BRIDGING THE GAP
Procurement's vital role in making ESG strategy a reality
Edward Cox, Director, and Simon Whatson, Vice President, challenge procurement leaders to bridge the gap between board-level strategic ESG initiatives and executing an actionable plan.
Sustainability: It’s time to stop talking and start delivering.
Sustainability has moved from being a nascent consideration to the mainstream. Greater scrutiny from consumers, financial markets, governments, and employees means businesses have had to strongly evaluate how they measure up against an array of environmental, social, and governance (ESG) issues. Encouragingly, ESG issues present a prime opportunity for businesses to foster innovation, increase worker productivity and loyalty, and heighten corporate reputation. What was once discussed in theoretical terms is now part of a global conscience and is set to stay.
This gives cause for great optimism. More than 300 significant businesses committed to the Climate Pledge, with signatories aiming to reach the goals of the Paris Climate Agreement 10 years early.
But optimism has never changed the world. While corporate commitments offer promise, what comes next is far more difficult: operationalising ESG strategy.
Through in-depth surveys and interviews with more than 1,000 Business Leaders and Procurement Professionals, we sought to understand the true state of the ESG agenda and its relationship to Procurement and Procurement Professionals. We wanted to know if we are set up for success and, if not, what is going wrong and what needs to change?
We also looked to understand who is going to lead the way, what role Procurement currently plays, and the role it will need to play in the future.
This report has reinforced our belief that Procurement, alongside board-level commitment, is the key determiner for organisations to successfully achieve their ESG objectives.
So, how does procurement do this?
To drive a sustainability transformation and effectively mitigate operational and reputational risks, procurement functions need to take concerted action. They need to assess their supply chains and execute new procurement strategies. They need to drive deeper supplier collaborations, and they need clear measures and targets.
Procurement’s direction has shifted from absolute cost to total value, where sustainability is a key value lever.
We are delighted to share our latest research that uncovers market insight from both Business Leaders and Procurement Professionals about the changing nature of the corporate landscape, the magnitude of issues currently faced by procurement teams, and the challenges of implementing ESG strategy within the supply chain. These challenges are significant but by no means insurmountable.Read the report
Part 1: ESG: A key element of the C-Suite corporate agenda?
While two of the top five strategic priorities for Business Leaders are ESG-focussed, traditional business objectives remain the greatest focus. Is prioritising ESG largely lip service or real intent?
Environmental sustainability is the second most important strategic project businesses are investing in (47%), after digital transformation (49%).
67% of Business Leaders agree that overpromising on sustainability-related goals is a major reputational risk to their organisations.
Of those who have set targets to reduce their greenhouse gas emissions, only 33% state that they are very confident in their organisation's ability to meet those targets.
Part 2: The current challenges faced by procurement teams
For Procurement to play a leading role in driving ESG improvements, it needs to overcome several challenges.
Fewer than two in five (38%) procurement teams capture metrics about the sustainability of the supply chain to measure the success of their team.
50% of Procurement Professionals identify recruiting and retaining people with the right knowledge and skills as key challenges
Almost half (49%) of CPOs face the challenge of a lack of Board-level buy-in as to what Procurement does
Part 3: Unlocking the potential in procurement
CPOs have a strategic vision for Procurement’s wider remit, but they have yet to make the clear value case within teams and to leadership.
69% of CPOs think it is within Procurement’s remit to ensure good governance; this compares to just 41% among the total Procurement Professionals sample surveyed.
67% of CPOs think it is within Procurement’s remit to deliver on sustainability; this compares to just 42% among the total Procurement Professionals sample surveyed
Only 35% of Procurement Professionals think that it is within their team's remit to shape organisation-wide strategy
Methodology and acknowledgements
To better understand the issues impacting the market, Efficio undertook a survey of 529 C-suite leaders and senior business managers (“Business Leaders”) across the US, the UK, Germany, Italy, UAE, Saudi Arabia, and the Nordics.
This was supplemented with a survey of 536 professionals working in procurement roles (“Procurement Professionals”) across the same regions to identify which solutions they feel they can deliver to their businesses in meeting their strategic priorities.
Survey respondents were from both private and public sector (taxpayer-funded) organisations, and all businesses had a workforce of at least 250 employees.
To provide an additional dimension to the quantitative research, a series of in-depth interviews were undertaken with leading industry voices, including Business Leaders, Procurement Professionals, and Academics. Special thanks go to our guest contributors:
- Professor Paul Ekins OBE, Professor of Energy and Environment Policy – University College London
- Dr Nick Watts, Chief Sustainability Officer – NHS
- Chris Johns, Chief Financial Officer – Yorkshire Water
- Rachel Dolan, Head of Procurement & Supplier Relationship Management – Permanent TSB
- Thomas Udesen, Chief Procurement Officer – Bayer
- Henrik Nilsen, Head of Procurement Excellence – Topdanmark
- Jessica Bederoff Stenvad, Sustainability Manager – Nordic Capital
- Edward Cox, Director
- Simon Whatson, Vice President
Read on in part 1
PART 1: ESG – A key element of the C-suite strategic agenda?
While two of the top five strategic priorities for Business Leaders are ESG-focussed, traditional business objectives remain the greatest focus. Is prioritising ESG largely lip service or real intent?Continue reading