Written by: Mike Edmunds

Posted on: 16/03/23

Seeing Your Value: Effective Cost Leadership and the Race to Become ESG Compliant

When considering procurement’s role in the drive towards a more sustainable future for modern businesses, the general consensus seems to be one of confusion from those within the department.

Most, if not all, industries will be looking inward to assess how to move with the times as they turn unequivocally towards increased scrutiny regarding environmentalism, social concerns, and proper legislative governance. However, uncertainty regarding department-specific targets, and a lack of clarity surrounding the best changes to enact in order to reach these indefinite targets, plagues procurement professionals, who exist under new and ever-increasing pressure to save costs whilst driving towards more sustainable suppliers.

This is concerning, as in my opinion and the opinion of many other industry experts, the procurement teams within businesses are strategically situated to have the most potential impact on a company’s sustainability level.

“Whilst good ethics and sustainability should be prioritised by all organisational departments, procurement leaders are uniquely placed to promote the advancement of ESG. Procurement teams can benefit from taking a leading role on these opportunities.” Writes Alex Maguire, a strategy and sourcing expert.

“As the primary interface with the upstream supply chain, the procurement function has a decisive role to play in shaping an organization’s ESG footprint, both directly through purchase decisions and indirectly by influencing product design.” This McKinsey article agrees.

There can be no doubt, therefore, as to the key role procurement will play in the big push to centre sustainability goals and to make real, tangible impacts on Scope 3 emissions for companies who will inevitably struggle to enact change due to their size and the complexity of their supply chains.

When it comes to forming a strategy with these values in mind, it’s easy for the task to seem daunting – because it is. Businesses are asking their procurement departments to perform miracles by combining two opposing ideals; reducing costs and increasing sustainability. These often contradict one another, for what is sustainable often comes with increased costs, and cheaper alternatives have a potential environmental impact which is incompatible with new standards.

How do you achieve the best of both?

Is it even possible?

These are questions which will have crossed the minds of procurement professionals as they begin to look at key drivers and targets for the year ahead, facing the pressures of a planet in environmental crisis and an economic downturn caused by the fallout of the pandemic and the Russia/Ukraine conflict. The challenges ahead cannot be underestimated.

But the potential power in the hands of the procurement department is also a force to be reckoned with. Procurement professionals have considerable influence over the businesses they work hard for; they can shape the direction, size, and profitability of the supply chain, dramatically affecting the business’ overall environmental impact. They are inherently valuable professionals and need to be supported and given the correct tools in order to maximise their potential for positive impact on the business.

“The procurement function will need new tools and data sources, too, to enable ESG supply chain teardowns and resource cleansheeting, or to facilitate the identification of suppliers with favourable ESG footprints or novel technologies that could help the organization achieve its sustainability goals.” – Celine Cherel-Bonnemaison, Gustav Erlandsson, Ben Ibach, and Peter Spiller continue, writing for McKinsey.

This outlook is one which is growing more popular, as the tasks become harder and the goals loom ever closer, and those who are in positions of decision-making power come closer to the realisation that a digital transformation is the best (and only) way to ensure that these goals are consistently met.

Paper-reliant filing cabinets and manual processes of times past simply cannot keep up with the new demands of industry, and they effectively clip the wings of the high-flying procurement teams who would benefit from updated processes and more streamlined workflows to keep up with them. The advanced capabilities of constantly evolving software support the development of diligent and shrewd procurement professionals, and there really is a solution for every problem out there.

Trade Interchange’s ARCUS® Supplier Management Platform offers one such example of this solution, with 9 fully integrational software modules with capabilities ranging from sourcing and e-auctions, through to supplier management and on-boarding, all the way to product design and organisation. Fully functional as standalone software modules or as a complete source-to-contract solution, the flexibility and customisability of the platform is its best feature, allowing for exactly the kind of support you need, exactly where you need it.

None of us can achieve our true potential alone – and we are ready and waiting to offer you the help you need to succeed.

Just ask.

This is the second 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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