Disclosure index development for sustainable procurement: An Australian perspective

Abstract

In recent years, there is a growing demand for corporations to demonstrate their commitment for and performance in sustainable sourcing of their goods and services. This has led to the promulgation of several sustainable procurement indicators (SPIs) and disclosure indexes (DIs) to guide businesses in meeting ‘responsible’ or ‘ethical’ business operations. However, extant SPIs and guidelines have reliability challenges due to inconsistencies and varying focuses as most DIs are skewed towards non-discriminatory practices and equity in wealth and income distribution. This study proposes a methodological framework and uses 33 indicators of globally accepted ethical norms and standards for business conduct to develop an index for disclosure of sustainable procurement practices. Based on the proposed framework, we conducted a proof-of-concept study using a sample of 60 companies in four industries listed in the Australian Securities Exchange. The findings reveal significant variations in disclosure, with less than 20% of the investigated companies reporting 80% or more of the 33 indicators that constitute the disclosure index. It is observed that companies tend to disclose more in the governance and the environmental dimensions, but less in the economic and the social domains. These results indicate that the disclosure index developed using the proposed framework can be a useful tool for assessing transparency in reporting sustainable procurement practices and can help improve sustainability performance across the supply chain. The index thus provides stakeholders and the public with a lens to examine and monitor a company's sustainable sourcing practices.