ESG (Environment Social Governance) and sustainability is on top of the agenda for most organizations today and it is here to stay. It is linked to various business operations. The choice to collaborate with selected suppliers and the behavior of these suppliers influence the overall ESG-sustainability performance of organizations. That is why procurement plays a crucial role in meeting the obligations and objectives in this domain.
It is the role of procurement to safeguard that contracted suppliers comply with the ESG sustainability policy and the goals of the organization. That responsibility covers the entire procurement process. From sourcing to payment of the goods and services delivered by suppliers. A positive development is that digitization of the procurement process comes with the introduction of IT solutions to support the realization of ESG sustainability efforts. Support, because like any other business function the vision and ambition of the organization needs to be translated into a set of policies embedded in aligned business processes.
Procurement is a vital to the realization of the ESG and sustainability objectives. The following list illustrates this point:
Selecting and subsequently contracting only the suppliers that have the right profile in all areas including ESG and sustainability is the first important step. Several IT solutions in the market provide tools to control this phase. A (questionnaire based) preselection of suppliers helps to make a first selection. Automated feeds from specialized databases like EcoVadis and Bureau Van Dijk give the buyer with detailed information regarding the risk profile of suppliers. Centralized contract management tools create a single source of truth regarding the detailed agreements made with the supplier.
When business is done with the selected suppliers it is key to monitor if the suppliers comply with the agreed way of working. Next to charging the right prices and conditions this also means that certain ESG certificates like FSC and BIO certificates need to be valid. IT solutions help to safeguard important aspects like certificate management.
In the ideal setup the procurement department organizes the framework to enable requestors across the organization to buy goods and services. This framework consists of contracts and a list of preferred suppliers that (obviously) meet the ESG and sustainability requirements set by the buying organization.
In conclusion: procurement plays a dominant role in driving the ESG and sustainability goals of the organization. This role is more powerful when the potential of IT solutions is deployed! If you are interested to learn how SAP-Ariba solutions, please don’t hesitate to contact us!