The four significant ‘procurement mindset changes’ that emerged from the disastrous combination of Covid, climate risks and social unrest of 2020 have immediate implications across the procurement digital tool chain, none less-so than the challenge of ESG and sustainable procurement.
These forces have confronted procurement with an urgent priority to rethink the link between sustainability and digital transformation: FROM “Analogue” and on-site methods such as Auditing, TO digitally integrated tools and intelligence.
A Call to Digital Action
The call for digital procurement solutions was already accelerating. According to McKinsey research, “69 percent of procurement leaders said that they consider digital and analytics solutions to be even more valuable in the “next normal” than they are today, with greater potential to increase procurement’s effectiveness.”
The COVID-19 crisis created even more urgent rationale for this transition. It pushed procurement leaders to embrace technology and digital transformation ten times faster than before – and supply chain monitoring is no exception.
Yesteryear’s Tools Aren’t Going to Transform Anything
Even before the pandemic, the limitations and evolving role of on-site audits were becoming clear, particularly that physical verification of an on-site audit is difficult to scale up. COVID removed all doubt, with the pandemic causing widespread cancellations of audits and shifting operations to a remote and work-from-home mode.
Similarly, there is a growing awareness of the need to upgrade self-assessed “checklist compliance” (“SAQs”) schemes, which aren’t going to transform anything. SAQs are extremely difficult for buyers to interpret and create little value or incentive for suppliers to engage and improve their operations. This was accentuated during the crisis, which revealed massive health and safety vulnerabilities as systems grounded to a halt.
The pandemic accelerated these realizations that it is impossible to integrate these schemes with the right sustainability insights into current procurement software processes, and they aren’t enough to stimulate the improvements in performance and resilience that we need.
Time to Rethink Sustainability Monitoring
We see the resulting shift in procurement’s approach: The ambition is to achieve digital sustainable procurement tools that cover the full spectrum of organizational, sustainability and digital criteria, and connect to the processes across the organization. This ensures that suppliers engage in sustainability practices and improvements that are needed to achieve resilience.
With this new mindset, we can see beyond cliches like “sustainability is the new digital,” but rather a vision that “sustainability is one of the best enablers of digital transformation.” Digital speed and scale have the potential to drive transparency, improvement, and ultimately resilience in an exponential way, and that can be integrated to drive value creation across the business.
Digital sustainable tools that are accessible and actionable — not only to procurement and risk staff, but also other stakeholders including sustainability, product and marketing teams, HR, investor relations, etc. — are key to making the new mindset a reality.
Now is the Time to Rally Your Team with a Dual Strategy
In the months to come, the focus should be setting up this “double-win.” It’s time to realize the power of sustainable procurement in value creation across the whole organization, and use sustainability as an enabler for your digital transformation at the same time. These two goals go hand-in-hand, and if accomplished simultaneously, a “double-win” is in sight.
Ready to take action? Read the 5-step guide to rethink and rebuild your supply chain strategy to make it sustainable, and future-ready.
David McClintock is Marketing Director at EcoVadis.