EcoVadis, NYU report on the state of sustainable procurement

sustainability

Sustainability efforts paired with technological growth continuously affect the way business leaders plan for their companies’ futures. As budgetary and operational plans are considered, thought leaders in the supply chain and procurement space are evaluating sustainability as an asset that can stifle risk and bring about further economic growth.

EcoVadis, a firm that works to provide sustainability risk and performance ratings for global supply chains, recently launched its 2019 Sustainable Procurement Barometer in partnership with the NYU Stern Center for Sustainable Business.

In its sixth annual report, this year’s findings analyzed data from 210 buying organizations across various industries and geographies. The report was carried out by an independent study of suppliers and was conducted among 399 companies, officials said.

Source: 2019 Sustainable Procurement Barometer

The report reveals three primary trends in the global state of sustainable procurement programs: growing sustainability awareness; the potential compliance stifling of procurement advancement; a shift among organizations that are beginning to focus more on human rights, labor and business ethics initiatives than environmental issues.

The Stern Center said there is a “lack of understanding of how sustainability strategically drives corporate financial performance. Our research focuses on helping companies quantify the full range of costs and benefits from embedded sustainability strategies, or, their return on sustainability investment.”

The report is based on two surveys. One survey seeks answers from buyers, while the other focuses on suppliers. The surveys are carried out as online questionnaires, which are then followed by in-depth interviews with select participants, representatives explained.

This year, the survey drew participation from an increased number of smaller companies than in previous editions, impacting trends noted in earlier such reports by marking a difference in the adoption of sustainable procurement tools and policies, for example.

The report notes that this year, the addition of less “sustainably mature” organizations into the survey brought factors such as the use of a supplier code of conduct to be reported by 64% of respondents, a decline from 88% as reported in 2017.

While smaller companies may still be learning sustainability adoption methods, the survey said overall commitment to sustainable procurement has seen a boost among the majority of buying organizations surveyed — 81% — and remained the same among 18%.

Source: 2019 Sustainable Procurement Barometer

Three challenges remain the same as the past two years at the forefront for businesses pursuing sustainable procurement: lacking internal resources; inability to effectively track supplier sustainability performance; and concerns regarding costs.

Executive board support — once noted as a challenge — has increased throughout the past six years and, according to the report, is now viewed as a challenge by only 13% of survey respondents.

Despite a growing number of tracking and assessment tools, the report notes that a large percentage of respondents are experiencing difficulties with tracking supplier sustainability practices. The report points to what is referred to as “the compliance trap” as one reason it may be hard to gauge supplier practices. While more mature companies may reap the rewards of sustainable practices, the survey notes a decline in such engagement from smaller, less mature companies, emphasizing that as many as 39% of suppliers see their customers’ sustainability commitment as being important “only on paper.”

At the same time, the survey notes that more than half of respondents — 58% — noted that their implementation of sustainable procurement programs make them better armed to mitigate risks, while 30% have been able to cut costs resulting from sustainable programs.

Compliance among organizations both large and small has grown, however, EcoVadis and NYU conclude that there remains great room for growth in sustainable procurement. More work must be completed to enable businesses to better track the benefits of sustainable procurement through the use of financial metrics to more efficiently monetize sustainability strategies, representatives suggest in the report.

“Sustainable procurement practices must take more of a center-stage position in management and business activities in general, and sustainability-related goals … must become seamlessly integrated into management strategy,” the report concludes. “This way, companies can fully benefit from their sustainable procurement initiatives.”

Sophie Rifkin, senior associate director of the NYU Stern Center for Sustainable Business wrote in the report that the CSB’s Return on Sustainability Investment (ROSI) methodology aims to provide CFOs and investors with guidelines regarding how to better implement, observe and report on financial performance resulting from an increased emphasis on sustainability.

“We find that companies that implement sustainable procurement practices are better positioned to manage their physical, reputational and regulatory risk along their supply chain,” Rifkin explained.

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