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Value Sustainable Procurement Practices

Value Sustainable Procurement Practices

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10/26/2013

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1020
PwC and EcoVadis in collaboration with the INSEAD Social Innovation Centre
 Value
of SustainableProcurement Practices
 A quantitative analysis of value drivers associatedwith Sustainable Procurement Practices
 
2
 Table of contents
Executive summary.................................................................................................3Quantifying the value of Sustainable Procurement ..............................................6 Valuation framework ...............................................................................................7
1) Cost reduction ......................................................................................................................................82) Risk reduction ..................................................................................................................................... 123) Revenue growth .................................................................................................................................. 15
Implementation cost .............................................................................................18Quantitative Model ................................................................................................19Caveats and limitations ........................................................................................20Moving forward .....................................................................................................21 Appendices
 Appendix I – Value drivers ......................................................................................................................22 Appendix II – Cases analysed ................................................................................................................23Bibliography ............................................................................................................................................25 Authors ....................................................................................................................................................26 About PwC ..............................................................................................................................................26 About EcoVadis .......................................................................................................................................27 About Insead ...........................................................................................................................................27
 
 Value of Sustainable Procurement Practices3
 
Executive summary
Relationship between sus-tainability and value crea-
tion will be a key issue tobe tackled over the long
term. The ability to express
sustainability benefits innancial terms is one of the key drivers neededto instil sustainability into
company business models.
 Although it is no easy task,
PwC, EcoVadis and Insead
believe that it should be oneof the priorities for research
in this field.
Sustainable Procurementis a new dimension for
Chief Procurement Officers
(CPOs) who until recentlybased their decisions pri-
marily on price, quality and
time. Sustainability wasmainly taken into account
on a risk-based approach
in line with the global move-
ment towards low cost
country sourcing. But howcan this risk protection be
quantified? And what is the
impact on cost reduction
and the development of new
offers/products? The aim of this study is to help Senior Procure-
ment Managers face this challenge by providing
strong arguments to build a business case with
top management and the CEO on the value of 
Sustainable Procurement. Accordingly we asked
ourselves: “Is Sustainable Procurement a true
value creation initiative to be welcomed not only
by customers but by shareholders and financial
markets as well?” To answer this question, weanalysed various case studies and interviewedprocurement executives. This brought to light
strong evidence of value creation, thus bridging
the gap and making a first business case for
Sustainable Procurement on the basis of threemain sustainable value drivers: cost reduction,risk reduction and revenue growth.
 The quantitative model was created by the analy-sis of the three main drivers and their respective
impact on the company’s annual procurementspend, market cap and revenue. Their impact
was then compared to the implementation cost
of a Sustainable Procurement programme.

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