Four Steps to Successful Procurement from an ESG Perspective:

It can feel as though it’s impossible to meet business objectives while also fulfilling ESG goals. I’d like to explore some of the issues surrounding this topic, as well as the potential solutions.

ESG has grown to previously unseen levels of importance for modern businesses. What has been something of a back-burner priority until recently, has emerged with new-found significance through the concerns of investors, customers, and stakeholders of prominent businesses.

But with so much change comes a price, as Dr. Dambisa Moyo writing for the Harvard Business Review attests:

“More generally, if a company focuses too much on ESG, it could struggle to compete against companies from countries with less rigorous standards, such as China. But if a company does not focus enough on ESG, it risks falling behind in the market, losing the support of employees, customers, and investors, and potentially even losing the license to trade in more stringent regulatory/ESG environments, like the U.S. and Europe.” – Dambisa Moyo, Harvard Business Review.

It seems like companies, and the teams who source for them, are looking down the blade of a double-edged sword. When analysing key metrics to set the main business drivers for the year, what takes precedence? Do you risk sacrificing a potentially huge area of the market in order to appeal to the growing segment of conscious consumers, or do you prioritise profit and risk alienating them?

These are the bottom-line questions keeping sourcing teams up at night.

So, what is the solution?

1.   Understand your starting point.

2.   Adopt a holistic sourcing approach.

3.   Increase visibility across the source to contract process.

4.   Do it efficiently.

1.   Understand your starting point.

Recognising and understanding your organisation’s ESG goals, collaborate and communicate with the stakeholders who are setting the policies and targets, and ensure the goals line up with your supplier qualification, selection and risk management. To reach those goals is paramount to beginning your journey to greater success in a procurement role.

2.   Adopt a holistic sourcing approach.

Adopt a holistic approach to your sourcing process, ensure every step relates to the goals of your organisation.  Incorporate them as part of all strategic sourcing activity, setting ESG goals as part of the individual projects and include the goals in supplier selection, compliance management, contracting and performance management.

3.   Increase visibility across the source to contract process.

 Visibility is key to measuring the effectiveness of your strategy, from an individual sourcing project to the alignment of your whole supply base. Visualising data, identifying key metrics, analysing drivers for the business will not only measure success, it will identify weaknesses and inform future strategy.

4.   Do it efficiently.

Leaning on technology is key here, technology can automate processes, thus providing efficiencies via integration with trusted data sources via API’s, saving time to collect, validate and update critical ESG data. Artificial Intelligence can validate key ESG related documents giving further confidence to the data collected to evaluate supplier compliance.

Trade Interchange and the ARCUS® software can help companies manage their source-to-contract processes in a way that supports their ESG goals and objectives. By incorporating ESG criteria into supplier selection, supplier on-boarding and contract management, companies can ensure that their suppliers meet their standards and contribute to their ESG performance.

This is the third of a series of thought-pieces I will be running throughout the year. Follow me to stay in the loop and be notified when the next piece is published.

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