Exploring Procurement Leaders’ Perspectives on Emerging ESG Initiatives

With climate and social equity issues ever approaching a crisis point, responsibility for the future has fallen squarely on corporations and the way they operate. Procurement professionals have quickly become key actors in the race to drive change and are always looking for new ways to increase their impact. 

At SpendHQ, we believe that the best insights come from boots on the ground professionals. To acquire these insights, we joined Market Dojo in London on May 15 to host an intimate dinner with clients and partners where we discussed how ESG concerns are redefining optimal supply chain management. 

ESG Initiatives: An Opportunity To Shape The Narrative 

The professionals who joined our discussion were particularly interested in AECOM. The multinational engineering firm stands as a key example of the benefits that come from establishing a business’ identity through value-based priorities. When AECOM committed to reducing its carbon footprint, it didn’t only establish itself as an environmentally conscious business, it also saw its stock price double and its access to reduced funding grow.   

The good news is that companies of all sizes can benefit from pursuing ESG initiatives, regardless of their size or industry. While AECOM focused on its carbon footprint, other companies can focus on increasing diversity or ethical sourcing. The benefits that come from these commitments vary as well, meaning that even privately-owned or self-funded businesses can create significant opportunities for themselves simply by committing to more sustainable and equitable operations. 

It Starts At The Top: Executive Ownership Enables Change 

Commitment to value-based priorities is key, but our clients and partners were clear that it won’t accomplish much until it’s paired with accountability and ownership from executives.  

While procurement departments often play a strategic role, many experts still feel that they lack the decision-making power to truly drive change. However, this trend will shift if senior executives move ESG from the priority category to the mandate category and place procurement professionals in charge of executing these initiatives. 

Another key point that our discussion uncovered is how corporate leadership should view the execution of these initiatives. Too often, company leaders are willing to pursue an initiative until it fails. However, the group agreed that because ESG is an emerging focus, initiatives will need long-term investments and the luxury of trial and error. For companies to achieve any ESG goals at all, leaders will need to create an ecosystem that encourages iterative processes instead of immediate results graded on a pass-fail basis.  

There is No Formula…Yet

Unfortunately, there are few ESG metrics that are readily available and consistent. As members of the discussion pointed out, expectations and focuses are constantly evolving. As a result, knowing where, when, and how to take action can be difficult.  

For starters, acting on ESG assessments is often costly, and many organizations lack the necessary resources to take the initial steps. In many cases, even the first step to change is large enough that it can be disruptive to business operations.  

Lack of executive buy-in is also a hurdle that procurement professionals must navigate. In companies that view procurement as a cost center or rely on long decision processes, new initiatives can take months or years to implement.  

Finally, setting measurable initiatives is often difficult. Because metrics and expectations are always evolving, it can be challenging to take a holistic view of a program’s effects. Compound this with the fact that ESG involves so many different facets, and procurement leaders often struggle to focus the scope of projects on areas where there are reportable metrics

However, relevant metrics and processes will evolve. To continue growing, companies must prepare for what they are facing today and for the opportunities their organizations will encounter in the future. The constant changes may be difficult to manage, but they are part of the rocky path to any multi-industry shift. The businesses that stick through them are the ones that will emerge on top.  

Key Takeaways

Environmental, social, and governance expectations offer the procurement world a number of challenges and opportunities. Several key ones found their way to the forefront of our discussion.  

  • Controlling the narrative: A focus on ESG gives companies the chance to determine how the world will see them, and doing so now can impact a business’ bottom line. 
  • Driving change with executive ownership: For ESG initiatives to move forward, senior executives need to set them as mandates and put procurement professionals in the driver’s seat. 
  • Navigating the road ahead: There’s no predefined path to ESG success. However, the companies that work through today’s problems will be uniquely positioned for tomorrow’s economy.  

ESG-driven procurement is a rapidly changing landscape, but it promises to take businesses to new heights. By considering the factors that are causing concern and optimism among our May 15 discussion participants, procurement professionals of all experience levels can transform their businesses and establish themselves as true industry leaders.