The procurement sector is at a pivotal crossroads. As political pressures, inflation, and new technology work in tandem to place unprecedented strain on global supply chains, procurement teams are increasingly finding themselves in the driving seat as their organisations seek to meet strategic objectives.
More than anything, however, it’s sustainability that appears to be the key driver of procurement’s move into the driving seat.
Sustainability putting procurement in the driver’s seat
A new report by KPMG looking at the trends shaping the future of procurement found that the changing nature of the procurement sector means that “Procurement leaders have a real opportunity to recast their functions as strategic influencers, enabled by generative AI and automation, to drive high-performing, sustainable purchasing activity.”
The survey of 400 senior procurement professionals from a range of industries found that 66 % of procurement executives believe increased regulatory and ESG demands will heavily influence strategic sourcing in the next 3–5 years.
Just over half (52%) of executives had a roadmap to guide investment in a sustainable supply chain over 1–3 years. The idea, according to KPMG’s report, is that by becoming more responsible and transparent, procurement functions can address increasing regulatory and market pressures to engage in more sustainable sourcing.
The report stresses that “ESG also provides a chance for procurement to play a bigger strategic role,” in organisations.
Procurement’s role is likely to shift towards being a coordinator of major organisational initiatives, including ESG and third-party-risk-management (TPRM), This will also mean procurement needs to collaborate more closely with other functions in the business. For example: risk, compliance, legal, sustainability, and supply chain.
Scope 3 remains a daunting challenge
As scope 3 emissions are increasingly brought into the focus of regulators and public scrutiny,
TPRM is becoming even more central to assessing ESG risks to the supply chain. “It’s likely that new TPRM policies will be necessary, with a need to vet suppliers for carbon footprint, circularity, labour practices and, ultimately, consolidating the supplier base according to its ESG/circular credentials,” say KPMG’s report authors.
Nevertheless, tackling scope 3 emissions remains a serious and, for some, seemingly insurmountable challenge for many organisations. According to a survey conducted in the UK by Lloyds Banks and Make UK, over three-quarters of small and medium-sized manufacturing firms are facing increasingly strict requirements from their customers relating to ESG topics. However, half of these businesses reported lacking the resources required to meet them.
Three in four (74%) of these manufacturers reported building ESG-related conditions into supplier contracts as part of revamped procurement strategies.
Lloyds Bank’s head of manufacturing and industrials Huw Howells commented that it is “important for manufacturers to work with their supply chains to ensure that ESG strategies are a sustainable collective achievement and a force for future growth.”
