Sustainable Procurement is the Present and Future: Exploring the Pressures, Motivations and Challenges

It’s time for procurement and supply chain teams to step up and leverage their influence to make an impact on the world. Our latest report, produced in conjunction with Ivalua, has the insight and answers for procurement professionals looking to step into a sustainable future.

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In the words of Procurious Founder Tania Seary, “Procurement can no longer stand by and watch the sustainability movement.” 

“We manage billions of dollars in spend. We have everything we need to make a difference. The pressure is on us to do the right thing and act now.”

Procurious and Ivalua surveyed over 470 procurement and supply chain professionals in May and June. The purpose of the research? To assess supply chain sustainability maturity levels, the impact organisations are driving, and how procurement teams can improve outcomes. (Get the full report here.)

The results may shock you: 39% of organisations are just beginning their supply chain sustainability programs, another 22% have an established program and only 15% have an advanced program. Meanwhile, 24% have not started at all. But hope is not lost, far from it!

“Starting your supply chain sustainability journey can feel overwhelming,” states Alex Saric, Chief Marketing Officer at Ivalua. “Thankfully, there are a lot of experiences, failures, and best practices to learn from. The goal of our research was to see what the sustainability leaders are doing, identify challenges, and to shed light on how to invest strategically and effectively.”

Supply chain sustainability: the pressure is on to do the right thing

We are experiencing a substantial shift in how and why society acts. When we started the research, we assumed that the majority of respondents would report that the primary pressure to improve sustainability programs was still external. That assumption was wrong.

According to our research, over 50% of respondents said the primary pressure to improve sustainability performance comes from within their organisation. It is a desire to do the right thing that has outweighed pressure from investors, shareholders, customers, and the government.

That wasn’t the case a few years ago. Today’s employees feel obligated and empowered to positively impact their company, society, and environment – and are making their voices heard. This underscores a larger point: regardless of where you are in your journey, sustainable procurement cannot be approached in a check-box fashion. Similarly, greenwashing will not be tolerated. Sustainability needs to be ingrained across company and departmental strategies, and approached in an intentional and well-resourced manner.

Environmental and societal impact: the engine that drives supply chain sustainability motivation

Factors affecting motivation are more complex to uncover. We asked respondents to identify their top two motivators for investing in supply chain sustainability. Environmental and social impact led the way, with 45% and 40% respectively. Risk mitigation came in third at 32%.

Not surprisingly, c-level executives were more than twice as likely to say sales and revenue is a top motivator compared to everyone else (33% to 16%). Another interesting takeaway: Risk mitigation was a higher motivator for those with established and advanced programs, compared to everyone else.

The other motivators, in order of popularity:

·       Brand reputation – 26%

·       Compliance – 22%

·       Sales and revenue – 16%

·       Investor expectations – 12%

With increasing pressure to fight climate change and reduce carbon emissions – including new regulations popping up across the world – it’s safe to expect that environmental-related pressure and motivation will continue to grow in weight and urgency.

Regardless of your specific motivations or goals, sustainability delivers. The triple bottom line of economical, environmental, and social impact should weigh heavily on every procurement team. Building a program that optimises for all three is the smartest way to approach sustainability and deliver a tangible impact. Today’s procurement teams have everything they need to succeed. (Get the full report to see the top strategies for making an impact).

Budget battle: why sustainable procurement is still facing budget constraints

While momentum for supply chain sustainability continues to build, there are still challenges and hurdles to overcome. According to our research, the top hurdles that organisations face when looking to implement and improve supply chain sustainability programs are:

·       Budget constraints – 53%

·       Lack of expertise and process – 42%

·       Lack of enabling technologies – 41%

·       Lack of urgency to improve or change – 41%

·       Cost dominated supplier selection – 38%

·       Supplier buy-in and collaboration – 28%

·       Lack of executive support – 27%

Budget is the most common challenge, identified by over 50% of respondents. “Budget challenges are a disappointing reality that leaders must overcome,” said Ivalua’s Saric. “The research clearly shows a tangible ROI from sustainable procurement programs. When you do it right, it positively impacts everything – sales, talent, risk, reputations and more. This is the way the world is moving and organisations need to equip their teams to succeed.”

There are plenty of external challenges as well, especially as you go deeper into the supply chain. 96% of respondents said they faced challenges managing the sustainability of their sub-tier suppliers.

A lack of visibility into sub-tier suppliers is far and away the biggest challenge (identified by 66% of respondents), followed by an inability to engage. Visibility topped the next closest option by over 25%.

Other challenges respondents face in managing nth-tier suppliers include:

·       Cost focus – 39%

·       Inability to collaborate and engage – 39%

·       Lack of expertise and process within supply organisation – 38%

·       Budget constraints within supply organisation – 37%

·       Lack of tier-1 supplier buy-in – 24%

·       Lack of sub-tier supplier buy-in – 24%

While external challenges add another dimension to sustainable procurement, you can’t improve outcomes without engaging your supply base. Supplier collaboration is the key to overcoming these hurdles.

“The most meaningful gains in sustainability will come from continuous improvement so you need to engage your supply base,” said Saric. “Our research found that collaborating directly with suppliers to change and improve is the number one strategy for measurably improving sustainability performance.”  

Additional insights from the research – including details on ROI, best practices, and essential technology – can be found in the full report. Join Procurious today and access your free copy today! Sustainable Procurement: Driving Exponential Impact Across the Supply Chain.