As executives race against the clock to meet and exceed their company’s environmental, sustainable, governance (ESG) goals, they must bring procurement - once a considered back-office function - to the forefront. Most of an organization’s environmental, social and governance risk resides within the suppliers a procurement team manages. To minimize risk and achieve ESG goals, the C-Suite must understand why procurement functions are pivotal to enabling sustainability efforts.
While ESG metrics have gained traction in holding companies accountable for sustainability efforts in recent years, many leaders see C-level commitment and a lack of organizational alignment as barriers to meeting ESG goals. Considering that only 50% of leaders see procurement as a top driver of meeting sustainability goals, this perception is no surprise.
Executives must build sustainability into their organizations’ DNA and start thinking creatively about better utilizing procurement resources to advance ESG efforts. As supply chain is one of the core industries driving demand for sustainability skilling, procurement teams must not be overlooked.
Strategies to optimize procurement operations to drive ESG goals
Leveraging procurement to influence and manage the supply chain’s impact on sustainability will enable transparency, profitability and competition. Workforces and operations will become better equipped to drive a more responsible and sustainable future. While there is no “one size fits all” approach, organizations should investigate strategies in back-office functions that drive revenue and increase employee retention, while helping organizations meet ESG benchmarks.
1. Initiate baseline training programs to align on ESG goals
Organizations have long regarded procurement as a support function rather than a primary driver of sustainability. As a result, these employees may lack the skills required to execute their organization’s sustainability goals — a recent Accenture study of enterprise leaders reveals that many procurement teams are not equipped with the necessary strategy, expertise or incentives to deliver when it comes to ESG.
To understand the nuances of sustainability reporting, internal teams and suppliers must receive training on data collection and analysis strategies. Without the understanding and alignment that strategic ESG data collection and analysis provide, pushes sustainability into an organizational silo.
2. Invest in on-the-job upskilling in sustainability and technology for procurement teams
Many sourcing and procurement teams have no common definition of success and little incentive to do anything other than drive down costs. They also lack the resources and digital tools including sustainability metrics and awareness.
Yet research shows that most employees are open and excited about gaining new skills in the workplace. Upskilling procurement employees with the right tools and knowledge can help grow each team member’s career trajectory, giving them new skills that are essential in this new era of prioritizing sustainability. As advancements in technology continue shaping Industry 4.0, the supply chain is growing increasingly connected.
Consider, for example, that companies’ hiring services cannot control the operations of their suppliers yet are held accountable for suppliers’ emissions. Procurement teams should now view suppliers through an ESG lens to weigh how they may fit within the organization’s ESG goals.
3. Look at the bigger picture to expand the sustainability mindset
Focusing on suppliers and those who manage them is essential to build a more sustainable future, but just as ESG goals shouldn’t exist in a silo, sustainable procurement evolve into other areas of the organization. According to Accenture research, respondents see energy, travel and logistics as three primary priorities.
For many companies, reducing energy usage has become the “low-hanging fruit” in achieving ESG goals. Companies are being more thoughtful about carbon implications when in travel and logistics. Leaders should consider how to use transition to less impactful modes of operation including road and ocean transport.
Organizations that build sustainability practices within their DNA can create a competitive advantage by becoming more efficient, transparent and profitable while building a future-ready workforce. Progress demands a different mindset, detailed data, governance tools and collaboration across organizations. Leveraging procurement to drive ESG goals is only the first step to build a pervasive sustainability mindset throughout every organization.