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How do we leverage procurement to reach net-zero?

The concept of net-zero emissions has surged in prominence in recent years as the world confronts the far-reaching consequences of climate change. Achieving net zero—a balance between greenhouse gas emissions produced and those removed from the atmosphere—is vital for mitigating climate change impacts, safeguarding ecosystems, and ensuring a sustainable future for businesses and society as a whole. For businesses, net-zero targets have become an integral part of corporate social responsibility and long-term planning.

The pressure of reaching net-zero

With rising global temperatures and more frequent extreme weather events, climate change poses increasing risks to businesses and their supply chains. Companies that proactively reduce their greenhouse gas emissions and adopt sustainable practices are better positioned to build resilience against these risks, secure their supply chains, and ensure long-term profitability. Moreover, these companies are more likely to attract investment, as environmentally responsible businesses are increasingly valued by investors.

Regulatory pressure to achieve net-zero targets is also mounting. Governments worldwide are progressively aligning their efforts to address climate change by introducing policies, regulations, and incentives that encourage companies to adopt more sustainable practices. Achieving net-zero is no longer just a choice for businesses; it is becoming a necessity. Business leaders must stay ahead of regulatory changes to thrive and benefit from incentives designed to foster a greener economy.

The role of procurement in the supply chain

Procurement is one of the primary areas where businesses can make a substantial impact on their net-zero goals; more than 80% of all greenhouse emissions from a business are produced in the supply chain. Procurement managers have a huge role to play, and need to shift from the traditional focus of saving costs, and instead prioritise environmentally responsible suppliers; selecting eco-friendly products and services, and promoting sustainable sourcing practices in order to contribute to the global effort to achieve net zero emissions. As companies continue to adapt and innovate in response to the challenges posed by climate change, procurement will be at the forefront of shaping more sustainable and resilient business models.

Corporate procurement is uniquely positioned to help companies reduce their carbon footprint because it has a direct influence over the goods, services, and suppliers a company engages with. Large enterprises are the important players in this ecosystem; as the biggest customer and largest producer of emissions in the supply chain, they have much more influence when it comes to creating better practices. Only by making environmentally conscious choices, and prioritising suppliers that align with sustainability goals, can procurement teams drive positive change throughout the supply chain, helping to reduce emissions from raw material sourcing to product disposal. As the gatekeeper for a company’s inputs, procurement has the potential to significantly impact the environmental performance of an organisation, promoting more sustainable practices and contributing to the global effort to reduce carbon emissions.

Of course, there are challenges faced by businesses, and procurement managers, when trying to achieve net-zero. Procurement is often constrained by factors such as limited awareness, short-term focus, insufficient sustainability expertise, inadequate internal support, lack of standardisation and transparency, and complex supply chains. To address these challenges and fully leverage procurement’s potential, organisations must invest in increasing awareness, building capacity, and crafting robust policies and processes that encourage sustainable procurement practices.

Leveraging procurement to reach net-zero

There are numerous real-world examples of procurement contributing towards net-zero. Organisations such as Unilever, IKEA, Apple, Nestlé, and Procter & Gamble have adopted sustainable procurement practices and have made considerable progress towards realising their sustainability goals. Unilever has pledged to engage in sustainable sourcing, concentrating on areas like deforestation, responsible agriculture, and fair labour conditions. IKEA is committed to sourcing 100% of its wood from sustainable sources and has put in place the IKEA IWAY Forestry Standard to guarantee responsible wood sourcing. Apple has made substantial strides in sustainable procurement by focusing on reducing its environmental impact through the use of recycled materials and renewable energy. Nestlé has created the Nestlé Responsible Sourcing Standard, outlining their requirements for suppliers in areas such as environmental sustainability, human rights, and labour practices. Procter & Gamble has implemented responsible sourcing guidelines for essential commodities like palm oil, wood pulp, and paper.

Those organisations that feel overwhelmed by procurement and net-zero efforts can leverage tools like Augmented Procurement Platforms, driven by AI, to create more sustainable practices. These platforms assist companies in making sustainable procurement decisions by consolidating ESG scores and carbon emission ratings from various providers, allowing for easy comparison and prioritisation of suppliers based on sustainability factors. AI-driven analysis and automated actions recommend alternative suppliers, compare shipping methods for CO2 reduction potential, and verify ESG certificates, ultimately helping organisations reach their sustainability objectives.

Corporate procurement can also utilise data analytics and machine learning to support sustainability efforts by employing advanced analytics to identify sustainable suppliers, assess the environmental impact of products and services, and optimise procurement processes. Machine learning algorithms analyse large datasets to uncover patterns, risks, and opportunities, enabling procurement professionals to make data-driven, environmentally conscious decisions. Integrating technology into the procurement process allows organisations to gain deeper insights into their supply chains, monitor supplier performance, and drive continuous improvement in sustainability initiatives.

Procurement has a huge impact on a businesses ability to reach net-zero, and business leaders and procurement managers need to monitor supplier sustainability performance, integrate sustainability criteria into procurement decisions, and track and improve procurement processes. While there are potential barriers to embracing sustainable procurement practices, these key stakeholders can play a role in overcoming these challenges, and drive towards that target of becoming net-zero.

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