WHAT IS SUSTAINABILITY SPEND ANALYSIS?

Sustainability Spend Analysis provides a tool to quantify environmental impacts, such as GHG emissions, water consumption, primary energy use, or waste generated across an organization's entire supply chain. The results inform which spend categories, procurement types, and supplier(s) warrant further investigation and/or engagement. This allows your organization to focus mitigation efforts on high impact categories.

 

Why use sustainability Spend Analysis?

 

Sustainability Spend Analysis is widely recognized as the most efficient and effective way to achieve a comprehensive, multi-impact analysis of the whole supply chain. 

 
 

 

An organization’s various sustainability impacts arise not only from direct interactions with its immediately surrounding environment and communities, but also (and often to a far larger extent) from its purchasing activities and corresponding supply chains. Click here to learn more about sustainable procurement strategies. 

 According to CDP, “On average, an organization’s supply chain emissions are four times greater than those from direct operations”

According to CDP, “On average, an organization’s supply chain emissions are four times greater than those from direct operations”

 

The volume and variety of organizational spend can present challenges for analyzing environmental, social, and economic impacts throughout the supply chain. The Sustainable Purchasing Leadership Council (SPLC) strongly encourages organizations to conduct a Sustainability Spend Analysis as a way to understand and prioritize opportunities to improve performance.

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Sustainability Spend Analysis Process

Using an organization’s general ledger, spend data is mapped to the Comprehensive Environmental Data Archive (CEDA®) via our proprietary software. CEDA then quantifies environmental impacts associated with the purchasing transactions between an organization and its suppliers.
 

 
Spend Analysis Process

1. Collect Data: Collect procurement data from the general ledger. This may require coordinating across departments within the organization.

2. Map Data: Map procurement data to purchasing categories that align with the categorization of the spend-based emission factors being used. North American Industry Classification System (NAICS) codes are often used for this step.

3. Apply Emissions Factors: Apply industry-specific GHG emissions factors to spend data. These factors are usually given as GHG emissions per dollar.

4. Identify Hotspots: Identify the spend areas in your purchasing ledger that constitute the largest environmental, social, and economic impacts. These “hotspots” can then be prioritized for additional analysis and targeted as priority areas for impact reduction.

 
 

The commodities associated with the most greenhouse gas emissions purchased by top purchasing departments.

 
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Reduce Environmental Impacts

Impacts can only be managed if they are measured.

The spend analysis results can be segmented in many ways, including by procurement type, product category, business division, supplier, regions, or projects. This diversity in output allows your organization to target the appropriate channels for performance improvement. 

 
  • Procurement Type: Implement purchasing policies that target the spend categories with high environmental impacts.

  • Business Division: Inform departments within your organization of their relative impacts and compare their impacts to other parts of the business.

  • Suppliers: Work with high impact suppliers to further develop supply chain engagement programs or initiatives.

 
 

Next Steps

Identify the internal resources and policies available for managing an organization’s supply chain risks or implementing sustainability initiatives. These could include budget availability, contract jurisdiction, company culture and values, and employee safety.

Use the VitalMetrics Spend Analysis Tool to identify supply chain hotspots. This tool and the underlying data enable efficient and rapid, yet comprehensive spend analysis results. Click here to contact us for a free trial. 

Prioritize actions based on internal resources and policies, and the targeted supply chain hotspots.

Track impacts and performance improvements over time, such as annually or once every three to five years. The spend analysis results provide a performance baseline against which future progress can be measured.

Reduce Environmental Impacts
Reduce Environmental Impacts
 
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Why VitalMetrics?

Our spend analysis tool and rigorously reviewed CEDA database combined with our science-based approach enable efficient and rapid, yet comprehensive environmental impact results. Click here for our spend analysis case studies.

We received the SPLC Leadership Award in 2015 and 2017 for providing sustainability spend analysis services to major purchasers. Our work with Travis Perkins Plc and the U.S. General Services Administration was specifically acknowledged in this recognition.

Below is an in-depth interview with Jez Cutler, Head of Environment & Sustainability at Travis Perkins plc. In this conversation, Jez Cutler shares his experience with spend analysis and comments on supply chain sustainability, the spend analysis process and results, and next steps.

SPLC Member
 
 

Interested in learning more? Check out our Sustainability Tools Page for more information regarding our Spend Analysis Tool. This web-based tool allows you to conduct this type of analysis in a robust and time-efficient manner.