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Supply Chain Disruption

Procurement’s Journey to Sustainability

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Following from our last year’s report on sustainable procurement, Powering Your Sustainability Through Procurement, we wished to go one step further and understand the degree of progress procurement is making in Environmental, Social and Governance (ESG). To this end, we talked to well over 300 Chief Procurement Officers from around the world, representing all the main industries. In order to assess their current level of maturity, we asked them where they believe they stand on each of the twelve areas highlighted in Oliver Wyman’s Sustainable Procurement Maturity Framework, in terms of Track, Act, Impact, and Operate.

We can report the positive finding that almost all companies have now defined their strategic procurement ambitions in ESG. Many have made good progress in embedding these objectives into their procurement agenda, while the leaders provide solid examples of how this ambition can be translated into robust metrics KPIs for their procurement teams and fully embedded in procurement processes and tools.

Not all the news is as positive, however. Many procurement teams find themselves falling a long way behind the leaders. For these companies, procurement is still almost entirely driven by historical metrics, such as cost, quality, and service level, rather than on ESG criteria. This gap is most noticeable in the Environmental area, which continues to lag Social and Governance. Excluding the exceptional case of carbon emissions, where many companies have focused until now, over 50% have yet to even set an overall Environmental objective for their procurement teams. Our examination of how procurement teams are doing on the twelve dimensions of the Sustainable Maturity Framework not only identifies where they are most advanced and where they are falling behind but also highlights the dimensions that need to be key areas of focus over the next few years.

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Continuing the Sustainability Journey

Sustainable procurement is central to delivering a company’s ESG agenda. This presents procurement with both an opportunity and a challenge.

ESG provides procurement with a unique opportunity due to its distinctive ability to connect with stakeholders and create coalitions across the entire supply chain and beyond. It gives it both the power and the influence to drive integrated sustainability throughout the business system — an influence that extends to shaping the agenda at the Executive Committee level.

Exhibit 1: Oliver Wyman’s sustainable procurement maturity framework

Table showing four steps of sustainable procurement maturity framework Table showing four steps of sustainable procurement maturity framework

1: Total Cost of Ownership, 2: Environmental Profit & Loss
Source: Oliver Wyman analysis

When things really click, the impact can be impressive. Many of the sustainable procurement leaders considered here provide solid examples of how procurement teams translate ESG ambition into robust management objectives, KPIs and impactful actions. Their successes demonstrate the way forward for the large number of companies and procurement teams that have yet to give ESG the centrality it requires alongside traditional metrics, such as cost, quality, and service level.

Sustainable procurement makes an enormous difference — for all of us

ESG also presents procurement teams with a major challenge. Sustainability procurement leaders do not wait for change to be driven by legislation. They listen to what their customers and investors are telling them. They respond to the zeitgeist and upskill their teams.

The pressures driving ESG have never been more evident. Procurement is impelled to grasp the opportunity encapsulated within this challenge. They need to move faster, act more forcibly and go deeper. All our futures are at stake.

Read the full report "Procurement’s Journey to Sustainability - First signs of systemic change?" here.

Procurement’s Journey to Sustainability