In an era of global trade volatility and ongoing climate change, companies around the world are reevaluating supply chain relationships and seeking new ways to integrate more sustainable practices into their procurement operations.
When Amazon Business surveyed procurement leaders in its 2025 State of Procurement Report, respondents almost universally agreed that procurement has room for optimization, and responsible/sustainable purchasing remains top of mind, with 80% of decision-makers saying their organizations now have mandates for working with certified suppliers (i.e. businesses that have undergone a verification process for sustainable practices). However, balancing sustainability goals with other procurement priorities (like cost and delivery times) remains a challenge, and one in five procurement decision-makers say they lack the systems to properly monitor and manage risk.
As companies adapt processes to meet modern demands, there is an opportunity for procurement to take on an elevated role as strategic business partner, helping drive efficiencies, streamline operations, and keep companies compliant with increased environmental, social, and governance (ESG) regulatory scrutiny. To do so will require a big rethink from procurement leaders, reframing the function to serve as both cost optimizers and frontline enforcers of sustainability mandates.
Rewiring procurement operations for sustainability compliance
In 2023, the EU enacted the Corporate Sustainability Reporting Directive (CSRD), which requires companies operating in Europe to disclose their greenhouse gas (GHG) emissions. The US followed suit in 2024 when the SEC finalized a similar rule for American companies.
Each mandate is governed by the GHG Protocol, an international standard categorizing GHG emissions into Scope 1, 2 and 3 based on the source. Scope 1 includes direct emissions from a company's own operations (e.g. industrial processes and fuel from company-owned vehicles), Scope 2 covers indirect emissions from a company’s purchased energy (e.g. electricity, heating, and cooling from off-site facilities), and Scope 3 encompasses all other indirect emissions in the value chain (e.g. delivery trucks, business travel, employee commuting, and waste generated as part of company operations). According to McKinsey, Scope 3 emissions can potentially contribute far more to an organization’s overall carbon footprint than the other two scopes, and typically represent around 90% of a company’s total emissions.
Tracking sustainability performance doesn’t just apply to tangible goods – SaaS products, consulting partners, and other service vendors all carry their own hidden environmental costs as well. As pressure mounts on chief procurement officers (CPOs) to improve procurement sustainability, success in this new compliance-driven landscape demands a mindset shift that prioritizes transparency and agility over legacy models.
Here are four areas that CPOs can address now to reduce a company’s carbon footprint, mitigate risk, and build resilience:
1. Optimize reverse logistics
In the past, procurement teams spent the bulk of their efforts on traditional logistics (moving materials downstream from suppliers to distributors), but as e-commerce has flourished and more attention is given to a product’s lifecycle, reverse logistics (the flow of returned or unused materials back upstream) can cause its own sustainability issues. Inefficient reverse logistics can result in additional transportation emissions and products being discarded instead of repaired, reused, or recycled, resulting in excessive waste and hindering progress towards a circular economy.
Improving efficiency in reverse logistics requires procurement teams to work cross-functionally with logistics, operations, and sustainability leaders to plan for the entire product lifecycle, and sustainable reverse logistics clauses should be embedded into RFPs, supplier agreements, and KPI dashboards. By streamlining processes, investing in technology/automation, and focusing on the long-term value of assets, procurement teams can help increase a company’s profitability while also reducing their ESG impact.
2. Close the visibility gap in Scope 2 and 3
While Scope 1 emissions are originated by the company and can be easier to control, tracking Scope 2 and 3 emissions is challenging due to their indirect nature, the complexity of multi-tier supply chains, and the lack of standardized data and reporting. Without insight into Scope 2 and 3 suppliers, organizations can be exposed to reputational damage and regulatory penalties, and the European CSRD holds organizations accountable not just for their direct suppliers, but also for the actions of subcontractors and sourcing partners.
For procurement teams, tracking Scope 2 and 3 emissions demands increased due diligence across the entire supplier ecosystem, and companies are increasingly requiring suppliers deeper in their supply chain to comply with codes of conduct.
3. Incorporate sustainability metrics into TCO models and contracts
Traditional Total Cost of Ownership (TCO) models often overlook long-term environmental costs, and contracts rarely include enforceable sustainability clauses. These omissions can limit the ability of procurement teams to fully assess the long-term value and environmental impact of purchases, resulting in unsustainable choices, legal hurdles, and potential missed cost-saving opportunities.
By factoring sustainability metrics into TCO models and contracts, procurement teams can gain a more comprehensive view of the true cost of assets, including not just initial purchase and operational expenses, but also end-of-life costs, energy consumption, and waste generation. This broader perspective can lead to more informed decision-making, reduced risk, and improved transparency with regulators. Some companies offer a global sustainability certification for IT products, which can help procurement teams expedite the vetting process.
4. Improve static supplier risk models
Historically, annual supplier reviews are insufficient for detecting sustainability breaches in procurement, mainly because they lack the real-time data and monitoring necessary for identifying emerging threats. Modern procurement teams need more dynamic/enriched data and better risk management capabilities that can continuously track supplier performance against ESG metrics to alert teams about potential compliance risks before they escalate.
By transitioning to real-time risk models, organizations can detect ESG breaches early, engage suppliers constructively, and avoid costly surprises.
A new mandate for procurement leaders
Sustainability compliance is no longer a back-office legal exercise – it’s a dynamic, cross-functional responsibility of the entire organization. As ESG regulations evolve and companies seek to reduce the negative environmental impact of their activities, the procurement function has an opportunity to play a critical role in the transition to more sustainable business models. By modernizing processes, enhancing supplier visibility, and embedding ESG metrics into contracts and risk models, procurement leaders can make a decisive difference in corporate sustainability performance and position their companies for a more sustainable future.
