Sustainability in Procurement and the Link to Profitability : An Exploratory Study

Abstract

This thesis explores how sustainability focus in the procurement function affects a firm's profitability. Sustainability has become increasingly relevant for firms to address, as the adverse impacts of a business on society and the environment has become increasingly clear in later years. We argue that the procurement function is exceptionally well situated to address sustainability within a firm and in conjunction with its greater supply chain. At the same time, we recognize that profitability concerns are pivotal for the ability to implement sustainability initiatives, as firms depend on profitability over time. Thus, we explore the link between sustainability in procurement and profitability by deriving generalizable characteristics of the relationship between these topics. The relationship can be bi-directional; however, in this thesis, we focus on how sustainability in procurement affects profitability. The research was conducted using an exploratory case design, where qualitative data was collected through six semi-structured interviews. Then, thematic analysis was used to analyze the data. From 85 unique codes, we identified nine themes regarding the relationship. Finally, we structured the findings by identifying three dimensions of themes, or characteristics, affecting profitability when implementing sustainability initiatives in the procurement function. Firstly, we find that the procurement function's possibility to implement initiatives through trade-offs and limitations may influence the revenue and cost effects. Secondly, the procurement function's basis, that is the employees' perceived need to address sustainability, affects profitability through maturity and perceived relevance. Lastly, the dimension means, the degree to which a firm will succeed in implementing sustainability initiatives, is identified to affect profitability through a firm's prerequisites and supplier relationships. The findings are formalized in a framework that a firm can utilize to optimize the implementation of sustainability initiatives in their procurement function, enabling the firm to positively affect the profitability outcome of a given sustainability initiative.