Beyond the Bottom Line: ESG Ratings – Procurement’s New Moral Compass

The world of procurement is undergoing a significant transformation, propelled by the growing importance of Environmental, Social, and Governance (ESG) factors. This critical shift is evident in a recent 2023 Deloitte Global Chief Procurement Officer (CPO) Survey, where ESG jumped to the number two priority for procurement executives globally, a remarkable leap from its 7th place ranking just two years ago.

This dramatic climb reflects the intensifying pressure from regulators and stakeholders on companies to embrace sustainability and transparently report on various environmental and social aspects of their operations. As the focus expands beyond internal operations, procurement leaders find themselves at the forefront, managing critical elements like Scope 3 emissions and human rights within their complex upstream supply chains.

The Deloitte survey, encompassing approximately 350 procurement leaders across 40 countries, revealed a telling statistic: “ESG is the top area where procurement plays an active, influential role in decision-making (85% of firms).” This surpasses even areas like corporate risk management and Financial Planning and Analysis (FP&A) highlighting the pivotal role procurement now holds in driving the sustainability agenda.

While ESG is undoubtedly gaining momentum in procurement, the survey also reveals that initiatives to quantify sustainability factors remain in their nascent stage. While 60% of respondents measure suppliers on sustainability to some extent, and 63% report collaborating with suppliers on ESG initiatives, a concerning gap emerges: less than half (40%) stated their procurement organizations lack defined or measured sets of relevant ESG factors.

Despite this gap, the surge in ESG prioritization is undeniably positive news. It signifies a broader shift towards sustainable business practices and a growing understanding of the critical role ESG plays in informed decision-making. However, the lack of defined and measured ESG factors within many organizations underscores the need for significant progress.

The future of ESG in procurement looks bright, with a remarkable 72% of respondents citing “enhancing ESG/Corporate Social Responsibility (CSR)” as a top enterprise priority, second only to “driving operational efficiency.” This indicates that ESG considerations are now on par with key strategic objectives like efficiency and digital transformation.

In conclusion, the heightened focus on ESG ratings in procurement is a welcome development, paving the way for more sustainable and responsible business practices. However, to truly embed ESG within procurement processes, organizations need to take a crucial step: defining and consistently measuring their own sets of relevant ESG factors. This ensures ESG is not merely a compliance checkbox, but a fundamental element of their business strategy.

CoriolisESG empowers you to make this pivotal shift. Our data-driven platform brings transparency to your supply chain, enabling you to:

  • Measure and manage your supply chain’s ESG credentials: Gain accurate insights into your suppliers’ credentials across key sustainability indicators.
  • Improve and build resilience: Identify areas for improvement and implement targeted initiatives to enhance your supply chain’s environmental, social, and governance practices.
  • Make informed sourcing decisions: Confidently choose suppliers that align with your ESG values and build a more responsible, resilient future.

The power lies in our data:

  • Global reach: Leverage data from public, private, and government sources across the globe.
  • Standardized frameworks: Aligned with internationally recognized frameworks like the UN SDGs, EU Taxonomy, PAI, SASB/IFRS and the SEC for consistent, comparable assessments.

CoriolisESG is your key to unlocking the true potential of ESG in procurement. Move beyond ratings and embed sustainable practices into your supply chain, building a future that benefits both your business and the world.

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