How sustainable procurement can generate supply chain value
The global impacts of 2024’s ‘super-election year’ on environmental, social and governance (ESG) legislation are becoming clear. However, decarbonisation deadlines that once appeared distant are now closing in.
Robust consumer and investor scrutiny around businesses’ sustainability is here to stay and businesses can no longer afford to delay action. Sustainable procurement is therefore key. Implementing practical processes that enable supply chain decarbonisation and regulatory-mandated reporting will help companies better understand and improve the impact of their operations.
With net-zero commitments high on the agenda, some companies are quickly tackling the issue and working to understand their supply chain emissions and wider social value. Others are early on in this journey.
The majority, currently, don’t go far enough. To avoid falling behind peers and wider legislative change, now is the time for businesses to act.
Building knowledge and capability in teams
Sustainable procurement is an incredibly complex area, and the level of maturity varies dramatically across different businesses.
Few companies have specific training in place for employees that address best practice sustainable procurement, with most having a more fragmented approach. Many are unclear on the exact level of knowledge and capability needed to drive sustainable procurement successfully.
To build a greater depth of expertise, businesses need to identify individuals best placed to own sustainable procurement responsibility and then empower them.
Ideally, this would be wrapped into existing roles in the team, given they will already understand how complex procurement functions operate. Alongside this, a new, dedicated senior role would be responsible for overseeing the sustainability requirements.
Sustainability considerations need to be integrated into both individual and team objectives, with the right implementation and training given to ensure they have the knowledge and understanding to succeed.
Teams need to recognise the context their company is operating in – whether their business model, location or supply chains, for example, might mean they’re at greater risk of finding poor practices or issues to resolve in their supply chain.
Aligning with the company’s wider strategic vision
Understanding the wider company context is also important to avoid having to create a strategy for sustainable procurement from scratch. Teams should use their new knowledge to build on and adapt existing procurement approaches that have been built up over time to align with business objectives.
For this to succeed, sustainable procurement must be integrated into the company’s core and aligned to its overall strategic vision. For example, supporting suppliers to build their ESG knowledge base, and ensuring teams are equipped to hold the supply chain to account if issues are found. Many companies are already doing parts of this. But they could be doing it better, more strategically and more consistently.
Furthermore, proper integration is also not a ‘one time’ activity – it requires continual reassessment, especially given the frequently changing regulatory picture.
With the Procurement Act 2023 finally coming into force in the UK, the legislation will strengthen the requirements for sustainable reporting in the public sector, including wider social value.
Across the Channel, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) published in summer 2024 will see member states adopt new regulations and required corporate processes over the coming couple of years.
Making better use of data
Regardless of changing regulations, better use of data will be essential in measuring supply chain ESG impacts, engaging suppliers, and managing performance.
Many organisations have reported difficulties in tracking their sustainability impact across procurement practices. For example, a lack of control over their suppliers and, by extension, a lack of access to their reporting data – which is an essential component in achieving change.
To make significant progress, companies need to increase collaboration with suppliers to decarbonise their value chain and build ESG reporting capability.
Extensive data is meaningless without the ability to properly analyse it, so companies need to assess their digital capabilities and ecosystem and ensure they’re set up with the right tools and systems for the job.
Embracing and embedding better utilisation of data will naturally help bridge the knowledge and capability gap that often exists between companies and their supply chains. It will allow businesses to make data-backed decisions about how to improve operations and supply chain performance against sustainability objectives.
Overcoming procurement challenges
Sustainable procurement challenges apply to businesses of all sizes. What varies are the internal challenges that must be navigated and the external support that might be needed.
Large businesses tend to have the resource to focus on sustainable procurement, but also more bureaucracy to navigate before approval or buy- in can be secured. They typically need support navigating internal governance to get things moving.
Smaller businesses can be more agile but often lack the personnel to take on these extra responsibilities – so may need to share the load with external expertise.
Sustainable procurement must become a core part of business operations, as the need for a robust strategy will only increase in years to come.
The solutions are straightforward, but it will take leadership buy-in to put the right priorities and processes in place. The risks of falling behind only make the reward for action even greater.