ESG is the acronym for Environmental, Social and Governance (Environmental, Social and Governance, in Portuguese). The term is used to measure companies' engagement in initiatives that reduce negative impacts on the environment, make companies economically sustainable and promote a fairer society.
It is also an indicator of sustainable investment that, in 2022 alone, moved more than $30,3 trillion (approximately R$151,5 trillion). According to the Global Sustainable Investment Alliance (GSIA), investors reported climate change and carbon emissions as the main ESG criteria when choosing assets. Other reasons highlighted were corporate governance issues and sustainable natural resources.
The movement emerged in 2004, in a publication by Global Compact with the World Bank, called “who cares wins” (those who care, win). The initiative, prompted by the then UN Secretary-General, aimed to engage 50 CEOs of large companies in the Ten Principles of the Global Compact and the agenda of the 17 Sustainable Development Goals (SDGs).
Regardless of the sector, sustainability is everyone’s agenda. By mobilizing and creating actions in favor of sustainability, companies can reduce their negative impacts, promote efficiency and innovation, ensure the resilience of their operations and strengthen their reputation and value in the market.
In this sense, the supply chain plays a fundamental role in achieving ESG. By adopting a sustainable approach, the purchasing area promotes not only operational efficiency but also environmental and social responsibility throughout the supply chain.
ESG pillars in the context of the purchasing area
Integrating ESG criteria into all stages of the procurement process includes supplier selection who share the same values and commitments to sustainability, implementation of risk management practices and compliance, establishing collaborative partnerships to promote innovation and continuous improvement towards ESG practices.
Below, check out the main impacts to be considered in the sector's strategy, considering environmental, social and governance aspects.
E (Environmental) – Environmental issues
In the purchasing area, the letter “E” in the context of ESG refers to environmental issues, a fundamental part of corporate social responsibility and sustainability criteria applied to the company's acquisition processes.
Environmental impact of products | Assessment of the life cycle of products, from the extraction of raw materials to disposal. |
Energy Efficiency | Prioritization of products and suppliers that prioritize renewable energy sources and more efficient manufacturing processes. |
Reduction of carbon emissions | Selecting suppliers with carbon reduction initiatives, such as using more sustainable transport. |
Conservation of natural resources | Reduction in water consumption, protection of biodiversity and preservation of ecosystems. |
Waste Management | Adoption of production and packaging practices that reduce the amount of waste, prioritizing recycling and reuse. |
environmental compliance | Company and suppliers comply with all applicable environmental regulations and standards. |
S (Social) – Social issues
Here, concerns are related to society as a whole, from basic issues such as customer satisfaction to socially relevant issues such as diversity, privacy and data security, human rights and labor laws.
Work conditions | Assessment of employee working conditions throughout the supply chain, including labor rights. |
Human rights | Ensuring that suppliers respect human rights, avoiding discriminatory practices and child labor. |
diversity and inclusion | Promoting diversity and inclusion throughout the supply chain, encouraging equal opportunities for all. |
community development | Support initiatives that benefit local communities where supplier operations are located. |
Health and safety | Implementation of policies and practices that protect the health and safety of workers as well as communities. |
Business Ethics | Adoption of ethical standards and transparency in business operations, avoiding bribery, corruption and unethical business practices. |
G (Governance) – Governance issues
By considering governance issues in procurement activities, companies strengthen their reputation, reduce compliance-related risks, and increase the confidence of investors, customers, and other stakeholders.
Governance structure | Assessment of the governance structure of the company and its suppliers, with supervision and control mechanisms. |
Corporate Ethic. | Promoting ethical practices throughout the supply chain, such as policies against corruption and conflicts of interest. |
Transparency and disclosure | Clear information about your operations, financial performance, governance practices and environmental and social impacts. |
Risk management | Have processes to identify, assess and mitigate operational, financial, environmental, social and compliance risks. |
regulatory compliance | Compliance with all applicable laws, regulations and standards relating to the company's operations and purchasing practices. |
Digital Audits | Audits play a fundamental role in ensuring compliance, integrity, reliability and effectiveness of processes. |
How can technology help companies with ESG criteria?
Technology plays a key role in supporting companies in implementing and advancing ESG (Environmental, Social and Governance) criteria. Through digital solutions, companies can improve their transparency, efficiency and accountability regarding ESG issues.
In the environmental area, technology enables the effective monitoring and management of natural resource consumption, reduction of carbon emissions and waste management. IoT sensors, big data analysis and artificial intelligence can be used to optimize logistics processes, identify energy consumption patterns and promote the circular economy.
Digital platforms, such as e-Procurement of the Electronic Market, can be used to verify fiscal, financial, operational and environmental aspects of suppliers. In addition, technology allows transactions between companies to be more transparent. Periodically, supplier performance can be assessed through questionnaires, allowing monitoring and adaptation to the company's objectives and guidelines.
In terms of governance, integrated management systems and blockchain are examples of technologies that can strengthen transparency and traceability across all company operations. These solutions help ensure regulatory compliance, promote business ethics, and increase investor and consumer confidence.
Procurement practices that promote ESG
Below, we have selected the main practices that the supply chain can adopt to make the company environmentally and socially responsible, as well as more valuable in the market:
- Cloud solution adoption
By adopting a cloud solution, such as those offered by Mercado Eletrônico, purchasing teams have control over operations with suppliers, promoting more transparent, fair and compliant commercial relationships.
- Efficient and sustainable transport and logistics
The transportation sector is the most polluting, followed by industry. For this reason, pay attention to the choices of your suppliers, such as vehicles powered by clean energy, route optimization and reduction of travel times.
- Supplier management
Choosing good business partners, that is, suppliers with socially and environmentally responsible processes throughout the production chain, is essential for building a more sustainable supply chain.
- Digital platforms
The use of digital solutions, such as e-Procurement of the Electronic Market, to manage purchases and suppliers are essential for ESG engagement, as they allow transparency and traceability with environmental, social and governance aspects.
Find out how Mercado Eletrônico can help your company achieve sustainable Procurement. Request a contact from one of our solutions specialists by clicking here.
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