Five strategies to make procurement more sustainable

Delivering on sustainability goals is a top driver in a majority of procurement programs

Subscriber: Log Out

Giving sustainability practices a prime spot on the company’s procurement agenda helps reduce costs and improve brand reputation and stakeholder relationships. A recent report from Accenture and EcoVadis has found that “delivering on corporate sustainability goals and commitments” is a top driver of 71% of procurement programs in 2024—a 13% increase compared to 2021.

(Photo: EcoVadis)

Sustainable procurement practices include incorporating specific criteria into procurement policies, for example, suppliers having to adhere to environmental standards such as reducing carbon emissions and using sustainably sourced materials. Another example is supplier sustainability scorecards, which track and assess sustainability management systems and metrics such as water usage, energy efficiency and ethical labor practices. These criteria and indicators are integrated into processes such as vendor selection, tenders and relationship management, helping companies monitor supplier performance against sustainability goals and encourage continuous improvement.

As part of our research, we analyzed the procurement programs of almost 600 organizations worldwide. We found, among other things, that about 10% of these programs were exceptionally more mature than others regarding sustainable value chain management.

What makes these programs so mature? We traced it back to five strategies at which leading procurement executives excel:

1. Finding friends in the right places to build the business case. Leading procurement executive practice “ongoing and action-oriented stakeholder engagement.” Essentially, it is winning over C-suite executives and peers with the results of sustainable procurement initiatives—continuously and backed up by data. If you can build a strong value case, the resources will follow.

Procurement leaders’ allies call the shots in finance, sustainability, operations, marketing, and risk and compliance departments. This makes them key to expanding leaders’ budgets and changing organizational behaviors. Their buy-in is one of the most critical factors to accelerate sustainable procurement programs. Today, such strategic engagement or even operational information of crucial stakeholders is happening in fewer than half of organizations.

2. Letting data rule supreme. Reliable, accurate data is essential for sustainable procurement decisions. It is also indispensable when it comes to precisely tracking sustainability metrics and identifying areas for improvement, and, therefore, for winning and maintaining support from internal stakeholders (see figure 1). Procurement leaders ensure that environmental social governance (ESG) KPIs and insights and supplier sustainability data are directly integrated into procurement software, for example, passing data directly via an API to procure-to-pay suites or standalone systems. ESG data is put directly into the daily dashboards and supplier profiles that buyers use.

 

(Photo: EcoVadis)

Despite these benefits, this kind of digital integration remains low. Spend analytics is the process with the highest level of digital integration—adopted by 25% of companies. At the low end of integration are supplier relationship management (8%) and systems supporting the formal request process (Rfx) (6%).

3. Engaging suppliers extra-deeply. Procurement leaders know that their suppliers must pull their weight to accelerate the adoption of sustainable practices. This does not end with supplier sustainability data being integrated into buyers’ end-to-end procurement approach (see above). Suppliers must commit to the organization’s sustainability goals. This commitment needs to be assessed and audited regularly—which fewer than 50% of mainstream programs do—and combine third-party ESG ratings with other disclosure tools. Programs that practice this approach typically follow through with deeper activities, such as corrective action, active support of carbon reduction target setting and reduction initiatives, and e-learning or innovation programs, which drive supplier ESG improvement and produce richer data and insights.

4. Using technology to achieve n-tier transparency. Roughly half of all companies have a good understanding of the sustainability practices of 50% or more of their Tier 1 suppliers but of fewer than 5% of their Tier 2 suppliers. The further down one goes, the murkier the water becomes. Leading organizations use risk and hotspot mapping technology tools to inform decarbonization and other ESG priorities, pinpoint risks and inform engagement strategies and investments across responsible sourcing practices.

The infusion of generative AI into supply chain functions promises to make n-tier transparency even easier. For example, Accenture built an n-tier supply chain navigator that helps procurement managers analyze supply network vulnerabilities in real-time and another generative AI solution delivering near-instant insights in suppliers’ Scope 3 emissions reporting and other ESG visibility and risk management aspects.

5. Ensuring procurement organizations have the right skills. To implement sustainable procurement in practice, companies need a supply chain workforce that brings two things: one, critical ESG knowledge, and two, motivation and commitment. It is an area where many companies still have work to do if suppliers are to be believed. In our study, 43% of suppliers said their customers’ commitments to sustainability are important to them only on paper. Procurement leaders make sure sustainability is incorporated into job descriptions, promotions and compensation for roles such as buyers, category managers, supplier relationship managers and risk and compliance positions. It provides incentives for these individuals to adopt a more strategic approach to sustainability.

Many companies leading in these capabilities report improved risk management and resilience, and better product or employer brand effects. But getting there is an iterative effort. It usually starts with a specific topic, like Scope 3 disclosure, region, or category. You get initial wins, and then you expand. Knowing in which direction to move first depends on where you stand. The first action you should take is benchmarking your internal sustainable procurement program and practices against a relevant cohort of peers, and evaluating your procurement technology tools against the current state of the art.

About the authors

Pierre-François Thaler is co-founder and co-CEO of EcoVadis. Matias Pollmann-Larsen is a managing director and the global lead for sustainable value chain at Accenture.

SC
MR

A recent report from Accenture and EcoVadis found that delivering on sustainability goals is a top driver in 71% of procurement programs.
(Photo: Getty Images)
A recent report from Accenture and EcoVadis found that delivering on sustainability goals is a top driver in 71% of procurement programs.

Subscribe

Supply Chain Management Review delivers the best industry content.
Subscribe today and get full access to all of Supply Chain Management Review’s exclusive content, email newsletters, premium resources and in-depth, comprehensive feature articles written by the industry's top experts on the subjects that matter most to supply chain professionals.
×

Search

Search

Sourcing & Procurement

Inventory Management Risk Management Global Trade Ports & Shipping

Business Management

Supply Chain TMS WMS 3PL Government & Regulation Sustainability Finance

Software & Technology

Artificial Intelligence Automation Cloud IoT Robotics Software

The Academy

Executive Education Associations Institutions Universities & Colleges

Resources

Podcasts Webcasts Companies Visionaries White Papers Special Reports Premiums Magazine Archive

Subscribe

SCMR Magazine Newsletters Magazine Archives Customer Service