Overcoming the tension between cost reduction and sustainability KPIs

In an era when sustainability has become a crucial factor in most businesses’ strategies, can…...

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In an era when sustainability has become a crucial factor in most businesses’ strategies, can procurement practitioners achieve sustainability key performance indicators (KPIs) and company cost reduction goals simultaneously?

A recent ‘Virtual Roundtable’ teleconference from Procurement Leaders suggests how this seemingly opposing double target can be met.

While cost reduction based on sound spend analytics, sourcing savings, effective category management, and tail spend management remains a perennial task for procurement teams, there’s no dodging the sustainability quest today.

However, while sustainability KPIs are more prominent in the procurement function of late — 53% of KPIs focus specifically on sustainability, according to Procurement Leaders research — many companies have nevertheless found that them only ‘somewhat valuable.’

Participants in the Virtual Roundtable identified the main reason for this: too many organisations simply choose too many KPIs, a trend that inevitably leads to many of them ‘falling by the wayside.’

As Procurement Leaders blogger, Ciara Whiteman, says: “It is better to connect with your key stakeholders and identify the areas of sustainability that are most important to your business, focusing on two or three KPIs that will directly impact this.”

The discussion identified the highest-impact sustainability KPIs, which all require a degree of flexibility built into them (static KPIs can rapidly become irrelevant). These are:

  • Completion of collaborative projects.
  • The number of corrective action plans drafted and executed.
  • The number of supplier engagements on sustainability.

The impression that embracing sustainability will inevitably lead to cost increases may be misguided.

The costs of unsustainable choices today can be much greater, both in reputational damage and in being ill-prepared for legislative reforms.

Cost reductions can still be achieved with effective supplier relationship management initiatives, which entail working directly with suppliers to meet sustainability targets.

Finally, stakeholders need to be brought on board with sustainability efforts.

Finding your stakeholders’ key priorities and delivering on this while still meeting sustainability targets can go a long way toward securing this goal.

Source: https://www.procurementleaders.com/blog/less-is-more-when-it-comes-to-sustainability-kpis-684516#.XXCtl25Fw5s

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