Procurement leaders play a crucial role in bridging the sustainability gap, and a recent consumer survey conducted by SAP provides valuable insights to guide sustainable procurement strategies.
Environmental, social, and governance (ESG) considerations have become imperative for businesses worldwide. Consumers, investors, and employees across industries are demanding change, and governments are rightly implementing new regulations. It is our collective responsibility to minimise environmental impact and make positive contributions to society.
With their comprehensive access to various business functions, procurement not only drives efficiency and resiliency but also serves as a key partner in addressing ESG commitments.
The Current Market
According to a survey conducted by the Chartered Institute of Procurement and Supply (CIPS), 72% of Australian organisations had a sustainable procurement strategy in place. Additionally, a survey conducted by Eco-Business in 2019 found that 83% of businesses in the Asia-Pacific region, including Australia, had incorporated sustainability criteria into their procurement processes.
In Australia, sustainable procurement has also become increasingly important in both the public and private sectors. The Australian government has introduced various policies and initiatives to promote sustainable procurement practices, including the Sustainable Procurement Guide, which provides guidance on how to integrate sustainability considerations into procurement processes.
In 2019, the Australian Government released its National Sustainable Procurement Guidelines, which aim to promote sustainable procurement across all levels of Government. These guidelines provide a framework for integrating sustainability considerations into procurement decisions, including environmental, social and economic factors.
As organisations from various industries work towards defining and fulfilling their ESG commitments, it is evident that we are at a critical turning point. Procurement leaders must act now to pave the way for more sustainable practices.
Consumer buying behaviour reflects a growing emphasis on sustainability, but inflation presents challenges. Sustainability, particularly in terms of tracking and reducing corporate carbon footprints, receives significant attention.
Key Findings to Know About
To understand how consumers prioritise sustainability in their purchasing decisions and what influences them, SAP conducted a survey. The survey yielded interesting findings:
- More than half of consumers (51%) have actively sought to purchase from brands that practice sustainability in the past two years, an increase from 36% in February 2022.
- Additionally, over one-third of consumers (36%) prioritise brands that practice ethical sourcing for their products whenever possible.
- However, inflation affects consumers’ ability to prioritise sustainable and ethical products, with 64% stating its impact. If the cost barrier was lower, 85% of consumers would prioritise making more sustainable purchases.
To drive a more sustainable future, procurement practices need improvement. Consumers not only prioritise sustainable purchases but also demand transparency. Many consumers remain sceptical of the data companies provide regarding their ESG efforts. Therefore, procurement will play an increasingly crucial role in sourcing and acquiring goods with sustainability in mind, ensuring traceability and verifiability.
The Way Forward
To build a path toward sustainable procurement in 2023, businesses must reimagine existing processes with sustainability in mind and provide greater transparency to establish trust with consumers.
Procurement leaders cannot tackle this challenge alone, but they can lay the foundation for success by leveraging their unique position to drive sustainable innovation throughout the supply chain. This requires a sustainable procurement plan that encompasses:
- Sustainable sourcing: Implement sustainable sourcing practices to reduce your company’s carbon footprint and greenhouse gas emissions.
- Circular economy participation: Collaborate with suppliers to develop innovative recycling and reusing methods to minimise waste.
- Supplier due diligence: Ensure vendors adhere to ethical labour practices and protect the environment.
- Social responsibility promotion: Select ethical and environmentally certified businesses that prioritise sustainability as a business objective.
The survey conducted by SAP highlights the importance of sustainable procurement strategies, particularly in meeting the growing demand for ESG compliance by consumers, investors, and employees. While consumers are increasingly focused on making sustainable purchases, they are also sceptical about companies’ sustainability claims. Procurement leaders can play a key role in building trust with consumers by sourcing sustainably, joining the circular economy, performing supplier due diligence, and promoting social responsibility.
With major investment from the public sector, sustainable procurement is becoming more important than ever, and organisations across industries are working to define and achieve their ESG commitments.
As procurement leaders, we believe it is essential to act now and develop a path towards more sustainable practices to help close the sustainability gap. SAP solutions like Ariba can help organisations follow sustainable practices throughout the procurement process, from source to pay to supply chain to the external workforce.
