Procurement has been an essential partner to businesses throughout the pandemic. While there are many factors that have led to its prominence, not all of them will have a long-term impact. In 2022, the tradtional function of procurement and the roles it performs will change drastically.
Environmental and social governance (ESG)
Environmental, Social and Governance (ESG). It’s not a new term: its origin dates back several decades, but it has gained increasing importance in recent years.
Over the past year I’ve had the chance to speak to a variety of senior business and sustainability leaders about supply chain topics and their implications on a range of ESG issues. What is apparent from these conversations is that the supply chain is increasingly considered to be one of the most impactful components of a company’s sustainability efforts.
Sustainability: It’s a word that certainly needs no introduction and one with global implications that reach far beyond that of the supply chain crisis we’re experiencing. Some devastating impacts of climate change are now unavoidable, and the topic of sustainability in procurement is heating up, too.
Most people who have used any sort of business software offhandedly consider the importance of maintaining quality data, but few make it a priority. Too often in my world, organizations will meticulously enter supplier information into a spreadsheet and dust off their hands. They see ongoing data quality as a difficult to achieve “nice-to-have,” accept the risk of bad data, and carry on with other business demands, fingers crossed. Not everyone realizes, however, the magnitude of that risk, especially around supplier data.
With more than half of the world’s GDP dependent on nature for its resources and services, companies and their supply chains, have an outsized impact on the environment. The stark reality is that corporations continue to increase emissions of toxic greenhouse gases year after year because of their reliance on fossil fuels as a dominant source of energy.
With 80% of an organization’s sustainability impact intertwined in its supply chain, businesses will need to identify where they can work with suppliers to realize their corporate purpose ambitions. On average, over 90% of an organization’s carbon footprint sits in “scope 3,” mainly in its supply chain and product lifecycle. Defer that logic across the wider scope of business initiatives, and you uncover a better understanding of where most sustainability lies.
Environmental, Social and Governance (ESG) factors are becoming increasingly important in supply chains. Consumers are demanding more transparency and better practices than ever before. Meanwhile, millennials are putting their money where their mouths are and increasingly investing in companies that align with their environmental and societal values.
For businesses across the globe, sustainability used to be a “nice to have,” but now the view has shifted. It’s a “must have — or else.”