In this episode of the Business Excelleration® Podcast, a discussion of the objectives, challenges and developments in the world of sustainable procurement, with European Procurement Advisor and Director Vicky Kavan, Senior Research Director, Procurement Amy Hillcox, and Procurement Advisory Principal Kurt Albertson.
Welcome to The Hackett Group’s “Business Excelleration Podcast,” where week after week we hear from experts on how to avoid obstacles, manage detours and celebrate milestones on the journey to world-class performance. This episode is all about sustainable procurement hosted by European Procurement Advisor and Director Vicky Kavan. Her guests are Senior Research Director for Procurement Amy Hillcox and Procurement Advisory Principal Kurt Albertson.
To begin, Kurt unpacks the definitions and terminology currently surrounding environmental social governance (ESG) being used in the U.S. This has been a very hot topic for the last several years. In the corporate setting, ESG has become the go-to terminology for this kind of work. Then, Amy unpacks The Hackett Group’s most recent performance study – the Sustainable Procurement Study. It includes a bird’s eye look at the topic at hand and provides insights into what top performers are doing to earn their status. Right now, we are seeing that about 90% of organizations are including all three ESG elements, with a huge uptick in the environmental piece.
Participants of the study were asked about their corporate- and procurement-level objectives. Surprisingly, there was a great deal of alignment demonstrated in the objective results between corporate and procurement. The third element of the top three elements was emission reductions. Fourth was improved brand value – a reflection of the demographic shift we are seeing. Kurt shares that these three objectives are being reflected in the interactions he has been having with clients recently. There are some broader categories some companies are beginning to look at within categories such as supplier diversity. Still, however, they are looking at percentages of spend with their suppliers. In the sustainability corner, CO2 has recently gained traction as data is being provided in order to develop real solutions. Ultimately, it is the stakeholder community driving the ESG agenda for most organizations. There is also rising concern about the supply chain emissions, and how we can align suppliers to be more sustainable and help reach these objectives.
The classic approach to suppliers is through the lens of a broader supply relationship management program and the percentages of spend. However, Kurt explains there really needs to be a more thorough review of suppliers with spend as an initial guidepost. Companies should take a balanced approach, which looks at spend in addition to the suppliers that will best help your program meet your goals of reducing emissions.
Next, Amy offers her best advice for companies who want to embed ESG throughout their procurement processes. It is best to start by building ESG elements into your category management processes. Then, think about how you can build these principles into your sourcing process. It is critical that it is easy for people to access this important information. You will also want to think about how you can do some of that supply market research as part of that process. As you begin thinking about bringing this strategy to life, think about your core procurement processes and where you can build in sustainability elements. It should also be as easy as possible for people within the organization to be compliant. Before wrapping up, the conversation touches on the tools and technologies currently available to help support these programs.
- 0:55 – Welcome to this episode hosted by Vicky Kavan.
- 1:53 – The terminology for ESG being used in the U.S. market.
- 3:44 – The Hackett Group’s recent Sustainable Procurement Study.
- 7:35 – The objectives of top performers.
- 12:25 – How these objectives reflect in Kurt’s conversations with clients.
- 20:15 – How are companies approaching supplier dilemmas?
- 22:32 – Advice for companies who want to embed ESG throughout their procurement processes.
- 28:17 – The tools and technologies to support these programs.
- 33:29 – Thanks to Amy and Kurt for joining us today!