Trends in Sustainable Procurement and Supplier Diversity – Contrasting US and European Perspectives

The Hackett Group Senior Advisor Kurt Albertson talks with Senior Advisor Nic Walden, discussing and contrasting trends in environmental, social, and corporate governance (ES&G) programs in the U.S. and Europe. They detail how sustainability and supplier diversity in particular are a growing priority for many companies, and talk about the requirements companies are putting on their procurement leaders and suppliers to more effectively address these issues and measure performance.

Show Notes

Today’s episode of the Business Excelleration Podcast is hosted by Kurt Albertson, North American Procurement Advisory Principal at the Hackett Group. Kurt welcomes his associate Nic Walden, Senior Director of the Hackett Group’s Procurement Advisory membership program in Europe. Today’s episode will provide a unique opportunity for the two to explore the topic of sustainability and determine how trends differ between the U.S. and Europe.

To begin, Nic explains how sustainability and procurement are currently being defined in Europe. The various definitions of sustainability tend to share one common thread, which is that sustainability refers not only to the environment but to social and governance factors as well. He breaks down the most common terms including ESG, SRI and CSR.

Then, Kurt gives us a look into market trends in the North American market, where there is a bit less regulation. The interest in sustainability procurement is on the uptick, especially in the last 3-4 years. The main drivers of this are the stakeholders including investors, communities, and company employees. Companies who are not following these trends are at risk in terms of revenue and profitability. From Nic’s European perspective, sustainability is nothing new. In fact, it has been emphasized for more than 20 years. Europe has laws which mandate sustainability information to be reported in equal importance to financial information.

In the last 20 months or so, the social component of business operations has become equally important as the environmental impact. Falling into this social category is the emphasis on supplier diversity. While these trends took foot in the U.S, they have inevitably begun to spread internationally. Europe, being composed of so many different countries and ways of life, tends to drive levels of acceptance. Thus, diversity has a different meaning in Europe than it does in America, and Kurt reveals that it is not quite at the forefront yet as he sees it. The Hackett Group’s recent study shows that at least ⅓ of companies have expanded their programs to be more inclusive and diverse and is expected to increase.

Sustainability efforts are often approached internally in an effort to drive efficiency. A large question now is to what extent do we apply these principles to our supply chains? Kurt shares a few common approaches to this matter in Europe, including formalizing sustainability policies and codes of conduct. The focus is less on certifications and more on working together to reduce the societal impact.

For businesses right now, there is a large focus on cost reduction. Many sustainability efforts can and should be implemented not only for their environmental impacts, but to drive down costs as well. It is a developmental area, but Kurt urges listeners to consider a few key factors moving forward. First, determine what sustainability means to your organization, figure out your strategies and how you will engage with suppliers and embed sustainability contracts within your process. Finally, focus on measuring and reporting your progress.

Timestamps:

• 0:40 – Kurt introduces today’s guest, Nic Walden.
• 1:57- Nic shares how sustainability and procurement is being defined in the U.K.
• 7:30 – Kurt shares his observations in the North American market.
• 12:05 – Sustainability procurement drivers in Europe.
• 16:40 – Discussing the widespread attention to supplier diversity in the U.S. and Europe.
• 23:10 – How is the environmental aspect of sustainability procurement approached in Europe?
• 27:30 – How can sustainability efforts be measured?
• 32:20 – Closing words and key takeaways.