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by PETER SMITH on JUNE 23, 2011

in PROCUREMENT GOOD PRACTICE

Continuing our look at “sustainable procurement” – economic sustainability is probably the hardest of the three headings (environmental and social being the other two) to get your head around. That’s partly because it overlaps with ‘social’, as we’ll discuss below – and it contains some areas of debate and controversy as we’ll also see.

The internal facets of economic sustainability seem to be simply making sure the organisation is utilising resources to best advantage. But the outward facing element that is more interesting to procurement usually covers the development of greater economic capacity, capability and robustness in supply markets, particularly those in disadvantaged areas.

It’s particularly interesting for some global companies who operate in developing countries – at the Procurement Leaders event recently, Anglo American spoke about their efforts to develop local business and suppliers in African countries where they operate mines. Now this had an obvious strategic and commercial driver for the firm – taking these actions was often a condition of them being awarded mining rights in a particular country or locality.

But it also had the benefits of helping Anglo in the longer term by developing a stronger, more robust local supply chain, potentially increasing competition, avoiding shipping costs and reducing supply chain risk by using local firms. Anglo stressed the importance of working on both the supply side and the demand – so helping local firms build capability through training for instance, and also making it easier for them to win contracts by ensuring procurement processes were not consciously or unconsciously favouring large firmsRead more