Corporate profits and the health of our planet have become inextricably linked. Business leaders should step up and take concrete steps toward a safe and sustainable future for all—and, with the right strategies and resources, Chief Procurement Officers (CPOs) can lead the charge.
In fact, their role is crucial. Why? Because they have the power and the reach to spark organizational changes from the top that can help their organizations reach Net Zero. Net Zero is achieved when there is an overall balance between emissions produced by an organization and emissions they take out of the atmosphere. Essentially, it means doing business in ways that have no net impact on emissions.
CPOs should move now to build ambitious Net Zero goals into all aspects of their procurement decisions and processes. Beyond prioritizing sustainability within every supplier network they touch, they should also create a systematic framework to reach Net Zero emissions while managing procurement costs and business needs. This may require bold leadership, collaboration and alignment across every department and within the C-Suite, along with reporting systems that harmonize competing cross-category needs and deliver a “single source of truth” from many disparate sustainability elements.
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CPOs should move now to build ambitious Net Zero goals into all aspects of their procurement decisions and processes.
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What’s at stake
Pressing sustainability challenges, such as climate change, air pollution, water scarcity and diminishing biodiversity, are putting up to $20tn in value at risk by 2030, according to forthcoming Accenture research.
Companies are being pressured on all sides to commit to Net Zero. Colliding forces are increasingly pushing organizations to sharply lower value chain emissions and to alleviate unavoidable emissions via carbon offsets. Here’s a quick breakdown of where these mounting pressures are coming from, and why they are of concern to CPOs:
- Investors: An increasing number of investors are integrating sustainability issues into their investing criteria. 75% of investors integrate Environmental, Social and Governance (ESG) principles into their investment approach and decision-making.
- Customers: A recent Accenture global survey of nearly 30,000 consumers found that 62% of customers want companies to take a strong stand on issues like sustainability. Companies that don’t step up pay the price: More than half (53%) of consumers are disappointed with a brand’s words or actions on social issues. Worse yet, 47% walk away in concern and 17% don’t come back.
- Regulators: Under the European Climate Law, Europe has pledged to become the first carbon neutral continent by 2050, including a binding target of Net Zero greenhouse gas emissions. This pioneering course puts European industries and organizations irreversibly on the path to a more sustainable future. Businesses across the continent are following suit, turning words into action and showing consumers that they are reasonably committed to reaching Net Zero. The hope is that the world—and the global business community—may follow.
- Employees: Studies show that employees are demanding purpose-driven work and when they feel they are working for a company supporting a good cause, such as environmental sustainability, it not only increases their well-being and loyalty, but it can also boost their productivity by up to 30%. After all, purpose-driven companies consistently outperform competitors, grow faster and are generally more profitable.
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of investors integrate Environmental, Social and Governance (ESG) principles into their investment approach and decision-making.
of customers want companies to take a strong stand on issues like sustainability.
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Procurement as the path to Net Zero
Within the growing consumer, regulatory and employee calls to drastically reduce or eradicate emissions lies a promising opportunity for CPOs. They are well-positioned to rise to the challenge by teaming up with sustainability members and integrating sustainability into all core procurement processes.
To take the reins and help sustainability, CPOs should transform their function and stretch beyond the traditional cost containment objectives. They should be ready to back more strategic aims, like evaluating sustainability metrics within the procurement decision making process. For example, sourcing corporate travel may now include new standard criteria related to the carbon intensity of the hotel chains they source, or sourcing packaging may now evaluate the percentage of plastic procured that is virgin versus recycled.
This also includes crossing the boundaries of the organization. As chief decision makers, procurement leaders can drive sustainability and influence upstream supply chain emissions and cost reductions across the entire supplier network. And, the benefits go beyond sustainability. Case in point: 95% of Carbon Disclosure Project members said suppliers that demonstrated environmental leadership are more competitive, with only 5% reporting higher costs in their experiences with such suppliers.
The good news is there are clear, measurable steps forward that procurement leaders can take to help their organizations reach Net Zero.
A wise first effort is to focus on consumption. Afterall, the product or service with the lowest carbon footprint is the one that you never purchase in the first place. Limiting consumption also has obvious economic benefits as well. After consumption, CPOs may consider the energy that they source for their company. Is it renewable? Are there opportunities for energy efficiency improvement, on-site generation or Virtual Power Purchase Agreements? Next, it’s time to tackle the emissions within the supply chain (scope 3), which can be as high as 5.5x of organizational direct emissions. Organizations can reduce their supply chain emissions by integrating Net Zero considerations in all direct and indirect procurement decisions, as data indicates ~40% of global GHG emissions are driven or influenced by companies through their purchases (i.e. purchased goods and services, such as logistics, IT and corporate travel) and through the products they sell. CPOs should leverage their buying power to help influence their supplier’s decisions about reaching Net Zero to set off an inevitable virtuous cycle.
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~40% of global GHG emissions are driven or influenced by companies through their purchases
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Transforming fossil fuel-based procurement and supply chain systems into clean, sustainable processes is one of the greatest challenges. But it also represents one of the greatest opportunities and preferred honorable pursuits of our time. Being at the helm of this essential purpose-driven journey makes CPOs champions of the meaningful and measurable organizational climate change we need. Not only because it’s the right thing to do for business, but also for our planet and the generations that call it home, now and in the future.
Check back for two more posts on how CPOs can lead sustainability efforts in their organizations.