Procurement leaders feeling net zero urgency despite action gap

A new market study from Sourcing Champions has found that while many companies have made gradual progress in sustainability goals, many others need to ramp up their endeavours. Companies should be embedding sustainability into the core of their strategies and operations – and especially into their procurement.

Climate change is an increasingly urgent threat around the world – that much is clear. Global temperatures are rising and natural disasters are more and more devastating. It is now evident that action needs to be taken not just from governments, but also from businesses worldwide.

One of the main findings in the study, which builds on a similar study released last year, is that there has actually been stagnation in the progress of net-zero goals since last year. The number of companies without formal net-zero targets has increased slightly.

Larger companies are more likely to have net-zero goals in place already, which could be the result of an increase in pressures to comply with regulations. In contrast, smaller companies are less likely to have formal targets in place.

That is seen as a problem in the larger scheme of things, because these smaller companies are often suppliers to the larger ones, depending on the industry. Overall, smaller businesses make up a huge chunk of global business activity.

Scope 3

The stagnation in net-zero progress has been especially pronounced in the area of Scope 3 emissions, which are those that are not controlled directly by a company because they are further down the supply chain. “Larger organizations are more likely to have formal targets, driven by regulations, greater resources, access to sustainability expertise, and advanced technologies,” said Robert Waalder, partner at Sourcing Champions.

“SMEs struggle more often with implementing net-zero strategies due to limited financial resources, lack of expertise, and insufficient access to technology and support.”

Another concern relates to the timelines that define how long a sustainability transition ought to take. Most companies still do not have a timeline for achieving net zero. There was, however, a slight increase since last year in the number of companies that do have timelines.

“There is a clear shift reflected in the increasing number of companies that have withdrawn or delayed their 2025 goals, resulting in fewer commitments to a 2030 net-zero target,” according to Waalder.

While 2023 saw many companies enthusiastically pursuing net-zero goals, the findings from 2024 show a more cautious approach, with many companies opting to extend deadlines in response to pressures like operational challenges or the macroeconomic situation.

Digitization

The results of the study also show a significant digitalization gap, particularly in procurement processes. A lack of digitalization processes can be a major obstacle for companies in meeting their net-zero goals.

For example, only 19% of companies are “somewhat digitalized” in Scope 3 emissions reductions initiatives. Across the board in all categories, only 1% to 6% of companies reported being “fully digitalized” in their net-zero initiatives.

In some key processes supply chain compliance, transparency, and emissions tracking, a full quarter of all companies surveyed still use manual tools like Excel for keeping track of procurement processes.

Another main takeaway is that though costs can remain a major barrier to following through with net-zero goals, especially for SMEs, regulatory changes are increasingly putting pressure on companies to act. The authors said that digitization could serve as a major enabler in this field – automation can cut out repetitive tasks, digitize time-consuming manual tasks and drive further value, and on top of that unlock new forms of value.

Reflecting on the study, Waalder said, “The challenges are significant, but so are the opportunities. As regulatory requirements become more stringent, business have a unique chance to transform these obligations into drivers of innovation and leadership in sustainability.”

Sourcing Champion’s study from last year found that up to 90% of company’s carbon footprint can be traced to the supply chain, with Scope 3 being a major part of that. This highlights the role of procurement teams in meeting net-zero goals.