Procurement is now pivotal to turning ambition into action, resilience and profitability
Supply constraints, climate change, human rights and ongoing global health care concerns are among a broad set of issues accelerating the drive for a more sustainable future. Organizations are taking action. More of the world’s Chief Executive Officers (CEOs) are making sustainability goals public, and procurement is quietly becoming a barometer of an organization’s progress.
Environmental, Social and Governance (ESG) metrics have gained traction as ways to hold companies—including their supplier accountability for sustainability efforts. These metrics vary widely, including: tracking carbon emissions, addressing human rights risks like zero child labor in the organization’s supply chain or understanding the circularity of materials used throughout the supply chain.
Climate reporting is already mandatory in Europe and this past March the U.S. Securities and Exchange Commission (SEC) officially proposed its much-anticipated mandatory climate-related disclosure rules for publicly-traded companies in the U.S. With procurement teams on the front lines of sourcing and securing goods and services throughout the supply chain, it is critical to adopt a sustainability mindset in all decisions. This means everything from monitoring the materials that go into products or services to tracking suppliers and ecosystem partners and assessing their overall environmental impact as a result of how they do business.
Yet many procurement teams aren’t equipped with the strategy, expertise, tools and incentives to execute their organization’s sustainability goals. This disconnect surfaced in a recent Accenture and HFS Research (HFS) study of 350 enterprise leaders, including Chief Procurement Officers (CPOs). The study examined how sustainability links to procurement and the entire supply chain. The findings reinforce themes that emerged at the recent COP26 UN Climate Summit that leaders need to think bigger and more holistically to turn sustainability aspirations into action. For all the talk about striving to be green, what has become clear is that sourcing and procurement are integral to an organization’s sustainability agenda and preparation is key.
Mind the gap
According to Accenture’s research with HFS, 60% of CEOs see the need for sustainability but significantly overestimate their organization’s ability to adopt these practices throughout the business. Only 27% of organizations see their CEO or board supporting sustainability and even fewer, 12%, see those same CEOs or boards leading the effort. Only 40% of organizations have dedicated sustainability teams, and about one-third say procurement is actively supporting their organization’s sustainability efforts. To drive real change, leaders must champion initiatives at every level of the organization.
The study revealed that leaders also need to better align with their leadership peers across different areas of the business. Over half of organization leaders outside of procurement see sustainability as a top-three procurement priority, while only 22% of procurement leaders feel the same way.
Leaders also underestimate the level of work that needs to be done to enable sustainability in procurement processes and teams. This observation is supported by companies spending less than 2% on ESG activities, and more than half of leaders don’t see that changing, with some even believing it may decrease.
Seize opportunities through procurement
In its role to source and secure goods and services throughout the business and manage supplier relationships, procurement is well positioned to enable sustainability. In fact, it is a huge opportunity. Managing scope 3 emissions and social risks can feel overwhelming because it requires companies to influence ESG factors outside of their operational control. To help drive sustainability, you need to reset expectations and begin taking key actions.
Turn ambition into action
According to our study, respondents see these as three main spend categories to initially focus on
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Preserve the future
There has never been a more urgent time to turn ambition into action or more opportunity. Organizations building sustainability into their DNA can create a competitive advantage by becoming more efficient, transparent and profitable with workforces and operations equipped for the future. Take those first steps, leveraging procurement to influence and manage the supply chain’s impact and helping to drive a more sustainable future.