition
  • Fewer nepotism appearances
  • Reduction of lead times

Keywords: #sourcing #supplychain #smallbusiness #procurementprofessionals #Construction #Machining #CNC #sourcingandprocurement #procurement #procurementleaders #supplychainmanagement #savings #costcutting

BzCall Technology OÜ 

Last time edited: 22.09.2023

Discover BzCall.com: The Future of Easy-to-Use Procurement Auction Site

As a sourcing manager with years of experience, I’ve always sought an easy-to-use procurement auction site or similar tools (e-auctions or e-procurement sites) to streamline my day-to-day work. The need for such a tool became clear through my various projects. When I couldn’t find a solution on the market, I decided to create one myself, hoping it would help others as well. And so, BzCall.com was born. The main goal? To save on expenditures and free up valuable working time.

Introducing BzCall

  • What is BzCall? The name combines “Business” (abbreviated as Bz) and “Call,” reflecting its purpose: inviting businesses (vendors) to bid on specific jobs. Simple, right?
  • Why Choose BzCall? In today’s competitive business landscape, controlling costs and expenses is crucial—not just for maximizing profits, but for survival. Over the past two decades, I’ve witnessed the ups and downs of the market. You probably have too. Maintaining market share and gaining a competitive edge is essential, especially as product and service life cycles shorten. Complacency is risky; market forces are relentless and can quickly outpace companies that fail to innovate. BzCall.com offers a way to step out of that comfort zone and make procurement auctions by reducing costs by 10-30% (or more with thorough preparation).

Key Benefits of BzCall

  1. Cost Reduction: Significantly cut down expenses.
  2. Reduced Lead Time: Speed up procurement processes.
  3. Vendor Improvement: Encourage vendors to elevate their performance.
  4. Fair Competition: Ensure a transparent and equitable bidding process.
  5. Minimized Nepotism: Reduce favoritism in vendor selection.
  6. Expanded Supplier Pool: Access a broader range of vendors.
  7. Time Savings: Allow sourcing managers to focus on other essential tasks.
  8. Confidence in Deals: Be assured of securing the best market deals.

Who Benefits from BzCall?

  • Sourcing Managers
  • Procurement Managers
  • Buyers
  • Supply Chain Managers
  • Project Managers
  • Small Business Managers and Owners
  • Cost Estimators
  • Technical Engineers
  • NPI Team Members

Summary

BzCall offers an efficient and effective solution to reduce expenditures and save time in procurement processes. Whether you’re a sourcing manager, procurement manager, or small business owner, BzCall is designed to help you thrive in a competitive market.

Discover how BzCall can revolutionize your procurement processes today!

Written by Gert

Last time edited: 11.07.2024

Internet Explorer Icon

NB! Microsoft on loobunud Internet Exploreri arendamisest ning sellele uuenduste tegemisest ja ei soovita antud internetibrauserit turvanõrkuste tõttu kasutada. Internet Explorer ei toeta enam uusi võrgustandardeid ning antud veebilahendus ei tööta siinses brauseris korrektselt.