In view of changing customer expectations and legal requirements such as the German Supply Chain Act or the new EU CSR Directive, companies are increasingly responsible for keeping environmental impacts and risks as low as possible when purchasing products or services. For sustainable procurement, the ISO 20400 standard is particularly helpful, as it addresses aspects of social and economic sustainability in addition to environmental protection. We have summarized the criteria and benefits of the ISO standard and explain what role the digitally designed supply chain plays in meeting sustainability criteria.
Three pillars of sustainability for responsible procurement
Today, sustainable procurement forms a central part of the corporate strategy and takes into account ecological as well as ethical and economic aspects. The approach aims to promote responsible action, improve social standards and support a sustainable economy in the long term.
Environmental aspects: With the aim of reducing resource consumption as well as environmental pollution, sustainable procurement takes the environmental impact of materials, products and services throughout their life cycle into account. This is done, for example, by promoting renewable energies or the use of reusable packaging.
Social aspects: Companies only purchase products from suppliers who meet ethical standards. This includes fair remuneration as well as appropriate working conditions, a healthy working environment and the avoidance of child or forced labor.
Economic aspects: If sustainable procurement uses technologies that reduce energy consumption and increase the use of recycled materials, environmental impacts can be minimized and operating costs saved in the long term. Companies that operate sustainably also benefit from competitive advantages and strengthen their market position, as ever more stakeholders attach importance to acting responsibly.
ISO 20400 – a standard for companies
Support for the transition to sustainable procurement is provided by ISO 20400:2017 – an international standard which was developed by the International Organization of Standardization (ISO) in April 2017 and which is suitable for companies of all sectors and sizes. The content builds on the British Standard BS 8903 and includes terms and core elements of the ISO 26000 standard for social responsibility. Companies and organizations are supported in aligning procurement practices at the strategic and operational levels according to sustainable development goals. ISO 20400 aims to:
- Integrate sustainability goals and social and environmental responsibility into procurement processes,
- Cooperate with suppliers who share environmentally sound practices and values,
- take into account the life cycles of products in order to promote a circular economy and reduce waste of resources,
- increase transparency in the overall procurement processes and
- balance the three aspects of people, the environment and economic success.
ISO 20400 is based on the high-level approach: in addition to seamless integration into existing management systems, compatibility with other standards such as ISO 9001 or ISO 14001 is guaranteed. However, ISO 20400 itself is not a certifiable management standard. Instead, it offers guidance for companies or organizations wishing to integrate sustainability into their procurement practices. Consequently, it does not contain any specifications for suppliers, but rather explains how purchasers can define sustainability criteria and successfully integrate them into their work processes.
Sustainable procurement: Benefits of ISO 20400 for companies
ISO 20400 provides an effective approach to establishing sustainability in the procurement of products and services. Companies benefit on various levels:
- Risk Management: Violations of ethical or environmental regulations can result in significant penalties or liability costs. By reducing social, environmental or economic risks, the potential for supply disruptions, legal problems and financial losses is minimized.
- Meeting requirements: Sustainability is increasingly becoming a focus topic – ISO 20400 supports meeting the increasing expectations of customers or regulators and facilitates compliance with national and international regulations that include sustainability aspects.
- Competitive advantages and strengthening of reputation: Companies that consistently act in a sustainable manner and communicate this to the outside world can set themselves apart from the competition and strengthen their own brand. A positive perception as a responsible company promotes customer loyalty and credibility.
- Access to new markets, tenders and partnerships: Some markets or stakeholders require verifiable sustainable supply chains. ISO 20400 procurement strategies can facilitate access to new business, attract investor interest, and support the formation of long-term, trusting partnerships.
- Cost savings: Through waste reduction and energy and resource efficiency, companies can lower their operating costs. Considering life cycles and choosing reusable, long-lasting products that need to be replaced less frequently leads to long-term cost savings.
- Resilience: Last but not least, sustainable procurement according to ISO 20400 helps to promote stability and resilience of supply chains, as it is based on ethical principles and responsible practices.
Digital supply chain: Implementing and monitoring sustainability goals
From the selection of suitable suppliers, taking sustainability criteria into account, to price comparisons and the processing of orders – procurement processes are time-consuming. Digital solutions and technologies can help by automating and regularly monitoring processes. For example, digital risk mapping and intelligent CO2 tracking are successful methods for keeping an eye on the environmental impact on the supply chain on the one hand and the sustainability of production and transport on the other. The more transparent the supply chain is, the more effectively companies can monitor their sustainability targets in accordance with ISO 20400.
- You can find out more about procurement in our blog article E-Procurement: successful digitization of purchasing and procurement.
With increased supply chain visibility, companies gain valuable information and can strengthen their own competitiveness in volatile markets. For strategic and operational logistics planning, the individual aspects of the supply chain such as procurement, transport and information flow must be effectively linked and coordinated. With appropriate digital tools, all processes and relationships within the supply chain can be openly presented and transparent data sharing can be operated: This minimizes risks of violating the agreed environmental or social ESG principles.
Conclusion: Sustainable procurement according to ISO 20400 as an opportunity for companies
The ISO 20400 standard promotes a holistic approach and helps to put sustainability at the heart of procurement strategies. In addition to the positive impact on the environment, implementation with the help of digital solutions and innovative technologies can lead to improved data management, communication, and risk management along the supply chain. By adopting a sustainable approach to procurement, companies not only take responsibility for their supply chain, but also gain a long-term competitive advantage by opening up new market opportunities and increasing their trustworthiness.