The world of procurement is witnessing a significant shift in priorities, with Environmental, Social, and Governance (ESG) factors rising to the forefront. According to a recent survey by Deloitte, ESG has ascended to the number two spot of top priorities for procurement executives globally, a significant leap from its 7th place standing in the 2021 study.

This shift is a clear reflection of the increasing regulatory and stakeholder pressure on companies to manage and report on a variety of sustainability factors. As the focus of these initiatives increasingly turns to companies’ value chains, procurement leaders are tasked with managing aspects such as Scope 3 emissions and human rights in upstream supply chains.

The survey, which included approximately 350 procurement leaders from over 40 countries, revealed that “ESG is the top area where procurement plays an active influential role in decision-making (85% of firms), with corporate risk management and FP&A next (roughly 70%).” This highlights the crucial role procurement plays in driving the sustainability agenda.

However, while ESG is gaining prominence in procurement, the study indicates that initiatives to quantify sustainability factors are still in their early stages. Although 60% of respondents measure suppliers on sustainability at some level, and 63% reported collaborating with suppliers on ESG initiatives, less than half (40%) said that their procurement organizations don’t define or measure their own set of relevant ESG factors.

This rise in ESG prioritization is undoubtedly good news. It signifies a broader shift towards sustainable business practices and a recognition of the importance of ESG factors in decision-making. However, the fact that many organizations are still not defining or measuring their own ESG factors suggests there is still much work to be done.

The future of ESG in procurement looks promising, with 72% of respondents citing “enhancing ESG/CSR” as a top enterprise priority, second only to “driving operational efficiency” at 74%, and tied with “digital transformation.” This indicates that ESG considerations are becoming as important as operational efficiency and digital transformation in the corporate world.

In conclusion, the increased focus on ESG ratings in procurement is a positive development, signaling a shift towards more sustainable and responsible business practices. However, for ESG to truly become embedded in procurement processes, organizations need to define and measure their own ESG factors. This will ensure that ESG considerations are not just a box-ticking exercise, but a core part of their business strategy.

You can read the full report here.