Procurement has a significant role to play in the pursuit of ESG goals

This is an excerpt of the original article. It was written for the July-August 2022 edition of Supply Chain Management Review. The full article is available to current subscribers.

July-August 2022

In late May, I attended the Institute for Supply Management’s first live conference since 2019. The message from Tom Derry, ISM’s CEO, was simple: These are challenging times, but along with the challenges come opportunities for those of us who can step up and lead our organizations into the future. One area where supply chain will be tasked with stepping up to the plate is going to be ESG, the initialism for environmental, social and governance. It was a major theme of the conference, and while all of the reporting requirements are still being debated, there’s little question that supply chain will lead the charge in environmental initiatives…

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One of the lasting legacies of the post-COVID era will be how ESG jumped to the top of the corporate strategic objectives. In fact, it’s such a popular board-level objective, visible in nearly every annual report, that the discussion is less about why to do it and more how to do it.

The previous laissez-faire approach to ESG is no longer tenable amid massive social upheaval. As individual brands seek to sell to a more socially conscious demographic (Millennials and younger), companies must put greater effort into how they produce products, reduce their environmental impact and create meaningful social change. In other words, to reach their targeted demographics, corporations must step in to fill a gap created as governments abdicate their social responsibility. However, this becomes a huge problem for procurement because many of our n-Tier suppliers are located at or near sites of unstable political upheavals. Russia’s recent invasion of Ukraine made this all too clear.

In an alarming number of cases, a national government is simply a failed state (such as, recently, Myanmar). Nongovernmental organizations such as the United Nations, World Bank and the World Health Organization are under severe political attack. In response, corporations are stepping in to fill the void. In fact, corporations have become so involved that there’s now pushback from activists against corporations becoming too involved in social issues. For example, in advance of Pride each year there’s usually a public questioning of whether Pride Month is selling out to corporations.1 In 2018, Vox carried an article entitled “How LGBTQ Pride Month became a branded holiday,” in which the author challenges whether corporate support of Pride is merely part of a branding campaign. The article notes that, for example, Adidas has a “Pride pack” of merchandise readily available for sale. Simultaneously, Adidas was a major sponsor of the 2018 World Cup held in Russia, a country that is continually hostile and punishing to queer people. If money spent on Adidas merchandise ends up supporting the Russian government and its persecution of the queer community, then Adidas is not serving its queer customers well.

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