Sustainable Procurement – How It Is Evolving as a Procurement Priority

EcoVadis (which provides sustainability ratings and performance improvement tools for global supply chains) has published its biennial report the ‘Sustainable Procurement Barometer,’ which sets out the results of its joint study with NYU Stern Center for Sustainable Business.

The 2019 study analyses data from 210 buying organisations across all industries globally about how sustainability is evolving as a procurement priority for them and the tools and processes they are using to drive tangible improvements (this is up from the data analysed in the previous study of 120 supply chain professionals). The findings are again complemented by an independent study of 399 suppliers.

This year’s survey included more ‘smaller’ firms than before (previously the firms actually investing heavily to ensure sustainability and major returns were the Fortune 500s) and companies that are much less mature in their sustainable procurement practices. So it’s interesting to see that in what appears to be a wider test, commitment to sustainable procurement has increased among the vast majority of buying organisations (81%), showing a growing awareness and desire to do something.

Some of the growing commitment seen can be put down to the level of executive-level support. In the last survey, 24% said they find executive-level support to be an obstacle for procurement teams, compared with only 13% this year. And more respondents are seeing a clearer return on investment, with over half (58%) saying they are better able to mitigate risk through sustainable procurement, and 30% that their programmes contribute to cost reduction.

Also encouraging is that greater emphasis is being placed overall on sustainable procurement, with 34% of procurement organisations seeing labour and human rights practices becoming significantly more important and 33% saying business ethics have become more important.

The report has a depth of results and analyses which is worth taking the time to examine, but as an overall gauge of how trends in what is basically CSR have evolved, and what has changed in terms of ‘critical importance’ to procurement organisations since 2017:

  • Reducing costs is down – by 15%
  • Reducing risks is up – by 19%
  • Complying with existing regulations more than doubled – up 39%
  • Creating value for stakeholders is up – by 17%
  • Delivering on corporate sustainability goals is up slightly – by 7%

The growth in importance assigned to complying with regulations is quite a striking leap, from 27% to 66%. “This can be attributed to the increasingly stringent regulatory landscape in Europe and the United States, including California Supply Chain Transparency Act, U.K. Modern Slavery Act, Dodd-Frank Act on Conflict Minerals and most recently Duty of Care and Loi Sapin II in France. It also prompts a hypothesis that businesses are primarily preoccupied with doing things by the book and failing to focus on creating value for stakeholders or delivering on corporate sustainability goals,” the report says.

While commitment to sustainable procurement has increased significantly “most companies today are still managing programs from a compliance standpoint, a trap that leads to limited engagement and lacks incentives to drive performance and long-term improvements … which could mean companies aren't realizing that more innovative approaches are available that can drive competitive advantage and business value.”

“While keeping up with compliance is important, a compliance-only approach could compromise the business benefits awaiting companies that move beyond "checking boxes" to truly engage suppliers."

Depth of supply chain visibility is still a major challenge: 45% of organisations say this insight remains with tier-1 suppliers; nearly a quarter have a line of sight into tier-2, and only 4% say they have visibility past tier-3. Worryingly, about a quarter (28%) of respondents have no visibility into their supply chains at all. Clearly if a firm wants to position itself as sourcing ethically and sustainably, it needs transparency into all tiers. But that’s easier said than done.

“While it is not easy to drill down to Tier-n, with suppliers oftentimes located in unstable countries and the data being fragmented, it is noteworthy that almost half of supply chain disruptions occur below Tier 1, causing a domino effect. Companies will therefore need to place more emphasis on gaining more visibility deep into their supply chains,” states the report.

To find out more about sustainable procurement implementation, obstacles and challenges, sustainable procurement results and benefits, return on sustainability investment, supplier perceptions and engagement, the report is free to download here: 2019 Sustainable Procurement Barometer: From Compliance to Performance.

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