How Procurement Leaders Can Help Drive ESG Strategy

Odemi Pessu
Odemi Pessu
Content & Storytelling Marketing Manager, Coupa Software

Odemi Pessu is a Content & Storytelling Marketing Manager at Coupa. She is also an author, artist, and women’s rights advocate. Odemi earned her Master of Public Affairs at Brown University, where she also earned her bachelor’s degree in International Relations and Political Economy. Her book, Force of Nature, encourages African women to lean into their vulnerability for strength and to honor their divine feminine energy for spiritual liberation.

Read time: 5 mins
How Procurement Leaders Can Help Drive ESG Strategy

The world is changing.

With a global community fighting to ascend in the wake of 2020’s health and social upheavals, all realms of life are evolving into something new.

The responsibility to forge a better future is no longer relegated to government officials and grassroots organizations solely. More than ever before, innovation and intentionality within the corporate sphere are essential to address modern issues such as climate change, socioeconomic inequality, discrimination, and ethical consumption.

As such, corporations find themselves in a unique position: one of vast potential to yield positive change and revolutionize the ways through which business operations contribute to the common good.

Companies have an opportunity to drive change

In recent years, CEOs and executives across various industries have taken steps to integrate social impact into their operational priorities. Often, there are opportunities to tie initiatives for the social good to bottom-line impact as well. For example, improving supply chain logistics to reduce transportation fuel requirements cuts down CO2 emissions while also reducing direct costs.

One of the most promising and rewarding opportunities for companies to act is in the realm of how they manage all of their business spending. Similar to how consumers advocate for change using their personal spending power, businesses can deploy their large-scale spend power to make a positive difference in the world.

The clearest path to do this is through intentionally aligning Business Spend Management (BSM) strategy with Environmental, Social, and Corporate Governance (ESG) principles. Thus, procurement professionals, and Chief Procurement Officers (CPOs) in particular, find themselves in a unique position to expand their scope of influence to the world of corporate social responsibility.

Separating truth from fiction in corporate ESG initiatives

One must understand that ESG is more than a 21st century phenomenon or LinkedIn buzzword. It is an arena where impact can and should be measured — in order to distinguish between actually driving change and just talking about it.

Corporations’ dedication to protecting the environment and taking a stance against systemic discrimination is becoming increasingly important. With good reason, people are looking to corporations to drive real change in societal and environment arenas. Now is the time to get in front of these customer expectations and drive real impact.

“What do we improve next?”
“How do we get there?”

So, how exactly can companies better prioritize ESG criteria across all of their decision-making when it comes to spend? What internal stakeholders are essential to do so? What is the relationship between ESG and business success?

The reality of the matter is that most companies are not sure where to begin. More so, many business leaders are still making the mistake of thinking about investing in ESG in competition with delivering bottom-line impact — when, in fact, the two can go hand in hand.

Responsible procurement as an enabler of change

One of the most impactful ways a company can signal that they care and they are dedicated to creating positive change is by reassessing how they allocate their resources. Both customers and internal stakeholders are recognizing the importance of business spend decisions. Customers want to know if a company they support is actually putting its money where its mouth is. They are wondering if, for example, the new sports gear they purchased was ethically manufactured. Or if the packaging it comes in is sustainable. They are inquiring about diversity metrics because they don’t want pandering, they want authenticity and tangible change. Customers want to have assurance that the products and services they purchase are not indirectly harming the world we live in — but, instead, making it a better one.

As stewards of business spend, CPOs can lead the charge. Over the course of the pandemic, CPOs have shown their ability to move mountains by getting critical PPE for essential workers and keeping production afloat even when materials were in extremely short supply. Within their spheres of influence, CPOs can harness corporate buying power to drive change at scale. For example, they can implement processes and systems to channel business spend to diverse suppliers or utilize only ethically-sourced production inputs.

How CPOs can integrate ESG goals into bottom-line priorities

As consumers and investors alike begin to pay more attention to how businesses drive impact with their spend, there is room for improvement beyond once-a-year sustainability reports. What once seemed a task better fit for Sustainability Officers and Diversity & Inclusion Program Leads, is now also an important agenda item for CPOs looking for a seat at the table of change.

Some of the important ways procurement leaders can take action and measure progress for ESG impact include:

  • Increasing spend with diverse suppliers, and paying these suppliers faster
  • Tracking CO2 impact across all purchases and the supply chain
  • Holding suppliers accountable for ethical goods and practices
  • Benchmarking their ESG performance in key metrics against that of their peers

Many CPOs will face barriers to realizing the immense potential of BSM as a lever for change. Companies that have low spend under management struggle to channel spend to preapproved suppliers without distinguishing those who are diverse from those who aren’t. Companies that already have good visibility and control over spend, may find their risk and compliance data siloed with teams and in processes that are difficult to combine with purchasing processes. But, the moxy and resilience that procurement teams have shown during the last year should embolden them to break down these barriers to drive greater impact.

Smarter procurement creates a whole new dimension for corporate activism in the modern era. By taking control of their spend, businesses are taking control of their legacies — and putting change at the forefront. Situating ESG principles as a business priority is not a one-and-done act, but instead a continuous quest to improve the world we live in with each dollar that is spent. At Coupa, we are dedicated to empowering companies to spend smarter so that they can do more and be more for their communities.

Change is never easy, but it is necessary for us to move forward together and bring about a more sustainable, ethical, and equal world.

Check out our new eBook, "Procurement in the Spotlight: A New Agenda for a New Era," to learn more about how you can unify your BSM and ESG for greater impact.