The ESG revolution has been upon us for a while but so far the impact in procurement has been felt in terms of what is being bought.
Purchasers know the difference between a product that you can recycle and one you can’t. They understand food miles and the dangers posed by microplastics. Environmental awareness is well established but, until recently, seldom measured.
So while there’s a general awareness of the issues, the procurement industry hasn’t yet changed behaviours with its own hand. But procurement’s role in the greening of supply chains is about to get a whole lot more interesting — and it all comes down to data.
Ambitions like the UK’s 2050 net zero target mean talking about going green is no longer enough. We’ve reached a stage where plenty of companies are declaring that they are operationally net zero, but that’s a relatively modest achievement on the road to true net zero. C-suite leaders in businesses of all kinds now have to be ‘detail people’.
To be fully net zero, companies need to make sure that their supply chains are too, and this creates a massive information headache. As each company reaches for the data they will need to satisfy net zero accreditors, the volume of data required to make the necessary calculations explodes. The carbon footprint of every brick laid, every journey made and every paperclip pinned by a supplier needs to be taken into account. Its scale is almost unimaginable.
The only industry that already tracks these transactions — and can pair carbon costs to each one — is the procurement industry.
And it’s not just about carbon. Sustainable procurement means far more than this, as does the Environmental, Social and Governance (ESG) movement.
Local procurement — a subject that has stormed back onto centre stage as the pandemic shot down unwavering faith in just-in-time supply chains — also falls under this umbrella.
While predictions of the death of globalisation are a little premature, local procurement has grown in importance over the past two years as necessity reminded procurement leaders of the value of local businesses, what they were capable of supplying and at what price.
Local procurement supports local jobs and economies. There’s a measurable social impact here — and this is another string to ESG’s bow, which policymakers are increasingly talking about.
Businesses are already using the carrot rather than the stick to encourage suppliers to be more forthcoming when it comes to becoming more sustainable. In a nutshell, the message already spreading far and wide is that greener firms will win more business. However, it’s no use just going green. They have to be able to communicate ESG data including carbon emissions in a precise and frictionless way.
This is where suppliers will fall down and the procurement platforms they already rely on will step in. Cataloguing and Purchase-to-Pay (P2P) systems are well-equipped to aid the transition in a way that individual businesses are not. They’re the natural home of ESG data. Carbon tracking services with catalogue and P2P help to capture data while analytics and data augmentation allow better ESG reporting even where the raw data might not be captured or the data is spread across multiple online and offline systems.
Corporate Britain’s next big IT need fits hand-in-glove with solutions that already track much of the life cycle of these products and services.
This is why Elcom is rapidly building on P2P, Spend Analytics, Carbon Tracking and other services with all embracing ESG data tools. Procurement platforms are destined to play a much bigger role in ESG accreditation than they currently imagine. The rise of digital tax stamps will enhance the ease with which this can be done.
With companies like Elcom sitting between clients and the data they need, it’s then just one small step for procurement platforms to morph into ESG accreditors in their own right, changing the conversation with customers forever.