While commitment to sustainable procurement has increased significantly over the past three years (81%), most companies today are still managing programs from a compliance standpoint, a trap that leads to limited engagement and lacks incentives to drive performance and long-term improvements. The study found that 66% of procurement organizations cite regulatory compliance as a critically important aspect of their sustainable procurement programs, which could mean companies aren't realizing that more innovative approaches are available that can drive competitive advantage and business value.
"The importance placed on regulations is quite striking, but not surprising given the global awareness and growth in supply chain due diligence and reporting laws. While keeping up with compliance is important, a compliance-only approach could compromise the business benefits awaiting companies that move beyond "checking boxes" to truly engage suppliers," said Pierre-Francois Thaler, co-CEO of EcoVadis. "Embedding programs into corporate strategy, leveraging external databases and integrating them via a balanced scorecard approach will inherently address compliance concerns while also delivering long-term value."
Despite the emphasis on compliance, organizations in sustainable procurement are seeing their programs progress and drive positive impact. Other key findings include:
- Executive-level support has increased significantly. In 2013, the number one obstacle facing procurement teams was executive and board support (50%). Today, leadership buy-in is only seen as a challenge for 13% of respondents (compared to 24% in 2017).
- There's a clear return on investment. Over half (58%) of respondents say they're better able to mitigate risk through sustainable procurement, and 30% say their programs contribute to cost reduction. Other benefits include innovation and access to new categories (25%) and improved procurement metrics (24%). Companies with mature programs reported more benefits across the board – risk mitigation (88%), cost savings (35%), innovation (29%) and improved procurement metrics (53%).
- 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 4% say they have visibility past tier-3.
When it comes to the tools, policies and best practices used by buying organizations to encourage responsible behavior, most (64%) 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.
"We are delighted to partner with EcoVadis on the 2019 Sustainable Procurement Barometer," said Tensie Whelan, director of NYU Stern Center for Sustainable Business. "The findings underscore the need for companies to better monetize their sustainability strategies and transition from a compliance-oriented mindset to an innovative and growth-oriented approach that can drive competitive advantage and value for society."
The 2019 Sustainable Procurement Barometer analyzes data from 210 buying organizations across all industries and geographies and was complemented by an independent study of 399 suppliers. In-depth interviews followed with selected participants.
For a complete look at the key trends and issues in the sustainable procurement landscape today, download the 2019 Sustainable Procurement Barometer.