Sustainable procurement in the real estate industry: towards a better involvement of the supply chain

Sustainable procurement is nowadays of growing importance for real estate companies. It has evolved into a core issue for businesses, particularly in terms of cost reduction, mitigation of business risks, brand reputation and innovation.

What types of goods and services can be included in sustainable procurement practices?

What kind of criteria can be considered by companies during the purchasing process?

On June 18th, the OID has published, in cooperation with Gecina and Icade, and other major French real estate actors, a tool designed to offer a sectoral formalisation of the CSR criteria to be considered by the instructing company in sustainable procurement policy.

This toolkit, developed over a period of 1-year, analyzes the criteria related to environmental, social/societal and governance stakes for 53 occupations, with corresponding examples of indicators and good practices. These 53 occupations represent some of the categories real estate companies call on while in the purchasing process for intellectual services, real estate programs, use and maintenance and as well as furniture. Inspired by other sectorial initiatives, this first draft of the toolkit is designed to evolve once published and used by companies and suppliers.

It is the perfect opportunity to focus on sustainable procurement initiatives in real estate!

Sustainable procurement: the next step to be taken by real estate companies wishing to deepen their CSR process

Now that real estate companies have done a lot of work to reduce their own environmental and social impacts, they should extend their CSR policy to their supply chain to completely address this issue.

First of all, it should be noted that in France the supply chain is responsible for more than 50% of the total GHG emissions of a building, meaning that even if a company or the occupants of a building make efforts to reduce their proper emissions, the indirect GHG emissions remain and continue counting as a large part of the building’s environmental footprint. Therefore, managing the suppliers’ impacts is a core issue in controlling and reducing the environmental and social footprint of a building and of a company.

Disasters like Rana Plaza in 2013 keep reminding us of the still existing risks in many global supply chains. This is a real issue for companies since their suppliers’ practices deeply impact their environmental and social footprint and can harm their reputation.

In fact, customers are increasingly aware of the issues surrounding sustainable procurement and supply chain control.

The challenge here is to make sure that the sustainable procurement objectives comply with the company’s expectations in terms of performance objectives since according to the Sustainable Procurement Barometer made in 2017 by HEC and EcoVadis, cost savings remain as the main priority of procurement organization (see figure below).

Illustration of the main priorities of procurement organizations in 2013 and 2017. Source: Scaling Up Sustainable Procurement, White paper based on the 2017 HEC/EcoVadis Sustainable Procurement Barometer

Towards a different relationship with suppliers

When they are defined, sustainable procurement criteria are, in the case of real estate, very general. There is a lack of specialization based on the categories of goods and services companies purchase. This makes such policies very weak and suppliers have difficulty implementing them because they aren’t specialized in their business. Differentiated criteria according to sectorial issues are one key solution to involve all stakeholders, including suppliers, in the process. That’s what the toolkit developed by OID tried to do in contacting different sectorial professional organizations to challenge with them the stakes of each sector.

An increased engagement from the companies is necessary but not enough to develop a sustainable procurement policy that works in the long run. Indeed, the policy should be developed hand in hand with the suppliers to include them in the transformation and innovation process around CSR and sustainable procurement.

On the other side, since CSR requirements ask for efforts from suppliers, real estate companies should as well complete with other requirements like payment deadlines.

The co-construction of the sustainable procurement policy and the dialogue with suppliers are a source of a new relationship between a company and its suppliers around CSR objectives. It should no longer be seen as a constraint but rather as an opportunity to change practices and innovate.

A window is open, it only remains for real estate companies to take inspiration from and adapt this initiative to their internal context!