Introduction
Suppliers play a critical role in a company’s environmental footprint. From raw material extraction to manufacturing, logistics, and services, many of the most significant environmental impacts occur outside a company’s direct operations.
The B Lab Standards support companies in using procurement as a key lever to:
Identify environmental risks,
Integrate environmental considerations into purchasing decisions, and
Work with suppliers to improve environmental performance over time
This How-To Guide explains how companies can meet sub-requirements 5.1 and 5.2,, using a practical, proportional, and integrated approach that aligns environmental and human rights due diligence.
Actions the company takes to meet sub-requirements HR4.2 and HR4.3 — to consider actual and potential human rights impacts in procurement decisions — may count towards these sub-requirements. This means the company can use a single process to assess both social and environmental impacts. However, to meet this requirement, at least one of the most important procurement decisions must show that the company considered environmental impacts.
Step 1: Identifying Material Procurement Decisions
Sub-requirements ESC5.1 and ESC5.2 focus on how companies identify their material procurement decisions.
The company can determine its “most material” procurement decisions using any of the following categories.
• Spend
• Volume
• Importance of a potential negative environmental impact, which may also include animal welfare.
It is recommended to use multiple categories to determine the “most material” procurement decisions, including the importance of potential negative impacts. If the company chooses to assess the importance of a potential negative environmental impact to determine if a procurement decision is material, then the company needs to consider the likelihood and severity of the impact. Severity should outweigh likelihood, so that highly severe impacts — even if they are unlikely — are still prioritized. For more information on how to evaluate materiality of environmental impacts please check the article: ESC 1.7: How to conduct an environmental impact assessment
This requirement applies to all forms of procurement (raw materials, goods, and services).
Companies may use one integrated process to consider both human rights and environmental impacts, provided environmental impacts are clearly documented.
Step 2: Assess if any negative environmental impact may occur
For the most material procurement decisions assess if there is any actual or potential environmental impact. For instance,
conduct research of specific suppliers, products or materials, or source countries.
engage your supplier directly for more information.
Step 3: Considering the Impact in Material Procurement Decisions
To meet 5.2.1, companies must show how procurement decisions were influenced by environmental considerations.
Actions may include, for example:
Adjusting What Is Procured
Procuring locally
Procuring second-hand
Selecting renewable materials from sustainable sources
Using reused or recycled materials
Avoiding virgin non-renewable materials
Reducing or eliminating single-use products and packaging
Selecting and Engaging Suppliers
For formal supplier relationships, companies may:
Engage suppliers to understand how they manage environmental impacts
Establish a responsible procurement or sustainable sourcing policy
Incentivize suppliers to improve sustainability performance
Prioritize environmental criteria during supplier selection
Prefer suppliers that:
Align with the company’s environmental strategy
Have environmental policies, targets, or certifications
Demonstrate strong animal welfare practices
When the company considers the environmental impact of a procurement decision it may realize that it is challenging to take action to mitigate the (potential) negative environmental impact due to, for instance, that the company has no or limited options in terms of the product or service, or the supplier. The company can still demonstrate compliance by explaining how it has evaluated its procurement options.
Examples of considering environmental impact in procurement decisions
Example 1: Raw Materials
A company identifies its procurement of palm oil as highly material due a material environmental impact, deforestation risk.
Actions taken:
Conducts risk research by country of origin
Prioritizes third-party certified palm oil
Switches to a locally sourced alternative, e.g. rapeseed oil, with better visibility on the production practices and environmental management of the supplier
Enquires origin related information and engages suppliers on traceability improvements, where possible
Example 2: Finished Goods
A consumer goods company identifies plastic packaging procurement as most material as a combination of volume and environmental impact.
Actions taken:
Re-evaluates if it can reduce or avoid packaging
Replaces virgin plastic with recycled content
Prioritizes suppliers aligned with circularity principles
Updates supplier selection criteria to include environmental performance alongside price and quality
Example 3: Service Sector
A professional services company, that is building a new website, identifies website hosting and data storage as one of its most material procurement decisions based on spend..
Actions taken:
Includes environmental criteria in supplier selection
Makes design choices that optimise website for energy efficiency
Chooses supplier powered by renewable energy
Example 4: Service Sector
A professional service company identifies that the procurement of electronics (laptops, screens) is a material procurement decision.
Actions taken:
Prioritises suppliers with credible climate commitments, e.g. that publish emissions data and renewable energy commitments
Chooses suppliers with take-back or refurbishment programmes
Procures refurbished electronics
Recommended Good Practices
Companies are encouraged to:
Develop a sustainable procurement guideline with environmental criteria
Use the B Lab Standards as a foundation, including:
Ensure procurement decisions support circularity by:
Reducing virgin non-renewable materials
Enabling reuse and recycling
Align procurement actions with broader environmental strategy and targets
Examples of a Sustainable Procurement Policy Template
Additional Resources:
Sustainable Public Procurement from UNEP
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