The first chapter of our blog series on the role of different departments in the sustainability transformation highlights the importance of procurement.
In recent years, sustainability has evolved into an increasingly cross-cutting issue for companies, with many departments playing a central role in driving progress. The growing focus on a broader range of topics and responsible business practices across global supply chains has triggered significant changes, requiring departments that traditionally had little or no connection to sustainability to engage with it more deeply. As a result, different business units and functions must address sustainability aspects and collaborate more closely. Integrated and holistic processes, and adequate governance models, are therefore becoming increasingly important.
In this blog series, we take a closer look at key business areas, highlighting challenges and developments within the scope of the sustainability transformation. The first chapter is dedicated to procurement.
To implement regulatory requirements such as the German Supply Chain Act, the Corporate Sustainability Reporting Directive (CSRD), or the Corporate Sustainability Due Diligence Directive (CSDDD) and embed sustainability standards within the supply chain, procurement departments can adopt various strategies.
During supplier selection, buyers can prioritize business partners not only based on financial metrics but also according to various ESG criteria, ensuring alignment with the company’s sustainability goals. These criteria may include a low carbon footprint, ambitious climate targets, or fair working conditions at production sites. Many companies integrate sustainability criteria into tenders and contracts, for example the mandatory use of renewable energy or evidence of relevant sustainability certifications. Additionally, proximity to local suppliers is often a key factor in decision-making, as working with regional vendors significantly reduces transportation emissions.
Beyond ensuring minimum standards in the supply chain, considering sustainability aspects also supports proactive risk identification and mitigation – an essential factor for enhancing resilience.
Procurement departments can also play a major role in reducing the carbon footprint of their supply chain and ensuring respect for human rights by selecting climate-friendly materials and establishing guidelines for sourcing critical raw materials (e.g., palm oil and conflict minerals). Additionally, a stronger focus on circular economy principles such as recycling, reprocessing, and reusing materials can minimize waste and preserve resources. Related efficiency improvements can also help reduce dependencies and strengthen resilience.
Procurement teams can have a significant impact on reducing transport emissions by optimizing logistics processes using digital technologies such as IoT sensors, big data analytics, digital warehouses, and comprehensive transport management platforms. According to a study by the German digital association Bitkom, accelerating the use of such technologies could save up to eight million tons of CO₂ annually in Germany by 2030.
A well-established risk management system lays the foundation for selecting suitable suppliers, sourcing sustainable materials, and transitioning to digital logistics processes. Organizations have already recognized this need: According to our latest study on the implementation of the German Supply Chain Act, 84% of companies have implemented risk management systems to identify sustainability risks in the supply chain. These systems help procurement departments ensure compliance with various sustainability regulations in areas such as due diligence, decarbonization, and product compliance.
For procurement teams, integrating sustainability into existing processes can be challenging, especially since it has only recently become a key responsibility. Training on regulatory frameworks and sustainability, case study insights on successful sustainable procurement strategies, and workshops with suppliers and experts to exchange best practices can help procurement professionals incorporate sustainability into their daily work.
The integration of ESG data into procurement systems is playing an increasingly important role in incorporating non-financial metrics. With API interfaces, this data can be seamlessly embedded into existing procurement systems, enabling buyers or category managers to select suppliers based on their ESG performance. The sustainability data can also be shared with other teams, such as sustainability, compliance, or IT, strengthening cross-departmental collaboration.
Procurement can be a key driver of sustainability within the supply chain. By strategically selecting suppliers and materials, digitalizing logistics processes, and leveraging comprehensive data management, companies can not only meet their social and environmental responsibilities but also gain a competitive advantage, strengthen resilience, and foster innovation. However, implementing sustainable procurement strategies requires continuous training for procurement teams and adherence to various sustainability regulations. Companies that successfully navigate these challenges will be better prepared for the future.
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