Leveraging Digital Tools to Create More Sustainable Supply Chain
Every business must focus on managing the environmental impact of their business at every level. The environmental, social, and governance (ESG) policies must also be incorporated into the procurement chain because consumers increasingly prefer brands with strong ESG values.
In a Mckinsey study, leading ESG performers experienced 10 to 20% higher valuations and faster growth. By implementing waste reduction policies, the EST policies also helped organisations to reduce costs by 5 to 10%. A procurement solution will help streamline and modernise procurement policies by including ESG strategies for supplier sourcing.
Procurement Software Enables Sustainability in Procurement
Organisations adopt local sourcing and optimised resource consumption practices to reduce costs and align with ESG goals. However, 80% to 90% of greenhouse gas emissions during product manufacturing are associated with the value chain, primarily procurement. Sourcing environment-friendly suppliers and choosing vendors who use responsible production materials can help strengthen ESG policies. It reduces overall wastage and also promotes morality among the employees.
Source: Deloitte
Sustainability in procurement is beneficial in the following ways:
Bolster brand reputation and reduce supplier risks by sourcing ethical and environmentally conscious suppliers.
Reduce procurement costs by encouraging the reuse of materials, local sourcing to reduce carbon footprint, and lowering energy costs to procure materials.
Accelerate revenue growth by making ESG a prime objective, attracting customers willing to pay more for products and services from environmentally conscious companies.
Future-proof procurement supply chain by choosing suppliers who are resilient to fluctuations in the economy and climate.
To implement sustainable procurement, you can use procurement software that can be customised to align procurement goals with enterprise-wide ESG policies. By building a resilient and environmentally responsible supply chain, your organisation can make products with a much lesser carbon footprint.
5 Ways in which E-Procurement can Help You Achieve Sustainability Improvement
A sustainable approach to business is encouraged by governments for climate control. In a Mckinsey study, 60% of CPOs knew about the importance of a sustainable supply chain, but they had difficulty creating a sustainable procurement strategy. Sadly, only 20% of the CPOs admitted that their sustainability solution included ESG initiatives.
Set EST Objectives for Buyers
Incorporating EST objectives into the first step of the procurement process paves the way to achieving sustainability. Before procurement optimisation tools, buyers were only focused on cost avoidance and cost savings. Thanks to the integrated procurement solution, buyers can focus on other non-cost elements, such as effective risk management, competitive pricing, negotiation savings, etc., while sourcing suppliers. The digital sourcing software allows enterprises to customise sourcing strategies, and ESG objectives can be easily incorporated into the sourcing process.
Fine-tune Supplier Selection
Procurement system employees prefer a broad category for suppliers because finding vendors and suppliers matching many criteria is often difficult. The e-procurement platform makes it easy to reach global and local suppliers seamlessly, thus increasing the vendor pool. Procurement software can give quantitative inputs on procurement spending based on ESG goals and suppliers' carbon footprint to e-source suppliers with similar ESG initiatives. The sourcing strategy can then be updated to include new ESG rules for environmental and social aspects. An automation tool helps buyers allocate priorities for supplier selection criteria. Procurement leaders prefer e-sourcing as they can input more selection criteria for a granular approach.
Evaluate Suppliers Aligning with CSR
Every enterprise has Corporate Social Responsibility (CSR) goals that all business processes must meet. The procurement system allows procurement leaders to define their KPIs for sustainability, strategic fit, compliance, and quality standards while evaluating suppliers. By quantifying these goals, collaborative data from different sources can be analysed under a single and unifying digital platform. Buyers can seamlessly benchmark categories, compare suppliers, and use analytics to create improvement plans.
Analyse Sustainability Efforts and Results
Any sourcing strategy that is put in use must be monitored and analysed to measure its performance. Sustainability regulations continue to change based on location and government policies. The procurement team should ensure that the sourcing process complies with the regulatory requirements. With increased societal contributions, the organisation's financial obligations can change rapidly. The analysis and reporting tools of the procurement platform provide sustainability data in a visual format for easy review. A comprehensive and centralised reporting solution will help organisations easily generate reports on greenhouse gas emissions corresponding to product manufacturing.
Improve Catalog and Ordering Process
The sourcing strategy developed will be fruitful only if the buyers adhere to the sourcing policy of the enterprise. Communicating ESG criteria to all the stakeholders in the procurement chain is crucial to ensure sustainability. Procurement software helps procurement leaders create smart catalogues loaded with ESG criteria to prioritise eco-friendly products, suppliers, and vendors. Buyers can easily purchase directly from these catalogues using the procurement dashboard.
Conclusion
Organisations must partner with suppliers and vendors with favourable ESG footprints to achieve sustainability objectives. Ambitious CPOs should equip the team with data, tools, and capabilities to include sustainability as a key objective. More than 70% of consumers are willing to pay as much as 5% extra on green products if they have the same performance as their non-green counterparts. This means that ESG goals can drive the organisation to tap new markets to accelerate revenue growth. About 44% of organisations are interested in sustainability programs mainly because of the improved business growth opportunities.
Procol is a highly rated procurement software that helps you seamlessly incorporate ESG initiatives into the procurement process. Call us to schedule a demo and experience a complete transformation of your procurement system that aligns with the CSR of your organisation.
