Procurement leaders play a critical role in closing the sustainability gap. A new SAP consumer survey shares insights to inform sustainable procurement strategies.
Environmental, social, and governance (ESG) has become a mandate for businesses around the globe. Across every industry, consumers, investors, and employees are demanding change. In response, governments are implementing new regulations – rightfully so. We all have a responsibility to minimize our impact on the environment and contribute positively to society.
Procurement leaders play an essential role in helping companies achieve their ESG goals. With access to nearly all business functions, procurement is not only critical to driving efficiency and resiliency, but it is also increasingly becoming a key business partner to tackle ESG commitments. In fact, according to a survey by the Stanford Business School, 51% of global businesses have a sustainable procurement policy in place, contributing to the resilience of their value chains.
What’s more, while sustainable procurement has long been a priority for the private sector, we are now seeing major investment from the public sector – with U.S. policymakers proposing the Federal Supplier Climate Risks and Resilience Rule to require major federal contractors to disclose their environmental data. In Germany, lawmakers passed the LkSG Act to regulate companies’ social and environmental responsibility.
With organizations across industries focused on defining and realizing their ESG commitments, it is evident that we are at a tipping point. As procurement leaders, we must act now to build a path towards more sustainable practices.
Consumers’ Buying Behavior Shows an Emphasis on Sustainability but Inflation Presents Challenges
We all know ESG is complex and multifaceted. One aspect that gets a high degree of visibility is sustainability, which is usually tied to the tracking and reduction of corporate carbon footprints. Given that visibility, we asked consumers how they are factoring sustainability into their buying decisions. SAP surveyed 1,000 U.S. adults to better understand how they are prioritizing sustainability in their purchasing decisions and what factors influence those decisions. Some interesting findings surfaced:
- Consumers are increasingly focused on making sustainable buying decisions. More than half of consumers (51%) said they made an effort to purchase from brands that practice sustainability during the past two years. This is an increase from 36% in our February 2022 survey. Moreover, more than one out of three consumers (36%) say that, when possible, they purchase from brands that practice ethical sourcing for their products.
- Inflation is affecting consumers’ willingness to buy more sustainably. Despite increasing their efforts to buy sustainably, 64% of consumers also say inflation has impacted their ability to prioritize sustainable and/or ethical products and services. The majority (85%) would prioritize making more sustainable purchases if the cost barrier to do so was lower.
Improving Procurement Practices to Drive a More Sustainable Future
Consumers are not only prioritizing buying sustainably, but they are demanding transparency. Many remain skeptical about the data companies provide on their ESG efforts. As a result, procurement will play an increasingly important role in finding, sourcing, and acquiring goods with sustainability in mind, and doing so in a way that is traceable with the ability to verify provenance.
Here is a closer look at what the survey revealed about what consumers are thinking:
- Growing skepticism about “greenwashing” may deter consumers from buying sustainably. When making purchasing decisions, only 22% of consumers rank a brand’s sustainability initiatives as their No. 1 factor. One cause for concern may be that a staggering half (50%) believe brands are exaggerating claims of sustainability to mislead customers. Another 34% are not sure.
- Consumers want to be informed on a company’s ESG initiatives, but a knowledge gap remains. Most consumers (40%) look for information about companies’ ESG initiatives on product packaging or with product information online. Other common places are the “About” section of their Web sites (34%) and social media (34%). More than one in four consumers (28%) do not know where to find the information.
Building a Path to Sustainable Procurement in 2023
The survey makes it clear that businesses need to reimagine existing business processes with sustainability in mind and provide more transparency to build trust with consumers.
Procurement leaders cannot tackle this challenge alone. However, they can lay the foundation for success by harnessing their unique position to pave the way for sustainable innovation across the supply chain. To get there requires a sustainable procurement plan that involves:
- Sourcing sustainably: Employ sustainable sourcing to help reduce your company’s carbon footprint and greenhouse gas emissions.
- Joining the circular economy: Collaborate with your suppliers to develop innovative ways to recycle and reuse materials to cut waste.
- Performing supplier due diligence: Make sure vendors follow ethical labor practices and protect the environment.
- Promoting social responsibility: Choose to work with ethical businesses, certified green businesses, and those that prioritize sustainability as a business outcome.
SAP solutions can enable you to follow sustainable practices at every stage of the procurement process, from source to pay to supply chain to the external workforce. All of this can help you build trust with consumers while also meeting your organization’s sustainability objectives and protecting the planet. It is a win-win.
Etosha Thurman is chief marketing and solutions officer for Intelligent Spend and Business Network at SAP.