ESG has become a key focus area for procurement executives around the world, rising to the #2 spot of top priorities in a new survey by global professional services firm Deloitte, up from 7th place in the prior 2021 study.
For the report, the 2023 Global Chief Procurement Officer Survey, Deloitte surveyed approximately 350 procurement leaders from more than 40 countries. Deloitte has been conducting the Global CPO survey since 2011.
The increase in ESG prioritization among procurement leaders comes as companies globally face increasing regulatory and stakeholder pressure to manage and report on a variety of sustainability factors, and as the focus of these initiatives increasingly turns to companies’ value chains, covering factors such as Scope 3 emissions and human rights in upstream supply chains.
The EU’s proposed corporate sustainability due diligence directive (CSDDD), for example, includes rules requiring large businesses to assess and address adverse human rights and environmental impacts in their value chains, while the ISSB’s new global climate reporting standard, will require reporting on emissions across the corporate value chain.
The report noted the key role of the procurement function in driving the sustainability agenda, pointing out that “ESG is the top area where procurement plays an active influential role in decision-making (85% of firms), with corporate risk management and FP&A next (roughly 70%).”
The report added:
“Procurement’s role in delivering value here can mean something as narrow as baseline compliance to the regulations, but it can also mean many other things, including identifying more carbon efficient suppliers.”
Overall, 72% of respondents cited “enhancing ESG/CSR” as a top enterprise priority, second only to “driving operational efficiency” at 74%, and tied with “digital transformation.”
Key ESG factors targeted by CPOs in the survey included waste reduction and material circularity, at 72%, followed by climate mitigation at 62%.
While ESG rises in the list of priorities for procurement professionals, the study indicated that initiatives to quantify the sustainability factors remains at an early stage. Although 60% of respondents said that they measure suppliers on sustainability at some level, and 63% reported collaborating with suppliers on ESG initiatives, far less than half (40%) said that their procurement organizations don’t define or measure their own set of relevant ESG factors.
The survey also highlighted key ESG-related investment focus areas for the CPOs, with top areas identified as assessments, the development of visibility and reporting platforms, the creation of supplier investment funds and consortia, and the incorporation of ESG into core people, process, and consulting/ transformation support.
The report said:
“ESG support is a critical C-suite issue for CPOs to support and one they should arguably be using to their advantage. It includes renewing ways to engage and collaborate with suppliers to balance cost, resiliency, ESG, and other factors.”