Procurement teams struggle with execution of net zero plans

04 October 2023 Consultancy.eu 4 min. read

International management consultancy Sourcing Champions has teamed up with Valuedesk to explore procurement’s growing role in the net zero transition. Report co-authors Sabrina Hueren and Ingo Rossdeutscher walk through the study’s key findings.

In today’s business landscape, sustainability isn’t just a buzzword; it’s a driving force behind success on both fronts: ESG and performance. Executives are well aware of the long-term value of going green, with investments in sustainability this year up 16% on the previous year.

Of all efforts to reduce emissions from operations, supply chains play a momentous role. Between 70% to 90% of a company’s carbon footprint can be traced back to its supply chain, also known as Scope 3 emissions. This also immediately underscores the pivotal role procurement plays in the path towards more sustainability.

Net-zero target adoption by company sizes in terms of revenue. We see that the share of companies who have a target tends to be greater for bigger companies.

Our study, which canvassed the views of 100+ procurement leaders and professionals across Europe, sheds light on the importance of procurement within the broader decarbonisation journey and provides guidance on how value can be unlocked.

The survey revealed that 93% of procurement professionals agree that sustainability is a top priority. However, only 50% of the companies surveyed had explicitly established a net zero target encompassing Scope 3 emissions. This suggests that while companies realise the urgency and potentially have started taking initial steps, they haven‘t fully structured their strategies around the topic.

Not surprisingly, larger companies are more inclined to adopt a net-zero target, which has to do with the heightened stakeholder expectations and more stringent regulatory requirements such as the Due Diligence Acts.

Percentage of companies that have set themselves a certain net-zero target. A majority of companies have not yet set a goal, and most companies that have a goal have set it for 2030

Against what timeline?

A significant portion of companies, around 32%, aim to achieve full net-zero status by 2030. Often, companies that aim for such an aggressive goal (or even more aggressive with 2025) are also taking a leadership role in driving their sector towards a more sustainable future.

Bringing these ambitions to life is not an easy task. Asked for what challenges companies face in their procurement-driven sustainability journey, limited data, complex supply chains, and limited control over supplier emissions were noted as obstacles.

A lack of resources and expertise is another bottleneck, especially among smaller companies, who may require additional support if they want to achieve targets.

Moreover, for many companies that participated in the survey, establishing a carbon baseline and developing a (science-based) net-zero target is new and often uncharted territory.

Average of the evaluation of the biggest challenges. Companies that already have a net-zero target evaluate the challenges to be smaller on average

Another challenge for progress lies in the fact that most companies prioritise price and delivery reliability above sustainability considerations when selecting a supplier.

Moving into action

In summary, procurement organisations firmly have net zero on their agenda. However, due the predominant importance of costs and the influence of various external factors on businesses, the achievement of successful net-zero implementations is being impeded.

The road to success will differ by company, yet key is to get started – establish an ambitious vision that acts as a catalyst for motivation and action. Accept the imperfections along the process (such as incomplete or inaccurate data), what truly matters is to get started.

As cost effectiveness remains a focus for procurement teams, an easy way to hit the ground running is to focus on measures that are beneficial for price and net-zero (or without monetary implications). By adopting this approach, companies can embark on their net-zero journey while considering the current challenges and maintaining emphasis on cost considerations.