This series of posts is based on research conducted by EcoVadis and A.T. Kearney (see earlier posts under Related Articles). EcoVadis’s Wim Peeters shared findings from this research during a presentation at the Dutch Sourcing Awards earlier this month.
There are multiple ways to assess the performance of sustainability programs in procurement. But the majority of companies today (55 percent) measure only “some” benefits rather than looking at the broader picture or impact of CSR and sustainable procurement and supply chain programs. Thirty percent of companies take a qualitative approach to success through case studies (one wonders if these initiatives are in fact lead by sales and marketing rather than a centralized GRC or sustainability program). And only 16 percent and 7 percent, respectively, quantify benefits in the form of an overall dashboard or by measuring the financial effect of programs.
EcoVadis and A.T. Kearney suggest there are three separate levers of measuring value of CSR programs (although it’s clear from the data that only a small majority of companies are measuring CSR returns on this level). These are: cost reduction (whose main drivers are energy, specifications, consumption, and taxes), risk minimization (drivers include brand image, volatility, disruptions, and compliance), and revenue increases (drivers include generating price premiums, recycling/scrap, and innovation).
Of these, EcoVadis suggests that revenue increases (not surprisingly) remain the most controversial from a measurement and program perspective. Unlike other areas of procurement initiatives (e.g., strategic sourcing, inventory reduction, commodity management), companies are generally not yet “ready to pay the full premium” to implement such programs.
Spend Matters research shows that the CSR programs in the cost reduction area that are most likely to gain support are likely to be deeply integrated with specific, event-driven sourcing processes such as quantifying the cost of green vs. non-green capital investments over the lifecycle of an asset or capital purchase (including potential tax credits or other incentives). Such individual programs are also a great way to shop the benefits of CSR initiatives to non-believers in an organization by quantifying the returns.
Spend Matters would like to thank EcoVadis for taking the time with A.T. Kearney to collect and share their findings and trending data from their sustainable procurement research.