ESG is the acronym for Environmental, Social and governance. The initiative came to being in 2014, through the UN Global Compact, and is now considered a key issue for businesses to generate value for consumers and investors.

To have a glimpse of ESG growth in recent years, according to a global survey by the Institute of Business Value (IBV), with the participation of 9 countries (Brazil included), 54% of consumers are willing to pay more for products from conscious brands.

A recent EY study about investors and businesses showed that ESG has oriented 99% of investment decisions in Brazil.

Se below some supply chain initiatives that can help businesses to engage with the ESG agenda and SDGs (Sustainable Development Goals):

  1. Adoption of cloud technologies

By using a cloud computing solution to manage procurement processes, the company can promote more transparent and commercial relationships, with compliance. Additionally, it has an impact on energy consumption, as it doesn’t require an IT infrastructure

  1. Efficient and sustainable transport and logistics

The transport sector is the most polluting of all, followed by industry. Now there is the possibility of choosing vehicles powered by clean energy, optimizing routes with technology and reducing travel times. It’s also vital to keep updated the maintenance of transport modes.

  1. Management of contracts with partners

With an efficient contract management, negotiations with suppliers can become safer, with visibility and control, thus meeting compliance and audit requirements in all processes.

  1. Supplier management

Managing suppliers through solutions that automate and optimize steps, such as certification and performance evaluation, helps decreasing risks related to ESG aspects. Besides, it promotes more collaborative relationships with partners.

How to promote ESG as an organizational culture?

In the corporate world, procurement is one of the key players in the ESG agenda. And a sustainable procurement goes far beyond the inputs chosen for its production.

It is crucial – and very challenging – assuring that the whole production chain doesn’t violate human rights. It’s also essential that there is no bribery or corruption in negotiations.

These and all other issues involving sustainability and compliance must be a priority on the agenda of CPOs – whose mission is to broaden discussion space in businesses.

Despite this, the procurement area cannot and shall not walk alone in the sustainable journey. The entire company must act in a responsible way and commit to ESG aspects.

To turn sustainability into reality – that is, to make it a cultural aspect – the factors of circular economy, ESG and supplier management must comply with more than mere legal aspects.

Supplier engagement starts at home

Supplier management and the procurement area must walk together on the journey towards sustainability. In businesses, sustainability and ESG policies include supply requirements, but unfortunately they don’t suffice to ensure good practices on the part of suppliers.

Despite this, the procurement area cannot and shall not walk alone in the sustainable journey. The entire company must act in a responsible way and commit to ESG aspects.

This is where we can see the importance of having supplier management practices, such as certification – a stage in which fiscal, labor and environmental aspects, among others, are properly checked.

Besides having very well designed processes on this journey, the suppliers shall be seen as strategic partners, a close relationship must be established with them – and, of course, they must be listened.

To be successful in all such requirements and manage to engage suppliers, it’s vital that sustainability actually happens from the inside out – and not the other way around.

ESG and procurement: a view beyond environmental issues

Besides being attentive to their own manufacturing, transport, distribution and procurement activities, businesses are emphasizing more and more those actions with social impact that include diversity and inclusion in hiring practices, whether in their workforce or when contracting their suppliers.

And procurement is integral part of the process by which organizations can create value, by influencing and developing the supply chain in favor of a more responsible logic for business.

However, while some businesses are based on the new economy (a conscious capitalism) and have already anticipated the new culture, others still maintain price, service level and quality as the only parameters when choosing suppliers.

At this moment, it’s better to promote a balanced approach. More than just the economic issue, we must think in a comprehensive way about the social and environmental impacts induced by procurement.

Sustainability agendas must be linked to risk, efficiency and the creation of both value and innovation. Managing supply risk and its practices is a way to pave the way for a more sustainable path.

To read the full material on sustainable procurement, download it here.

See you next time! 😉