Environmental, social, and corporate governance (ESG) concerns have become a critical aspect of doing business in recent years. Companies are now expected to adopt sustainable practices that meet the needs of their stakeholders, and procurement plays a critical role in achieving these goals. Procurement processes are critical to achieving sustainability goals, and companies that prioritize ESG in their sourcing decisions can achieve substantial benefits. By improving supplier relationships, reducing costs, meeting stakeholder requirements, driving innovation and reducing risk, ESG can improve procurement processes and enable companies to create more value for their business and society.
To date, there is not globally recognized or harmonized system for sustainability tracking and reporting. The GRI guidelines are among the best known worldwide. However, each company must select the metrics that are right for it, depending on what is relevant or essential to its own business and industry.
Environmental sustainability metrics is the most prominent area for tracking sustainability in most companies. Environmental KPIs cover a wide range of activities. For example, these KPIs include Percentage of reduced energy consumption, of reduced CO2 emissions (Scope 1, 2 and 3), of degradable or recyclable materials, or the number of suppliers audited against environmental standards.
Sustainability metrics that focus on social can include employee satisfaction (define specific values), number of projects that promote diversity and inclusion, number of training opportunities, number of sick days, community engagement or volunteer hours.
In the area of corporate governance, helpful KPIs include compliance with the code of conduct, fair pay (measure against industry benchmarks) or compliance with safety requirements.
What can procurement contribute to this? Supplier engagement and performance on environmental, social and governance standards must be assessed as part of procurement processes and policies. For this, reliable data, efficient processes, industry knowledge and analytical expertise are the basis for tracking internal and external sustainability performance and communicating results to stakeholders. Focusing efforts on key suppliers and risk categories are often part of the first step. Reliable environmental reporting requires working closely with suppliers and setting common goals.
To avoid falling for greenwashing, procurement professionals must carefully review suppliers’ environmental claims. Greenwashing can take many forms, such as making false or exaggerated claims about a product’s environmental performance, using vague or misleading language to describe a product’s environmental benefits, or using environmentally friendly buzzwords without demonstrating any actual environmental benefits.
Sustainability reports are also becoming increasingly important as legal requirements for disclosure become more stringent and ESG concerns become a key criterion for business partnerships and customers. The Climate Choice has identified five key insights for companies to avoid common mistakes in sustainability reporting.
– Be concise: Don’t beat around the bush.
– Specificity matters: Get down to the details.
– Transparent disclosure: Disclose your CO2 emissions for all scopes and categories.
– Backed by evidence: any claim should be supported by valid evidence.
– Be thorough in dating: Information on the timing of actions and planning is extremely important.
Bottom line: companies that integrate ESG into their procurement processes will enjoy long-term success in a rapidly changing business world and have a positive impact on the world around them. Assessing sustainability performance allows for setting goals and taking corrective action to drive improvements and do sustainable business in the long run. Transparency and up-to-date data are critical to the success of their sustainability strategy as ESG requirements, market conditions and supply chains continue to evolve.
We would be happy to support you in achieving your sustainability goals.