SUPPLIER SUSTAINABILITY RATINGS AND THEIR IMPACT ON STRATEGIC PROCUREMENT DECISIONS

Abstract

In the face of growing environmental and social challenges, organizations are increasingly recognizing the importance of integrating sustainability into their procurement and supply chain management practices. Sustainable procurement goes beyond the traditional focus on cost and quality, incorporating environmental, social, and ethical considerations throughout the entire procurement lifecycle. This paper examines the influence of supplier sustainability ratings on strategic procurement decisions. Using assumed but realistic data, the paper applies analytical tools, such as scoring matrices and clustering techniques, to demonstrate the strategic value of sustainability ratings in procurement. A multi-criteria decision-making (MCDM) framework is used in this research to assign sustainability scores to suppliers. Findings from a study showed that environmental indicators are implemented significantly across suppliers, resulting in positive outcomes with a higher mean score. Further, it reveals that suppliers who have scored highly on sustainability indicators are selected more often, have longer contracts, and handle greater procurement volumes. Overall, the descriptive analysis justifies the need for a holistic supplier evaluation framework that balances the ESG constituents, thereby facilitating procurement decisions that are not only cost-effective but also socially and environmentally responsible.