What positive and negative impacts does your supply chain have on the environment and society? These and other questions are how your department can start planning actions aimed at ESG in procurement – acronym for environment, social and governance –, which today is a matter of survival for companies.
To bring insights on the subject, we invited Adriana Nunes, ESG leader in Supply Chain for Latin America at EY, and Marcelo Pereira, specialist in Supplier Management at Mercado Eletrônico, to the special episode about sustainability in purchasing in ME Cast.
Among some data collected by participants during the chat, there is the percentage of costs companies spend on their suppliers, which is around 70%. This significant number shows that it is not possible to separate business between companies from the sustainable journey of companies.
In this ME blog post, we selected the main insights from the chat between Adriana and Marcelo, experts on the subjects of ESG in procurement and supplier management.
Enjoy reading! 🌱
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Sustainability and ESG: what’s the difference?
The concept of sustainability is broader and is related to a principle that, according to the UN, should ensure that future generations have quality of life in the future. ESG, acronym for Environmental, Social e Governance, is related to business and investment practices.
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Sustainability and ESG as strategic company values
ESG initiatives need to be part of a journey, not just isolated processes, especially in the supply chain and in the day-to-day lives of buyers. For this reason, it is essential that sustainability is recognized as a value, not a problem.
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Governance and compliance are complementary concepts
Governance and compliance are not the same thing, but both are important to the ESG in procurement. The concept of corporate governance is broader and is related to principles (policy), while compliance is more focused on compliance with standards, rules and laws (process).
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ESG in procurement: where to start?
As issues such as the climate crisis, diversity, inclusion and human rights become more evident, these aspects need to be considered in purchasing strategies. A good start is to seek to understand the impacts of your operation on the environment in which it operates, through materiality, which helps to list the topics of greatest relevance to the company's audience: employees, customers, investors, community, etc.
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ESG is not just for big companies
Sustainability is an agenda for all of us: companies, governments and citizens. Therefore, it is wrong to believe that only large companies are solely responsible for responsible supply chains. When choosing more conscious suppliers, whether for direct or indirect purchases, small and medium-sized companies can also contribute to environmental, social and governance issues.
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Sustainable journey is transversal to the purchasing strategy
In sustainability, nothing is done alone. All areas of the company need to consider sustainable practices in their daily activities and projects. To achieve good results in ESG and innovate in purchasing, it is also interesting for the area to encourage the participation of other departments. For example, the sales area, which has direct contact with customers and can supply Feedback important.
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Local suppliers and the return of backshoring
More recent crises such as covid, lockdowns in China and the Russia's invasion of Ukraine, have impacted supply chains and economies around the world. In supply chain leaders, the crises drove the adoption of a strategy of backshoring, which is to increasingly seek to invest in local operations and suppliers, to reduce the risks of supply shortages. This movement also encourages the development of local suppliers, which is an action linked to ESG.
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Social issues become increasingly relevant
More than a trend, concern for social issues tends to increase in the coming years. One of the most important measures to achieve ESG in procurement is supplier management. In other words, it means choosing partners that have good environmental, labor, and tax practices, in addition to considering issues related to diversity.
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Circular economy is already a reality in many companies
Unlike the linear economy, which extracts, produces and discards, in the circular economy, “trash” becomes business, meaning there is practically no waste. When it comes to purchasing, there are many ways to apply the circular economy concept, such as choosing raw materials that extend the life cycle of products and enabling waste recycling.
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The importance of technology for ESG in procurement
By helping to optimize and control business between companies, technology is a great ally of ESG in procurement and buyers. The purchasing management solutions increases collaboration between buyers and suppliers and makes transactions more transparent. In addition, the use of digital tools frees professionals to direct their efforts towards the company's most strategic pillars, such as the ESG agenda.
Did you like this content? Then you may also be interested in our free materials about Sustainable procurement. 🌱
See you next time! 😉
