Procurement is becoming a more important strategic role as companies are under more pressure to meet environmental, social, and governance goals while dealing with complicated changes in the world. These days, procurement teams are not just support staff in the back office. They are getting more power at the top by making their internal teams work better together and forming more collaborative partnerships with suppliers.
There is a clear trend, though, toward “green-hushing,” which means that companies keep doing things to be more environmentally friendly but don’t talk about them as much. According to research by PwC, about 84% of businesses are keeping or strengthening their climate commitments, even though they aren’t talking about them as much in public. This shows that people know that ESG efforts are not just about following the rules, but they also make the business better.
A recent study funded by SAP and done by Economist Impact shows that this change is happening. It shows that procurement leaders are becoming more confident that they can meet ESG performance indicators. About 90% of those who answered said that procurement worked well with other parts of the business, up from 75% the year before. Externally, stronger partnerships with suppliers are having a big impact, especially on innovation and sustainability.
Working Together as the Main Driver
The procurement department’s growing power comes from working closely with other departments. Teams that work together across different parts of the business are creating new value by better planning for the future and working together better. Specialized business partner groups connect strategy and execution, making it easier for companies to meet the needs of different departments.
This method has already shown benefits, such as lower costs and faster adoption of digital technology. At the same time, investing in talent is still necessary for long-term value creation, like innovation and supply chain flexibility. Over the next 12 to 18 months, procurement professionals will need to be very good at AI and ethical technology. Sustainability knowledge will be a close second.
Working Together with Suppliers Speeds up ESG Impact
Companies that look to the future are using partnerships with suppliers to help them with their decarbonization efforts and long-term sustainability. Collaborative programs include using packaging that can be recycled, getting materials that are better for the environment, and using logistics that produce fewer emissions. These projects not only help the environment, but they also make the supply chain more resilient.
Almost half of executives say that working more closely with suppliers has improved their sustainability performance. Thirty-eight percent say that working with suppliers has led to more innovation. Procurement teams that carefully manage these relationships can find a balance between ESG goals and operational efficiency and cost savings.
Putting ESG into the Heart of Decisions
More and more, businesses are using digital tools to keep an eye on emissions, keep up with changes in the law, and measure how well their value chains are doing in terms of sustainability. Scope 3 emissions used to be hard to measure, but better data collection and performance management for suppliers are making them more important now. The EU Corporate Sustainability Reporting Directive and Germany’s Supply Chain Due Diligence Act are two examples of rules that show how important it is to have strong ESG monitoring.
The Strategic Opportunity for Procurement
To speed up ESG progress, it is important to work well with others, both inside and outside the organization. It encourages digital adoption, cuts costs, and breaks down silos within the company. Externally, it encourages new ideas and lets suppliers make a real difference in reaching sustainability goals. Poorly coordinated collaboration can lead to suppliers losing interest, operations becoming less efficient, and ESG initiatives getting stuck.
Procurement is in a unique position to turn goals for sustainability into results that can be measured and expanded. Companies that take ESG factors into account when making purchasing decisions and make sure that suppliers know what is expected of them and get the help they need are likely to see both short-term operational improvements and long-term strategic benefits.
Businesses can keep track of their environmental impact throughout the supply chain with technology like SAP Ariba, SAP Sustainability Footprint Management, and SAP Sustainability Data Exchange. These platforms help with openness, following the rules, and making smart buying choices, which ensures that sustainability is a key part of the operational strategy.
The impact of procurement will be determined by how well it can align ESG goals with business execution. This will show that responsible sourcing and sustainability can go hand in hand with growth, efficiency, and innovation.
