6/30/24, 9:30 PM Achieving Sustainable Procurement by Adopting Five Procurement Mantras

I N S I G H T S / B LO G S

Procurement mantras for achieving your

ESG goals
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Marketing Head, TAP™, TCS Platform Solutions When you visit any website, it may store or retrieve information on your
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6/30/24, 9:30 PM Achieving Sustainable Procurement by Adopting Five Procurement Mantras

HIGHLIGHTS

The focus on Environmental, Social, and Governance (ESG) is now no more a concept and has become an integral part of any
business model.

The three pillars—E+S+G—form the core of sustainability which is the number one challenge for today’s organizations due to
multi-directional pressures.

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To accelerate the pace of achieving an organization’s ESG goals in a systematic way, five procurement mantras can be
defined:
possible experience on our website.
1. Align Procurement goals & objectives to the organization’s ESG
When you visit anygoals
website, it may store or retrieve information on your
browser, mostly in the form of cookies. This information might be about
2. Develop a robust baseline for ESG you, your preferences or your device and is mostly used to make the
site work as you expect it to. The information does not usually directly
3. Re-visit your spend category, category strategies and supply
identify you, butbase
it can give you a more personalized web experience.
Because we respect your right to privacy, you can choose not to allow
4. Engage and innovate with your suppliers, and some types of cookies However blocking some types of cookies may

5. Embed sustainability in core procurement processes

The focus on environmental, social, and governance

(ESG) is now no more a concept and has become an
integral part of any business model.
Where environmental goals refer to how a company contributes to save and conserve the nature, social criteria manage an
organization’s relationship with its stakeholder — employees, suppliers, clients, and communities. Governance-related aspects focus
on a company’s leadership, audits, and internal controls. These three pillars are the focal point for all stakeholders, including the
organizations own staff, investors, clients, consumers, and suppliers. These three pillars (E+S+G) form the core of sustainability which
is the foremost challenge for today’s organizations due to multi-directional pressures. There is pressure not only from consumers
where sustainability features have taken prime slots of consumer agendas making them demand more and more sustainable
products but also from governments that are imposing increasingly stringent ESG regulations.

The procurement function’s comprehensive overview of corporate ecosystems, including an organization set up, business units,
suppliers, and customers put procurement in a unique position to make a real difference across all the three pillars of ESG, and can
best support an organization’s ESG agendas.

The following five procurement mantras define a systematic approach and can accelerate the pace of achieving an organization’s
ESG goals:

1. Align procurement goals and objectives to the organization’s ESG goals

2. Develop a robust baseline for ESG
3. Re-visit your spend category, category strategies, and supply base
4. Engage and innovate with your suppliers
5. Embed sustainability in core procurement processes

1. Align procurement goals and objectives to the organization’s ESG goals

It’s important that the procurement function must align its goals and objectives with the organization’s ESG goals. The right way for
this alignment is to set up the precise picture of the target ESG goals, decide specific objectives to achieve the goal, build focused
procurement activities, and decide on key performance indicators (KPIs). These ESG goals for organizations can differ from industry
to industry. As an example, a CPG (Consumer packaged goods) company can have a goal of becoming carbon neutral in 10 years.
For this, one of the goals for procurement (aligned with the organization’s goals) can be to achieve zero plastic packaging over a
period of 10 years. Procurement then needs to create specific procurement objectives and corresponding activities for ensuring
zero plastic packaging, like including this as one of the selection and award criteria for sourcing and set a KPI to monitor it.

2. Develop a robust baseline for ESG

It’s important for the company to be aware where they stand today with respect to their ESG goals and hence, developing a well-
defined ESG baseline is even more critical for procurement to start with. Constituting a cross-functional team to analyze the
company’s data from multiple sources (purchasing, contracts, accounts payable, etc.), creating an ESG baseline and building KPIs on
that, such as spend per category or spend per supplier. It’s also important to get a clear picture of the ESG impact along the entire
supply chain and for that, it’s important to focus on all suppliers in the supply chain ecosystem, including not only tier 1 suppliers but
also tier 2, tier 3 and others.

3. Revisit your spend category, category strategies, and supply base

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6/30/24, 9:30 PM Achieving Sustainable Procurement by Adopting Five Procurement Mantras

Traditionally, the sole aim of category management was to deliver the most cost-efficient goods and services with no supply chain
disruptions. There was almost zero/ minimum consideration for ESG and its impact in category management. Now, with the global
focus on ESG, there are stringent sustainability guidelines and regulations like renewable energy directives, carbon border
adjustment mechanism, emission trading schemes etc., and these have a high degree of impact on a company’s supplier base and
category management strategies. The procurement team needs to revisit it’s spend category, category strategy, and supply base
against a broader spectrum of criteria and must include ESG metrics so that it can be towards a more local and a more robust supply
base. The ultimate target should be to integrate procurement into the circular economy to mitigate risk and avoid unnecessary
costs.

4. Engage and innovate with your suppliers We use cookies to give you the best
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To make ESG a successful program, it’s imperative for the experience
procurement onone
unit to engage with our website.
of its most critical stakeholders i.e.,
suppliers. For this, there needs to be consistent messaging
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objectives and this should be two-way, to get a buy-in on the goals. But an organization can have hundreds of suppliers and
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practically, it is not possible to engage with each supplier
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Because we respect your right to privacy, you can choose not to allow
the largest impact can be achieved. This will ensure that the initial efforts are oriented towards the areas of business where the
some types of cookies However blocking some types of cookies may
maximum impact will be delivered. Sustainability should be on the agenda of every supplier interaction, project review, and business
review stages.

5. Embed ESG in procurement processes with the help of source-to-pay technology platform

To achieve integration of ESG into the procurement processes, it’s important that all the core procurement processes are ESG-
driven. A technology powered source-to-pay platform can certainly help in embedding ESG in the procurement processes. For
example, during supplier onboarding, while sourcing goods and services for the organization, the sourcing manager can include a
section on ESG or sustainability and request suppliers to provide the data. New age sourcing platforms provide pre-configured,
industry-specific ESG questionnaire templates with an option for multiple choice answers, yes or no type questions, allowing multiple
attachments for certifications, date picker features, and many more features and functionalities that allow the sourcing manager to
quickly create ESG-related sections in their RFPs. Assigning weightage and auto-scoring with built-in AI models help in assessing
suppliers and providing the right ESG and sustainability score for the suppliers. There are third-party, ready-to-use databases in the
market that help an organization to know a supplier’s ESG scores. Such databases can be easily integrated with source-to-pay
platforms. One can consider a sustainable supplier while awarding the RFP to the best value suppliers. Even in a downstream
process like purchasing, requisitioners can easily view the ESG score of the suppliers while raising the request for buying any goods
for their requirements. There are multiple use-cases in source-to-pay where ESG can be embedded in procurement processes and
technology is a great enabler for achieving it.

Conclusion

ESG is the way forward for organizations and the procurement function has no other option but to adopt these mantras to
accelerate the organization’s journey towards achieving its ESG goals

ABOUT THE AUTHOR

Amit Kumar

Amit Kumar is a management graduate and a Certified Professional in Supply Management (CPSM) with 20+ years of experience in
procurement, digital transformation, and operations with expertise in source-to-pay processes.

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