The concept of sustainable sourcing, also known as green purchasing or social sourcing, is nothing new. Sustainable sourcing is impacting nearly every area of corporate business and the consumer’s mindset. Everything from sourcing materials, talent attraction and consumer purchasing habits are changing because of the growth of sustainable sourcing. However, the term gets thrown around in the procurement industry quite a lot and is often misunderstood or misused. So, here’s a guide with all the basics you need to know about sustainable sourcing.
WHAT IS SUSTAINABLE SOURCING
First and foremost, we have to define the term. Sustainable sourcing is the integration of social, ethical and environmental performance factors into the process of selecting suppliers. It includes purchasing sustainably preferable products and services (products made from recycled or remanufactured materials), as well as green purchasing guidelines that might pertain to certain products or commodities.
The term “tail spend” has become a common term in procurement-speak because in our minds we like to visualize all of our spend fitting on a nice curve with suppliers on the X-axis and spend per supplier on the Y-axis, something like in Figure 1 below. The suppliers with the lowest spend are plotted to the right and we think of that as the tail. A shorter tail implies we’ve done a better job of consolidating our spend among fewer suppliers. Since supplier consolidation with the goal of cost savings was the raison d’etre of early sourcing groups, the shape of this curve feels like an indicator of success.
Amy Fong, Principal - Procurement and Purchase to Pay Advisory, The Hackett Group