Sustainable procurement 'nearing adolescence'

6 February 2017

Fortune 500 firms are not only investing heavily to ensure sustainability and CSR are ingrained across procurement and the supply chain but are also seeing major returns on this spend, according to a report.

The HEC/EcoVadis Sustainable Procurement Barometer found 50% of sustainable procurement (SP) leaders experienced increased revenue from sustainability initiatives. However, this figure drops to 17% among laggards.

“No longer seen as a nice-to-have discipline, SP has evolved into an integral business function responsible for reducing costs, mitigating business risk, protecting and improving brand reputation, driving revenue and supporting innovation and growth,” said the report.

The drivers, identified by respondents to a survey, are improved brand reputation, named by 76% as a direct result of SP, and stronger supplier relationships, cited by 55%. Three quarters of organisations use CSR data when selecting new suppliers.

Another benefit was improved rankings in green financial rankings – identified by 48% of firms.

In the US the primary driver behind SP is risk mitigation, while in Europe the number one driver is brand reputation.

Meanwhile, CPOs and CSOs still face the challenge of ensuring that their investment pays off and has the desired impact across the supply chain.

While the last barometer report, which was published in 2013, found organisations struggling to gain support and attention from top management, today the SP landscape is “nearing adolescence”.

The authors said that this year one of the key themes was “scaling up”, with many organisations focusing on growing their programmes and expanding their coverage.

Some 45% of respondents said their SP programme covers at least 75% of spend volume today, up 18% on 2013.

“Covering ‘strategic’ or ‘large spend’ suppliers is simply not enough. Disasters like Tianjin and Rana Plaza are reminders that significant risks remain unaddressed in most global supply chains,” said the report.

The more mature sustainable procurement programmes are seeking strategies to expand the breadth and depth of coverage of their supply base.

Key priorities within procurement organisations were largely unchanged from 2013 – cost savings, compliance, and risk reduction.

However, compliance increased sharply as a priority, overtaking risk to become the second priority, with cost savings remaining number one.

The rise of compliance was probably due to increasing regulations in Europe and US, which have directly affected procurement and supply chain, such as the California Supply Chain Transparency Act, the UK Modern Slavery Act and the Dodd-Frank Act on Conflict Minerals.

Almost all (97%) of organisations considered SP important but only 23% of respondents reported it to be critical.

Only 6% said they had full visibility into tier three suppliers and beyond.

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