8 Procurement Clauses Every Sustainability Team Should Know

Delivering on corporate sustainability goals starts with procurement. According to the Sustainable Procurement Barometer by EcoVadis, over 70% of companies now view sustainable procurement as a key driver of corporate responsibility. Yet, only 30% of ESG integrations in procurement are “very or extremely effective.” 

In this blog, we explore eight essential procurement clauses that can help sustainability teams embed ESG commitments into contracts — strengthening your organisation’s sustainable procurement strategy and achieving real impact. 

From Policy to Practice

Procurement and sustainability teams are not always fully aware of the targets, requirements, crux of each other’s remit, and the benefits of using supply chain spend as a catalyst to meet those sustainability requirements. 

Understanding the procurement process and where the ESG/Sustainability team fits in is crucial:

• This begins with each team understanding what drives the other. In workshops that we have run with our clients, there are many a Eureka moment: norming, storming and eventually an understanding of the process and urgencies. There is a need for both teams to speak to each other early in the procurement process to avoid social value and sustainability requirements costing an arm and leg for being left too late. 

• Align the procurement and commercial and contract management policies to the ESG/Sustainability policy and create an organogram or a RACI matrix to ensure roles and responsibilities are allocated, and therefore your policies are actually implemented.. 

• Have an in-depth ‘plan-source-manage’ review of the procurement process with the sustainability team for your large, strategic, above threshold tenders; to see where they need to contribute to supply chain requirements in: a) the early supplier engagement, b) pre-qualification, c) on boarding, d) tender and e) specification stages. They therefore also know post contract award, what had been added into those tenders and can successfully engage with the awarded suppliers and subcontractors to ensure those commitments and KPIs are fulfilled. 

These steps almost serve like a filling in of the broken pieces and gaps, and strengthening of the relationship for both teams, to ensure the organisation’s ESG and sustainability goals are being worked on and delivered. Almost like Kintsugi Leadership. And client organisations that we have worked with deliver as beautiful social value outcomes and impacts as this. 

Procurement and contract clauses to be aware of post-award for effectively managing sustainability

It is important for ESG/Sustainability teams to understand the contractual mechanisms that can support the delivery of the requirements they have collaboratively embedded in the procurement process: 

• Monitoring and Reporting: contracts contain a requirement for suppliers to provide regular reports on their sustainability performance, such as data on waste generated, emissions, and resource use. This is usually tied in with the quarterly supplier performance management (SPM) on the 5 Rights of Procurement. Ensure your SPM agendas include for sustainability discussions. 

• Supplier Risk Management:  if there is not already, it is vital to include a clause outlining how to manage and mitigate sustainability-related risks within the supply chai (as with any of the other risks that can affect the successful delivery of the contract) 

• Continuous Improvement and Innovation: a provision that encourages suppliers to continually improve their sustainability performance and to collaborate on innovative solutions. 

• Environmental Compliance: a clause requiring suppliers to meet all industry-specific environmental guidelines and regulations. If you use the NEC suit of contracts, they contain a Secondary Option X29 on Climate Change, which provides a framework for clients to set specific climate change and sustainability targets for projects. It requires a Climate Change Plan from the supplier and allows for the use of a Performance Table to monitor and financially incentivise performance against these targets. 

• Environmental Targets: Clauses that set measurable targets, such as achieving a specific percentage reduction in resource consumption (e.g., energy, water), becoming carbon neutral by a certain date, or eliminating single-use plastics by a specific year. This is important as you can see progress versus the corporate sustainability targets and drive that change. 

• Embodied Carbon Reduction: A clause requiring evidence of a supplier’s efforts to assess and reduce the embodied carbon emissions in their products or services. This is for materials and products and where the purchasing organisation has leverage and/or influence based on scope, value, duration and of course size of the supply chain organisation. 

• Ethical Sourcing: a requirement for suppliers to commit to ethical practices, such as fair labour conditions and human rights, in line with standards like BS 25700. 

• Supply Chain Transparency: a clause that mandates suppliers to provide visibility into their own supply chains to identify and address potential sustainability and human rights risks.  

We take great pride and care in helping organisations fulfil their sustainability ambitions.  At Action Sustainability, we help organisations embed ESG principles and ISO 20400 standards into their procurement processes. 

Get in touch with our Sustainable Procurement team to learn how your organisation can strengthen its procurement strategy, enhance supplier sustainability performance, and deliver measurable impact.