PSM 606

SUSTAINABLE PROCUREMENT
 Risks in Procurement
The urgency of sustainability: Risk and
resilience
The post-pandemic years will be challenging for
Procurement. Study shows that increased supply chain
disruption, inflation, and commodity volatility are the most
significant risks to business. It is reported that resilience is the
#1 priority, surpassing the need to deliver cost savings. 
There have been many recent supply chain shortages, from baby
food to microchips. Procurement’s top risk area is managing
ongoing supply disruption and its impact on revenue.
 Risks in Procurement
The urgency of sustainability: Risk and
resilience
The global Procurement community has now recognized that
more than ever, flexibility and resilience are critical these days.
Procurement will play a key role in developing resilience
strategies and reacting to shifts in demand. For example, before
the pandemic, reducing single-use plastics was on the
Procurement agenda. But, the sudden need for personal hygiene
products in the wake of the pandemic quickly changed priorities.
 Risks in Global Procurement
Global procurement risks
❑ By reviewing global risk trends, we can identify all types of
risks that could affect Procurement.
❑ Conducting a risk assessment that considers the likelihood and
severability (impact on business) of each risk may help us
target the key areas for development.
❑ Many of these are by no means predictable, a sustainable
mindset can offset many of these risks and you’ll be better
prepared to mitigate the damage when it hits.
 Risks in Global Procurement
Environmental risks
We cannot understate the risks of climate change. We see factory shutdowns
and transportation challenges due to extreme weather. Material
unavailability and rising commodity costs are becoming business as usual. The
time for Procurement to act is now. Companies play the biggest role in
reducing carbon and greenhouse gas emissions on the planet. Environmental
risks include:
Extreme weather
Global temperature changes
Biodiversity loss
Natural resource crises
 Risks in Global Procurement
Geopolitical risks
Because the world is so interconnected, there is a high sensitivity to
geopolitical conflicts. Wars and other conflicts send ripples worldwide,
causing mass migratory events, humanitarian crises, and supply disruptions.
Geopolitical risks include:
Economic sanctions
Interstate conflicts, war
Geopolitical resource contestation
Geo-economics confrontations, trade wars
Multilateralism collapse
Weapons of mass destruction, terrorism
Monopolistic supply markets
 Risks in Global Procurement
Social risks
Transparency into supply chains has also revealed the alarming prevalence of
modern slavery, child labor, and forced labor worldwide. Social risks affect us
all and have implications for employee well-being and human rights.
Negligent behavior towards the social aspects of your supply chain can cause
serious reputational and employer brand-related damage. Social risks include:
Livelihood crises, living wages
Social erosion, dissent
Mental health and well-being
Modern slavery
Involuntary migration
 Risks in Global Procurement
Health risks
As the global pandemic has shown, new infectious diseases are always a
threat and will require more efficient supply chain solutions. Also, we’ve
unfortunately seen tons of examples of dangerous additives and products
harming consumers on the market. Health risks include:
Infectious diseases
Food pollution, product recalls
Harm to consumers through unsafe products
Harm to health from pollution
Famines and droughts 
Medical supply chain shocks
 Risks in Global Procurement
Economic risks
Economic stagnation, rising prices, and inflation can hurt
businesses and supply chains. Economic risks include:
Debt crises
Prolonged stagnation
Asset bubble burst
Price instability
Commodity shocks
Industry collapse
 Risks in Global Procurement
Compliance risks
As the regulatory landscape rapidly adapts to mitigate
these negative trends, Procurement must pay closer
attention to compliance. Compliance risks include:
Losing license to operate
Losing competitive advantage
Losing brand reputation
Losing stakeholder trust
Losing revenue and customer
With good data, transparency, and strong analytics solutions, you can
prepare for any risk.
 Why sustainable procurement is
important?
► Sustainable procurement is important because we have a
key duty to the planet and people.
► That’s why thousands of companies have already
committed to reduce their emissions and complying with
internationally recognized standards and agreements for
corporate responsibility.
► They regard suppliers as an extension of their business and
work with them to build capacity and reduce long-term
risk. 
 Why sustainable procurement is
important?
Sustainable procurement is also essential for compliance reasons.
Sustainable Procurement also important to measure ESG performance.
Some available guidelines and directives of ESG:
► UN Global Compact
► ETI Base Code
► MNE Declaration
► International Labor Standards
► The UN Guiding Principles on Business and Human Rights
► Global Reporting Initiative (GRI)
► ISO Standards 14001, 26000
► The SA8000 Standard