Only Half of Procurement Execs Say Supply Chain Sustainability Strategy Aligned with Corporate ESG Goals: Survey
Only around half of procurement professionals and decision makers believe that their companies’ supply chain sustainability targets and strategies are aligned with their broader corporate sustainability ambitions, according to a new report released by Boston Consulting Group’s (BCG) procurement and supply chain-focused subsidiary INVERTO.
For the report, “Sustainable Procurement Study 2022,” INVERTO surveyed 90 professionals in procurement, executive management and management board roles across Europe and the U.S. 39% of respondents were employed at companies with revenues greater than €2 billion.
One of the key findings of the survey was the emergence of a gap between companies’ corporate sustainability strategies and practices at the procurement and supply chain levels. 93% of respondents reported that their organizations had a corporate sustainability strategy in place or in progress, compared with only 61% with a procurement sustainability strategy in place or in progress.
Of the respondents with a sustainable procurement strategy in place, only half believe that it is well aligned with the company’s sustainability strategy.
According to INVERTO, the lack of a sustainable procurement strategy could put many companies at risk of breaching new laws set to come into force over the next few years, such as the EU’s Corporate Sustainability Due Diligence Directive, to be implemented in 2024, which includes rules requiring large businesses to assess and address adverse human rights and environmental impacts in their value chains.
Thibault Lecat, Managing Director of Inverto in the UK said:
“Businesses that fail to adopt a procurement sustainability strategy are taking a big risk and may find themselves wrongfooted by regulation as well as under pressure from their more ESG-focused shareholders.”
While the new laws may pose a risk to companies, they may also serve as an incentive to implement more comprehensive sustainability strategies. According to the survey, regulation forms the main driver for companies’ focus on sustainable procurement, with 40% of respondents ranking “regulatory aspects” as the “most important” driver, followed by “strategic aspects” (22%) and “financial aspects” (22%), with only 17% reporting “reputational aspects.”
The study found that while sustainable procurement was well embedded in their companies’ operating models at a high level, more work needs to be done to incorporate sustainability in the supply chain at the employee and network level. Over three quarters of respondents reported good support from the top levels of their organizations with regards to sustainable procurement, and 68% report having a dedicated sustainability team in place, only 29% felt that sustainability incentives for employees were well embedded in the model, and only around half assessed sustainability training for their procurement teams as good or very good.
Social topics emerged as the most relevant supply chain sustainability aspects in the report, with labor and human rights reported as very relevant sustainability topics in the procurement function by 55% of respondents, ahead of decarbonizing the supply chain (41%), circular economy (34%) and decarbonizing individual products (26%). Similarly 70% of respondents said that they consider labor rights practices and human rights practices when selecting suppliers, compared to only 50% who consider carbon footprint, and 26% for sustainable raw material extraction.
In order to improve their supply chain sustainability performance, the top areas considered by the professionals included changing internal products and processes, implementing procurement policies and compliance checks, and including sustainability targets in supplier selection. Only 22% of respondents reported actively terminating relationships with suppliers who do not meet specific sustainability targets as a top-3 lever.
The report also examined the greatest obstacles for implementing sustainable procurement, with “lack of transparency” topping the list, reported by 60% of respondents, followed by insufficient capacity to implement the practices, and a lack of knowledge and expertise.
“It is reassuring… that only a small and shrinking minority of businesses are ignoring the need to implement a corporate sustainability strategy. However, businesses that have been slow to react will want to start planning procurement sustainability strategies.”