Commitment to sustainable procurement has increased by a significant 81% over the past three years, according to a new study from EcoVadis, driven in part by a rise in executive-level support. The 2019 Sustainable Procurement Barometer report shows that just 13% of respondents cite leadership buy-in as a challenge to sustainable procurement today, compared to 24% in 2017 and 50% in 2013.
Companies are also seeing a clear return on investment: 30% of respondents say their programs contribute to cost reduction, 35% say their programs provide cost savings, and 58% say they’re better able to mitigate risk through sustainable procurement.
But while commitment to sustainable procurement has increased, most companies today — 66% — are still managing programs from a compliance standpoint. This, says EcoVadis, is a trap that leads to limited engagement and lacks incentives to drive performance and long-term improvements.
This means that companies might be missing out on opportunities for more innovative approaches that could drive competitive advantage and business value. Rather than focusing strictly on “checking the boxes” in terms of due diligence and reporting laws, companies might want to consider “embedding programs into corporate strategy, leveraging external databases and integrating them via a balanced scorecard approach,” says Pierre-Francois Thaler, co-CEO of EcoVadis. This will “inherently address compliance concerns while also delivering long-term value.”
- Greater emphasis is placed on all sustainability themes. For 34% of procurement organizations, labor and human rights practices have become significantly more important over the past three years and 33% say business ethics have become more important. Only 22% observed the same shift in environmental concerns.
- Depth of supply chain visibility is still a major challenge, with 45% of organizations saying this insight remains with tier-1 suppliers. Nearly a quarter have a line of sight into tier-2, and just 4% say they have visibility past tier-3.
- 64% of organizations have a supplier code of conduct. Contract terms are the most common method used by buying organizations (35%) to engage suppliers on performance improvements, with 42% of organizations having a specific contract clause relating to sustainability. An encouraging 22% of procurement organizations collaborate on sustainability improvement strategies with suppliers and 38% say they have a sustainable procurement policy in place.
The study was developed in partnership with the NYU Stern Center for Sustainable Business. It analyzes data from 210 buying organizations across all industries and geographies and was complemented by an independent study of 399 suppliers.